Australia’s first feevee cabler Optus Vision bowed its 12-channel service with a glittering bash Sept. 20, as industry observers raised serious doubts about the viability of the $A13 billion ($9.8 billion) Oz feevee industry.
Despite constant sniping by Optus and rival cabler Foxtel (which is retransmitting the channels of satcaster Galaxy), all sides – and media analysts – agree on one thing: three feevee providers will not flourish.
“I don’t think three pay TV operators can survive for any length of time,” Optus chief exec Geoffrey Cousins said at the launch, concurring with recent remarks by News Corp.’s Australian chief exec Ken Cowley. Cowley said: “Australia is going to be no different than Great Britain. We cannot afford two pay TV services and we certainly cannot afford three.”
Optus is backed by Continental Cablevision, Kerry Packer, telco Optus and Channel Seven; Foxtel is backed by Rupert Murdoch’s News Corp. and telco Telstra.
Cousins predicted Optus would post profits within five years and give shareholders a complete capital return within 10 years. He said Optus has $984 million from shareholders, of which $401.2 million was recently brought forward to speed up the cable rollout (. Variety, Sept. 18-24).
With a combined tab of $7.6 million, the cabling race between Optus and Foxtel is the main focus of competition, with Optus gaining an edge with its above-ground cable passing 250,000 homes in Sydney and Melbourne (which will rise to 2.3 million by late 1996). Foxtel is expected to shift its underground cabling to the cheaper and speedier above-ground option.
Cousins maintained Optus’ planned delivery of feevee, telephony and interactive services will boost his service over Foxtel, solely a pay TV provider.
But Variety understands Foxtel told investors that any discounted Optus telephony would be matched, one way or another, by its telco partner Telstra.
Telephony will be the key to anyone making money, since the cost of cabling amounts to $3,785 per connected subscriber (assuming 50% penetration) which translates to a subscriber cost of $1,419 per annum vs. consumer resistance to paying anything more than $454 per annum, according to media analysts. Analysts believe the revenue a subscriber is willing to pay increases from $454 to $1,572 when telephony enters the equation.
Satcaster Galaxy, backed by Australis Media and Telecommunications Inc. with a cable retransmission deal for Foxtel, would appear to be the most likely first casualty. It recently announced a $90.3 million loss on a paltry 31,000 subscribers.
Foxtel holds 9% of Galaxy and 50% of its main programming supplier XYZ Entertainment, leading insiders to believe either a formal merger of the two, which Cowley refused to rule out, or an unofficial meshing of services looms.
Meanwhile, Murdoch joined forces with archrival Packer on Sept. 21, this time to produce an Australian news service for pay TV, while also inking a kidvid deal with Viacom the next day.