Can Game of Thrones save Foxtel?


Yesterday’s return of hit series Game of Thrones saw pay-TV operator Foxtel smash audience records, and the numbers are likely to climb even further this week.

Foxtel says the first episode of the sixth HBO series, titled The Red Woman, recorded a total audience of 727,000 – more than 31% over season five. It also narrowly beat the previous record holder – the 2011 Rugby World Cup semi-final decider between Australia’s Wallabies and the New Zealand All Blacks – which had an audience of 719,000.

Once consolidated numbers for the week are recorded, the number is expected to rise even higher and expected to eclipse the 1 million-viewer mark. Foxtel is airing the first episode of the new season a number of times this week.

The record comes despite the more than 1 million estimated pirated downloads via BitTorrent, according to TorrentFreak, with Australia the worst offender accounting for 12.5% of download activity.

But is the record enough to save the pay-tv operator?

Just today, Quickflix Ltd (ASX: QFX) filed for voluntary administration, mostly due to being unable to compete with better-capitalised rivals including global giant Netflix as well as locals Stan and Presto.

In the US, HBO is aiming to become a rival to Netflix, expanding its global presence and ramping up production of its own content. Netflix has now been switched on in 130 countries around the world and has 70 million subscribers.

HBO currently owns the rights to Game of Thrones, with Foxtel licenced to air the show in Australia, but that may not always be the case.

For Foxtel’s joint owners, Telstra Corporation Ltd (ASX: TLS) and News Corp (ASX: NWS), what to do with the pay TV service must be a cause for concern. Foxtel has been unable to expand its subscriber base much beyond 30% of Australians, and the competition from the subscription video on demand (SVOD) services like Netflix has already forced Foxtel to slash its package prices – but they are still multiples of a monthly Netflix subscription.

A potential listing of the 50% of Foxtel on the ASX was considered by Telstra but has reportedly been scrapped. Media reports suggest Telstra is concerned about Foxtel’s future due to rising competition from SVOD services as well as digital competition.

The one ace in Foxtel’s sleeve is its hugely popular coverage of the NRL and AFL which it shares the rights to with Channels Seven and Nine, respectively owned by Seven West Media Ltd (ASX: SWM) and Nine Entertainment Co Holdings Ltd (ASX: NEC).

Foolish takeaway

We’ve suggested several times that traditional free-to-air television and its linear programming was facing structural decline from the ‘watch anything, anywhere and anytime’ services currently available.

Foxtel could find itself in the same boat, and has a lot of work to do to convince Australians it’s worth paying multiples of Netflix’s monthly subscription for. If it can keep finding content that’s hugely successful like Game of Thrones, it may well have a future.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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