I am a Foxtel subscriber and every day I get that little bit closer to turning off my $100 per month payment. Not because it is too expensive, but because the value equation is getting worse, at a time when alternatives are becoming more attractive. Sure, their penetration in Australia might be growing, but we are on the precipice of disruptive change to Television, in a way that Foxtel must respond to if they want to survive. And their response needs to be before the impending disruption, or just like the music industry, they’ll be wondering what happened.
I’ll give a summary of the why, and then revert to the what they should do.
Why Foxtel is doomed
The primary reason is that their system is antiquated. The model they employ, is the same as the cable television model which emerged from the US in the late 1970’s. Yes it still exists, but it’s days are numbered. it has already happened to newspapers, it has happened to music, and TV is next. The belief that they can demand that consumers subscribe to content in a world of infinite content is foolish. The world is moving quickly from a pay to play – subscription model, to a ‘free and on demand’ model. The fact that Foxtel has access 35% of homes is irrelevant. The real competition of Foxtel isn’t Free to Air TV, it’s the alternative web enabled screens in the home; laptops, desk tops, ipads, kindles and connected TV’s. Web enabled TV has already penetrated 17% of homes in Australia. With the dropping cost of screen & web technology, the future for Foxtel is bleak.
Foxtel is reducing what we get for the same price:
Only two years ago our $100 per month gave us the gold package. Every channel, 2 free new release movies per month, the IQ recording device and approx 30 on demand shows / movies. Without notice the same amount of money gave us ‘less’ incrementally. First they removed the 2 free movies – without notice. Then they slowly started reducing the number of on demand shows. As I write this it is down to a paltry 7 shows as of today. While everyone else is giving us more, Foxtel are giving less. Anyone would think Moore’s law works in the opposite direction the way they operate.
They don’t get on demand:
The great innovation on the web and entertainment deliver is on demand. Foxtel, still choose to schedule nearly everything that is available, save for a few movies and TV shows they are promoting (the 7 mentioned above). They expect us to work to their schedule. The world doesn’t world like that anymore. They need to wake up to this before most of their customers wake up to the fact that their are far cheaper and better alternatives available than Foxtel. (Including watching all USA TV on demand on Hulu via a proxy spinner.)
They don’t provide access content for purchase without subscription:
In their wisdom Foxtel has added a ‘movie library’ which is ‘on demand’. I thought – ‘Finally they are starting to get it.’ So when I attempted to watch an ‘old movie’ I was informed I had to; subscribe to get access. I thought I went into a time warp back to 1983 or something. It is not as though the movie was going to be free. I was happy to pay for it. But they also wanted me to pay for the right to have access. How stupid are these people, given that the tubes are already connected to me TV? Surely giving everyone access could and would increase revenue via people like me sitting down to watch an old movie. They have the system upside down. They have turned off their revenue tap. This is where they should be taking a lesson from iTunes. You can download whatever you like on demand for a rental fee. I’m really flummoxed by this. I think it is currently the worst media strategy in Australia by any company.
The NBN will hurt their business:
The imminent National Broad Band Network in Australia (NBN) is very bad news for Foxtel. It is basically putting the power of HD web live stream in every home. All that needs to happen is an on demand web enabled competitor to arrive and any one with half a clue will turn off their Foxtel. Not to mention the fact that Youtube HD will become a seriously viable TV option. (If you haven’t lately, you should check out the Youtube Movies, Youtube live Concerts and Documentary’s section – it’s growing daily as are brand content channels – no prizes for guessing their strategy is to win the screen in every lounge room).
Apple Television in coming:
It was reported that Steve Jobs last great disruption was coming to Television with the Apple TV. Not the Current Apple TV box, but fully fledged in home Television screen connected to the web with levels of wizardry we can only imagine. One thing we don’t have to imagine is the depth of content that will be available from it’s existing iTunes store. All on demand, up to date and without subscription fees. When this comes – and it will, I am certain TV will never be the same again…. and Foxtel will be very model T Ford.
Connected TV is rapidly encroaching on Foxtel:
Foxtel is all about being connected to narrow cast content. Now that all TV’s sold are web enabled, we have access to everything we could imagine – Free. It’s a pretty compelling price point. The really important thing we must remember is that the price of technology is dropping. A connected Plasma 42″ TV is now as little as $500 to buy. With the user interface improving rapidly and many US streaming players arriving shortly (Hulu, Netflix, Startup XYZ) there is no space for the ‘monopoly like’ behaviour or pricing. For Newscorp it is newspapers all over again.
Users must pay for unwanted (unwatched) content:
The idea of having to buy packages is archaic. The idea of ‘Packages’ is a supply centric mantra from a time when the factory called the shots – much like travel agents did in the 1980′. But we now live in a user decides, mashup, self design commercial society. The idea that we can’t pay for the exact channels we choose (with volume discounts of course) is not design for users, just the owners. people don’t watch sport. They watch football, or boxing or surfing. people have specific needs, not generic ones. BBC viewers are different to Fox news viewers, so why treat them them same and ‘bundle them up? ‘ It’s an old method which is quite simply broken.
They’ve thrown their opportunity to be ‘platform oriented':
Foxtel had their chance to own the distribution point of content on demand in Australian homes, and they let it go. They have tubes going into 35% of homes and every Foxtel discussion I have with anyone these days is around how poor the value equation is, and how they are poised to seek alternatives which they know are emerging. Their old world mentality is much like th music industry who were in love with their system, and not their customers. And this will be their downfall.
What Foxtel must do to survive:
Everything above and more.
But I honestly think it is too late. They may still exist, only via exclusive content like global sports properties. They’ve missed their chance and I have no doubt that disruptive internet technology will do to them the same thing it has done to many industry stalwarts. The most interesting fact is that, although I’m calling their game as over, the opportunity for startups in the space is still alive and kicking, which is ironic. It comes down to one basic fact, that companies who feed off legacy infrastructure almost always lose.
There are only 2 things we can invest:
Time & Money.
Rather than complaining about not having enough money to invest, invest your time instead. Time is the great equalizer. A rich person has no more or no less than you, me or anyone. We can beat anyone with what we do with our time. Learn the skills or put in the labour until it turns into money.
The trick is once the money comes in, to keep investing the time so you know how to use the money and not lose it.
There has been a deluge of cool startups happening in our local community lately. So I thought I’d feature a few of them here to spread the love, as well as give my honest views on their potential.
Wealie is a digital loyalty card which can be used in and by multiple retailers. It’s an interesting space that is starting to emerge as we move closer and closer to the digital wallet. Which Bill Gates first spoke about in his book from 1995 – the Road Ahead. I really think that NFC (Near Field Communication) will open up a huge amount of opportunity in the app space. Anything that happens on a card or paper in our wallets, will be digitized. Early movers like Wealie, will have a big advantage as they learn from their mistakes before everyone converts to their digital wallet.
I’m totally in love with Cheatspeak. As far as I can tell it is a foreign language phrase book Wiki. So, so cool. Being someone who speaks a foreign language or two, it’s premise is very solid – Living language – that represents the spoken word, rather than a text book. The idea of creating a book or language guide with the ‘simplest way to say it’ is so ‘user focused’ it is revolutionary. I’m sick of have to learn 7 ways to say one thing in a foreign language – if the goal is speaking it, then cheat speak is on the money. It has smart exit options too.
Put simply Pygg is way to send and receive money through twitter – without any fees. Micro payments for a micro blog. Another smart startup which seems to flow nicely into NFC and the digital wallet. Another thing which just adds a level of goodness to it, is the fact that it is money in ‘public’. Good deeds and rewards are on display. I reckon this could really add a layer of fun to what Mick and the team are up to.
Started by all round good guy Mike Boyd – Cupstart is another ‘money remover’, in the sense that we don’t need actual dollars in our pockets to use it. Cupstart is a platform used to order & pay for coffee online at your favourite cafe, skip the queue and pick up your coffee on arrival. Which could move into all sorts of payment system / retail options. A web enabled retail POS system anyone? I like the idea of starting in cafes a lot, because the frequency of usage (buying coffee) moves the startup up the learning curve much quicker. (as a side note Mike is looking for a ‘tech’ partner based in Australia….)
So the virtual assistant is well known and successful on-line. Get ready for the physical version. TaskWant is a geo-locating app to help you find people to do stuff for you. You can either be a task provider or doer. It’s a great way to take advantage of idle labour and get cashie jobs. I love it. I reckon this could blow McDonalds out of the water for teenagers and be a much better option – which is just one of the potential strong points. Not to mention Charlie the Squirrel.
Another cool thing is that everyone of these is from people in our local startup community in Australia. The world is changing, the only question remaining is whether you want to be a change maker or change taker.
Get out there and launch!
The web has changed business models so much, it’s hard to know where to start when discussing the implications of revenue streams.
In the past I’ve been very clear on my views about Free – it is not a business model. It’s a sampling campaign, or a related revenue strategy. But in truth, the methods for extracting revenue are being totally reinvented by the web. Given the cost of producing everything from flat screens, the flat pack furniture to microchips is in a state of rapid deflation means we need to reconsider the revenue equation – or more appropriately, the timing of the revenue.
For a business to survive, revenue must be extracted.
But before revenue can be extracted, value must be created.
When creating web based startups it is very hard to create value, until we have large numbers of participants (espoecially if we are not selling physical or virtual goods). The way to get large numbers of participants is the reduce the barriers to usage and entry. And the best way to reduce the barriers to entry, is to reduce the price, or even remove it entirely in the short term.
So when thinking of pricing models we need to forget about the price and start thinking about value. It isn’t until we have created value, that we will be able to extract it. So the real question is not ‘what to charge’, but has value been created yet?
In many ways Gamification is an evolution of the long lived Loyalty Scheme. But so much better, and the evidence exists even at the simplest level – the words themselves.
Loyalty Scheme: Firstly the word loyalty seems very one way. It was / is as if the company expects us to be loyal to them. And although one might argue that loyalty is a two way street, the second word of the phrase is the giveaway – ‘Scheme’. Yep, sounds like some kind of a trick to me. A scheme to make us believe we are getting a good deal, when in truth we are just a number on some kind of cost / benefit analysis spreadsheet. Intuitively, schemes feel like there is a winner and a loser.
Gamificiation: Games are fun. We spend most of our childhood playing them and find as many excuses as possible to play them as adults. ‘Who wants to come to the football this Friday night?’ A game needs at least two willing parties or organisations to play. Sometimes we can collaborate and form teams and clubs and divisions and theme songs and have awards nights and weekend getaways. We can celebrate wins together and lament the losses, either way we like to return to the game and try and win, or even better our own score, although it’s collaborative, it’s also personal. The game is the ‘thing’, not the result of it. Games contrive all of the important human emotions that make our hearts beat.
Play is human. Great games even turn into industries.
Yep, it feels to me that gamification facilitated via Moore’s law is here to stay.
Yesterday I was reading through the business and tech sections of the huffington post. There were so many new stories on new business ideas, new technology, upcoming research, recently funded startups, and product launches from tech giants that I had to stop and take a breath. I realised that there is no possible way to keep up with everything happening in the business world. It was a bit deflating to read it all. I felt out of touch.
With exponential change happening we’ve got to stop trying to keep up. It’s a waste of time. Instead we need to remember no one is responsible for all this innovation, and the only way to be part of any of it, is by focusing on the tiny segment which is right in front of us.