Investors will therefore be anxious to hear from News whether Foxtel, which News co-owns with Telstra, is experiencing much of this so-called "cord-shaving" in Australia, and how its world-beating average revenues per user of more than $100 a month are faring in the wake of those price cuts.

Freudenstein, who is on a mission to expand Foxtel's population reach beyond the 30 per cent it has been stuck at for some years, is feeling pugnacious about the future of cable, and television, in the face of the market panic and Netflix's flyaway share price.

Confidence supported in evidence

His confidence finds support in new evidence that suggests the medium's dominance remains in the US and the UK where streaming is more advanced (more of which in a moment).

In an interview with The Australian Financial Review the Foxtel CEO scoffed at Netflix CEO Reed Hastings' prediction last year that broadcast TV will probably die by 2030.

"Broadcast TV will continue," he said. "In the US you will see particularly the main broadcast channels are becoming more and more valuable, it appeals to a wider audience. I think in Australia [where cable penetration is 30 per cent versus 90 per cent in the US] there will be continual fragmentation and Foxtel is taking advantage of that."

The Foxtel CEO also predicted that audiences will stabilise after Fairfax Media reported that free-to-air linear television viewing in Australia dropped below 90 hours a month for the first time ever, one month after Netflix's launch.

"There has been a lot of hype around SVOD and clearly some big early numbers but over time people will realise there is a big difference between SVOD and a Foxtel service," he said.


"I can't talk numbers [ahead of News's results] but if you look at our third-quarter numbers, subscribers grew 7 per cent year on year and churn was 10.9 per cent, down from 13.1 per cent in the prior corresponding period. That was just after Netflix launched and you saw very strong growth based on the new pricing model. We are very optimistic."

Freudenstein also points to Foxtel's advantages over SVOD, which costs between $9 and $15 a month. "Our research shows a lot of people get it and realise it hasn't got what Foxtel has," he says.

"I am very comfortable with Foxtel's product and positioning. We have far and away best content. Netflix has no intention of having sport. We are investing in more Australian content, winning three Logies more than any other individual network, and we show more first run programmes across our platforms in a week than Netflix does in any year. There is absolutely room in Australia for both SVOD and Foxtel to grow."

Broadcast TV still ahead

Sceptics will doubtless think Freudenstein doth protest too much. But at the same time new figures from the US and the UK provide a sobering counterpoint to the wave of predictions about Netflix destroying broadcast in Australia – including pay TV.

In the US, Nielsen estimates that devices hooked to the TV such as Apple TV, game consoles, Roku (with which Telstra last week announced an Australian alliance) and "over the top" services like Amazon and Netflix collectively account for about 31 minutes a day of viewing time.

"That amounts to about 10 per cent of the size of TV viewing with a large portion of that device time for content like Netflix," Nielsen's US operation said in a note to the The Australian Financial Review, which is owned by Fairfax Media.

In contrast to the digital TV challengers, Nielsen says American adults still spend 310 minutes with broadcast TV every day (substantially higher than the 180 minutes for Australians each day).


Netflix launched in the UK in 2012 and according to the London-based TV industry measurement body, BARB, the SVOD superstar in just 14.1 per cent of UK homes after three years. It's not quite the bloodbath many believe is imminently on its way in Australia.

Equally interesting is BARB's numbers on the so-called "digital natives" – homes without a TV set. Those households sit well below the 14.1 per cent national average of all homes that subscribe to Netflix.

"If you're after evidence of a paradigm shift, then you should look away now," says BARB in its latest Viewing Report. "Netflix indexes poorly against households that don't have a TV. In other words digital natives are not huge fans of Netflix.

"Actually, Netflix viewers tend to be found in cable households; they tend to be people who own three or four more TV sets and also subscribe to sports and movie packages. They are, not to put a too fine point on it, inveterate telly addicts. It's also interesting to note that the SVOD market as a whole in the UK was actually flat in the fourth quarter (of 2014) with modest Netflix growth coming at the expense of a small loss at Amazon."

Critical of doom merchants

Tess Alps, the chair of the UK TV industry's marketing body, Thinkbox, is equally critical of the TV doom merchants. "Most of the companies that predict the death of TV are actually trying to become TV," she said last month. "And the likes of Google and Apple are using the word 'TV' because it's aspirational and signifies quality to viewers, Netflix is hilarious. To my mind, there is no question it is part of the TV landscape – it buys content from broadcasters and producers, it's available via TV platforms, it's watched on TV sets, it invests in original content, which it sells back to broadcasters – yet it positions itself as a TV-killer."

Citi analyst Justin Diddams believes SVOD is "complementary to Foxtel", with only 7 per cent of households responding to his own survey saying they were "unlikely" to retain their Foxtel subscription and 4 per cent of "non-user" households saying they were "likely" to subscribe in the future.

Foxtel's own SVOD service Presto, which it owns with Seven West Media, is lagging Netflix in third-place with 193,000 signs ups Citi estimates – rivals sledge that Foxtel is not pushing it for fear of cannibalising its handsome cable revenues. Meanwhile, the broker puts Stan, owned by Nine Entertainment Co and Fairfax Media, in second place on 332,000 sign ups.

It is a fast-moving, uncertain market both here and overseas. And – as one rival noted privately – it could change again in a heartbeat if Rupert chooses to accelerate faster into SVOD.