Fetch TV will easily survive iiNet loss

news Fetch TV has revealed it is financially profitable and rapidly expanding its operations and customer numbers, in news that signals it will not be substantially adversely affected by the decision by iiNet’s new owner TPG to terminate its long-standing relationship with the Internet television company.

Fetch TV was founded in July 2010, backed by Malaysian company Astro All Asia Networks, as well as local companies Harvey Norman and Domayne. The company’s business model saw it bundle a set-top box through Australian broadband providers that gave customers access to both personal video recording functionality to enhance their live TV viewing, as well as the ability to stream many different forms of content to their television.

The service was viewed as a competitor to Foxtel, and quickly attracted broadband providers such as iiNet (and its current stable of brands, including Internode, Westnet, Adam Internet and so on — some of these companies had not yet been bought by iiNet), as well as Optus, Dodo and others.

However, last week it was revealed that iiNet and its subsidiary brands had instantly dumped Fetch TV following iiNet’s acquisition by rival TPG. The order for the closure came directly from TPG, which is reportedly developing its own Internet television offering, based on a partnership with Foxtel.

In response, Fetch TV chief executive Scott Lorson last week released the company’s updated customer numbers, revealing it now had some 275,000 Australian customers. “We’re experiencing record growth at the moment,” Lorson added, noting Fetch TV had bolted on some 80,000 customers in the past four months alone.

The executive also noted Fetch TV was profitable and debt-free, and was currently in the process of launching its first product overseas, among many other “live discussions”.

“We’ve built a track record for innovation and disruption, and we’re about to enter one of our most exciting periods over th next six months, making announcements about hardware software and content,” Lorson said.

Although iiNet and its subsidiary brands had initially pushed the Fetch TV product hard into the Australian market, the broadband provider had appeared to taper off its marketing effort related to Fetch TV over the past year. It is not believed that iiNet contributed substantially to Fetch TV’s recent customer growth.

Instead, it appears as though much of the company’s growth is currently coming through other channels — retailers like Harvey Norman, as well as parters such as Optus and Dodo.

iiNet customers will continue to be able access Fetch TV’s services, although customers of iiNet and its subsidiary brands, including Internode, will no longer be able to sign up for the service.

opinion/analysis
Last week I wrote that I believed that TPG’s move to dump Fetch TV could be the start of a process where Fetch TV could end up being sold off or subsumed into one of its parent companies. I had believed the news was pretty bleak for Fetch TV.

After speaking to Lorson, I no longer believe this to be the case. Instead, I think what we’re seeing here is that iiNet and its subsidiary brands (including Internode) acted as a significant force to help get Fetch TV off the ground in Australia, but that they are no longer crucial to Fetch TV’s success. There is no doubt that the move is a blow for Fetch TV. But it’s not a killer blow — and I think the company will be just fine without iiNet’s support.

It’s less clear why TPG is undertaking such a move.

Logically speaking, it would make sense if what the company was doing was seeking to even the playing field in the Australian telecommunications landscape with respect to pay TV.

Right now, it is my understanding that both Telstra and Optus are able to provide Foxtel’s pay TV platform to their customers — Telstra because it owns half of Foxtel, and Optus because (I believe) the company has a deal to access Foxtel content dating back to its deployment of HFC cable infrastructure.

TPG is now the main competition to both Telstra and Optus in Australia. In this context, it would make sense if the company probably wants to offer the same Foxtel broadcast platform to its customers that the other two major players do.

However, two arguments undercut this idea. Firstly, the launch of services such as Netflix in Australia means that more and more Australians consider Foxtel irrelevant. And secondly, TPG’s deal with Foxtel does not appear to include one of Foxtel’s most valuable and unique assets — rights to Australian sports broadcast.

If TPG launches a set-top box featuring some Foxtel channels, but without the pay TV giant’s sports offerings, you’d have to argue such a platform would likely be less functional in general, with less options than Fetch TV. And that wouldn’t make much sense. It would make even less sense in the context of rival companies such as Optus and Dodo actually seeing fairly decent levels of growth with Fetch TV at the moment.

Is it possible TPG actually wants to keep the Fetch TV relationship, and that its contract cancellation actually represents a negotiation process? It’s possible, but don’t forget that TPG never actually signed up with Fetch TV in the first place, unlike most of Australia’s other decently sized ISPs. For whatever reason, TPG has never liked Fetch TV. But TPG still does need an Internet television strategy to keep up with Telstra and Optus. I guess now we wait to find out what that will be.

One final note: I want to briefly address the comments of a number of readers, who had correctly pointed out that in August 2012, I had called for iiNet to back away from its poorly performing Fetch TV relationship. People have argued that I have been hypocritical over the past week in expressing my shock at the rapid nature of TPG’s Fetch TV cancellation.

Well, yes, you’re right — I did make those comments in August 2012. However, in April 2013, Fetch TV came out with a completely revamped set-top box and service. Based on this new situation, I revised my opinion of Fetch TV, as I wrote in my review at the time. I change my opinion based on new evidence, people — and I recommend that you do too. And I was right to do so — Fetch TV has grown strongly since that point.

Was TPG ultimately right to cancel the contract? As I wrote last week, I don’t yet know. I don’t think we have enough evidence yet — and we don’t know enough about what TPG was planning. You’ll note I wrote last week: “To what extent can the specific move to cancel new signups of the Fetch TV service be justified? To be honest, I don’t think we know at this point.”

Image credit: Fetch TV