Foxtel and Netflix could be the best of frenemies

If you can't beat them ... join them.

Netflix, the $US44 billion ($57.6 billion) streaming behemoth, has taken Australia by storm since launching a year ago, shooting well ahead of local rivals.

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Foxtel is now considering a radical change to its traditional wall-garden approach by debating whether to put Netflix on its upcoming Apple TV-style "puck" streaming device.

It makes sense as Telstra considers selling its 50 per cent stake in Foxtel and has already launched its own puck – Telstra TV – which has Netflix, Stan, a 50-50 venture between Nine Entertainment and Fairfax Media, and Presto, a joint venture between Foxtel and Seven West Media.

Foxtel is considering its own streaming device.
Foxtel is considering its own streaming device. Photo: Jim Rice

Telstra, at this stage, is only making its device available to its own customers.

For Foxtel, there's a whole market of people out there who don't have pay TV and are not Telstra customers. Aggregating Netflix's content and possibly others as well as some of its own would make Foxtel's puck more appealing.


Foxtel's smaller rival, Fetch TV, already hosts Netflix and Stan on its internet television platform.

It remains unclear how Foxtel, which is owned by News Corporation and Telstra, will position its puck device.

Customers come to Netflix for content such as House of Cards.
Customers come to Netflix for content such as House of Cards. Photo: Supplied

The pay TV provider could add its streaming service Foxtel Play, which offers Foxtel's channels online, to the puck device, adding revenue from customers who would not sign up for a set-top box.

However this model makes it easier for customers to disconnect and downgrade packages. It could also cannibalise its existing traditional subscribers.

It could instead offer snippets of its own content, mixed in with Netflix and other subscription video on demand (SVOD) services to try and capture a market that is never going to sign up for the full service.

Foxtel was the only place to find Netflix content in Australia, but we now know that was just a stop gap move for the streaming giant as it prepared itself for launch.

Netflix's great strength is its own original content such as House of Cards, Daredevil and Orange is the New Black. Sure, the other shows are nice, but they're old and not what people subscribe for.

Big global television players such as NBC, Disney, AMC, Viacom and HBO have seen the success of Netflix and are looking to build their own brands in Australia rather than be exclusively aggregated on Foxtel.

While some have already signalled their intentions Down Under, others are waiting to see whether Australia is a big-enough market to sustain standalone services.

To Foxtel's advantage it still holds all this content. If these players launch their own direct services in Australia - as NBC already has with hayu - Foxtel may lose exclusivity over some key shows.

However, once you start adding more and more SVOD services direct from the studios, it can become more expensive than Foxtel – although Foxtel's premium movie and drama takes the price point much higher to $46.

If the pay TV giant can bring Netflix content back to Foxtel, even if just on its puck device, it still holds the advantage of having the greater breadth of content.

Losing exclusivity on international content means it should be paying less for it and could instead invest that in what Netflix doesn't do – local shows.

Stan, which is 50 per cent owned by Fairfax Media, publisher of The Australian Financial Review, The Sydney Morning Herald and The Age, is developing its own local content – including Wolf Creek and No Activity – as well as signing international content.

Netflix's strategy relies on its own content and as well as global rights to other TV shows, it is yet to dive into local content by regions and considering the price and payoff in a market like Australia, it may never.