More Examples of Business Models Under Threat cont.
Foxtel (rise and fall)
Introduction
Foxtel with once Australia's most profitable media organization
”...a decade ago, the cable television broadcaster reached nearly one in three households. It annual earnings were close to $A 1 billion…”
Sam Buckingham-Jones, 2024
In the last decade it has faced strong competition from streaming businesses like Netflix.
It aimed to get the best of both worlds by building low margin streaming businesses like Kayo and Binge, while trying to maintain many as possible
customer for its high margin, set-top boxes. The balancing act is becoming harder; its revenue
“...set to shrink by a further $A 150 million over the next 3 years to $A 390 million……a company once feted for a $A 2 billion valuation and a
public listing now faces an uncertain future…”
Sam Buckingham-Jones, 2024
Some major suppliers of content to Foxtel, like Warner Brothers Discovery, HBO, World Wrestling, etc are no longer available for Foxtel (2024).
However, the deal with Australian Football League, Cricket Australia, etc will help alleviate some of this financial pain. Also, development of Hubbl
which will to bring together the 18 streaming Foxtel platforms available in Australia into one searchable interface.
Foxtel has essentially 2 separate businesses, ie one dedicated to streaming and other to maintain the old cable network,
“...Streaming has a completely different sensibility and matrix of value for customers...…we do see a real bifurcation of markets. We saw that
between Foxtel and Kayo when it was introduced. Generationally pay TV is something that's known and loved and used by an older generation
that were young families 25 years ago. We will continue to run streaming businesses and Hubbl separately from Foxtel.
Practically Hubbl is not very different from Apple TV or a Google Chromecast…”
Patrick Delany as quoted by Sam Buckingham-Jones, 2024
The streaming customers add very little revenue, ie
“...they made up 66% of Foxtel customer base, just 23% of its revenue. Foxtel 1.5 million set-top box customers contributed 63% of its revenue…”
Sam Buckingham-Jones, 2024
In this deteriorating financial situation, Foxtel has been cutting costs, including reducing staff numbers.
In addition, to top players like Netflix, Amazon Prime and Disney+, there are 2nd tier players like Stan, Paramount+, etc that Netflix has to
compete against
NB
“...Entertainment is getting more competitive……they are all fighting with strong content for the same share of households’ viewing and budget.
There is not much left from a subscriber growth perspective, so you are hoping that the industry works together and pushes prices at the same
time…”
Darren Leung as quoted by Sam Buckingham-Jones, 2024
Will Foxtel be able to re-invent itself?
Australian Retailers (Loyalty Programs)
Loyalty programs have helped reinvent Australian retailers.
Traditionally loyalty programs were complementary to their retail business. Now they are pivotal. For example, Myer (an Australian retail conglomerate over 100 years old) has a loyalty program
“...is central not just to Myer’s survival but it's entire value proposition, with 4.3 million active shoppers and more than 7 million accessible members. Today, most of Myer’s sales - which hit A$1.8 billion in the December half - are in the hands of Myers One members. The Relentless focus of Myer One has improved results on all major loyalty tracking metrics: greater engagement, new member acquisition and spending, personalization and rewards…”
Carrie LaFrenz, 2024
Further evidence of the importance of loyalty programs, in 2024 Myer appointed a new executive chairwoman (Olivia Wirth) who is a specialist in loyalty programs, not retailing. She had a successful track record running the frequent flyer program for Qantas (an Australian-based domestic and international airline).
A similar story exists for Australia's biggest retailer (Woolworths) where Amanda Bardwell who heads Woolies X (digital and loyalty) was named as the next senior manager, putting loyalty and data ‘front and centre’.
These loyalty programs aim to get suppliers to fund all the ‘bonus earn activities’ through their programs and using AI. AI-powered engagement is improving communications by making it more personalized and the programs are successfully bringing in partnerships and suppliers. For example, Myer One has partnerships with Virgin, Amex and the Commonwealth Bank.
“...Supermarkets have harnessed suppliers to fund bonus points, airline programs utilize their partners to provide new earning opportunities, and Myer One has done a top job in developing a platform that enables brands to create their own campaigns targeted at desired cohorts……The real battle within loyalty programs is being fought over the delivery of meaningful value……Rewards and ability to use points as currency is increasingly important…”
Philip Shelper as quoted by Carrie LaFrenz, 2024
Irrespective of the product or service, the principles of loyalty programs are the same: use of the data collected to determine which customers to court and which to ignore. Surveys have shown that around half of respondents agreed that a retailer’s loyalty program influences their purchasing; need to put the right offer in front of the right customer.
Some insights into customer loyalty programs:
- 95% of consumers are members of one or more loyalty programs
- There has been an 18% increase in customer stated usage of loyalty programs in the last 12 months
- About 50% of customers in categories such as fashion, homewares, takeaway food, and beverages state that loyalty programs influence their choice of retailer; with groceries this increases to 79%
- Age impacts loyalty program usage, eg around 70% of Gen Z and Millenniums are influenced while only 35% of Boomers participate.
(main source: Carrie Frenz, 2024)
Pop Music
A couple of decades ago musicians, entertainers, singers, artists, etc used touring to drive record album sales. This has reversed since the pandemic (starting 2020), ie touring
“...proceeds now account for between 70 to 80% of an artist's income......with albums used to drive ticket sales on tours which have vastly greater pay-off..."
Samantha Hutchinson, 2024
This has resulted in a different mindset in which artists focus more on the business side of touring and have developed different kinds of values about health practices, ie sex, drugs and rock 'n' roll had been replaced by kale, kombucha and quinoa:
"...They're travelling with their own personal trainers, their chefs and they're focused on making sure they don't burn out..."
Samantha Hutchinson, 2024
Linked with touring is the selling merchandise.
Furthermore, social media, with fans recording and sharing the concerts, has significantly increased the reach of each performance.