Kim Williams, the new chief executive of Australia's dominant pay-TV player Foxtel, has called on the Hollywood studios that supply his industry to stop "pricing us into oblivion."
Instead, Williams asked his US film suppliers to work with the Australian pay TV sector to find a new commercial model that replaces per subscriber costs with a system that ensures a greater volume of subscribers and greater pay-TV penetration. This, he said, would be in the long-term interests of both the local industry and the studios.
He described the industry-wide high programming costs, particularly with regard to movies, as a threat to the future of the industry, and predicted that there will be a lot of renegotiation ahead to achieve a rational framework.
"We all know the studios were able to capitalise on the intense competition for programming that exploded in the sector in the early 1990s. Good luck to the studios and we cannot expect commercial favours now or in the future," Williams told the Australian Subscription Television and Radio Association (ASTRA) conference. "However, they have no right to slow the growth of the industry by pricing us into oblivion."
John Porter, head of Austar, supported Williams' view that the Australian pay-TV sector cannot go forward unless it achieves reasonable parity with the prices paid by other markets around the world and gets some relief from the burden of program costs.
"We get, on average, $30 (A$56) per household (per month). Some customers are perfectly happy to pay that but our research shows that if we had a $15 (A$30) product we would achieve 40%-50% penetration ' The global benchmark for content as a percentage of revenue in this industry is between 30% and 35%. In Australia the best margins are running close to 50%."
When the original program deals were done the US dollar was worth about 82-85 Australian cents, Porter added. Now one Australian dollar is worth about half a US dollar.