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Foxtel’s newest threat to free TV

Foxtel will launch a new service this year that will allow users to watch TV shows and movies on demand through their broadband connections. Consumers will be able to access more than 40 channels and over 200 video –on-demand titles from start up.

Richard Freudenstein, CEO of Foxtel made the announcement today, which will allow consumers to access Foxtel services without the need for a Foxtel set-top box and dedicated connection. The Foxtel On service will relaunch in June as Foxtel Play and consumers will be able to subscribe by the month, with no lock-in contracts.

Packages of Foxtel channels will be available from as low as $25 a month – less than the current basic Foxtel product through a set-top box.  A stand-alone subscription movie service is also expected later this year.

While Foxtel’s cable and satellite delivery channels will remain the cornerstone of its business, viewing content on other devices is becoming increasingly more common. The Foxtel GO service allows subscribers to view a selection of channels, via Ipads, anywhere they want. Mr Freundenstein said that the app had been downloaded to more than 500,000 devices and an Android version was coming in June with PC and Mac versions shortly thereafter.

For free-to-air broadcasters, like Ten Network Holdings (ASX: TEN) and Seven West Media (ASX: SWM) this represents an enormous threat. With internet-capable TVs already available, consumers will be able to watch what they want when they want, as well as having a vast variety of choice, in a similar way to which they watch free-to-air TV now.

For some time, another company, Quickflix Limited (ASX: QFX) has been trying to establish a business modelled on Netflix in the US, by providing streaming shows and movies to subscribers. Foxtel’s latest move could swamp Quickflix and the company will be lucky to survive.

Foolish takeaway

Foxtel’s joint owners, Telstra Corporation (ASX: TLS) and News Corporation (ASX: NWS) will likely be cheering the move to internet TV (IPTV), but it could be another nail in the free-to-air coffin.

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