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  • Writer's pictureNick C.

Binge launch and market positioning in the streaming wars

Updated: Feb 2, 2021

Foxtel has announced it is releasing its new subscription platform Binge on Monday 25th May. This means more content choice for Australian consumers, and the timing is great for those of us who are close to finishing Netflix’s catalogue after 10 weeks of COVID isolation. The service will include part of Foxtel Now content and hit shows as Ballers, Chernobyl, Game of Thrones, The Sopranos, The Walking Dead and Westworld.

The problem Foxtel is trying to solve is that for too long it has skimmed a high price for its content, around ten times the price of today’s streaming services. Foxtel initially introduced Foxtel Play in 2013, now Foxtel Now, and its sports streaming service Kayo in 2018 in an effort to fight the streaming alternatives to its previously dominant paid broadcast service.

News Corp’s recent Q3 earnings press release demonstrates the result of its subscription video services activities. Between March 2019 and March 2020, its total number of subscribers has increased by 1%. This result is attributed to Kayo doubling its subscriber base during the period to offset the drop of Foxtel’s core subscribers, with 408,000 Kayo paid subscribers at the end of March 2020.

Unfortunately, revenue went down 7% and EBITDA 24% during the same period. By introducing fighter brands to compete in the streaming wars, Foxtel is losing revenue from some its more price conscious customers. Foxtel took a risk of cannibalising of its own customers with a cheaper offering to retain subscription numbers. Unfortunately, that has led to lower revenues and, most importantly, lower margins.

March and April 2020 were tough months for many companies due to COVID-19. Interestingly as of May 2nd, there were only 272,000 Kayo paying subscribers left. This means Kayo shed a third of its subscriber base in a single month due to the suspension of live sports.

Enter Binge!

Initial commentary from CEO Julian Ogrin and messaging through video advertising indicates a communication strategy relying on the breadth and quality of the catalogue as a unique selling proposition. It has great quality shows to be sure, unfortunately it is fighting in a very tough content space. When it comes to positioning, exclusive and original productions seem to be the name of the game these days. The question thus remains whether Binge will be able to leverage its partnership with the likes of HBO for such original and exclusive content.

Choosing a less expensive alternative (LEA) strategy is a sound one at first glance. One can draw a parallel to aviation with the emergence of Virgin Australia, Qantas launched Jetstar as a LEA in order to manage two brands at both end of the price spectrum and combat Virgin on its turf. Qantas’ strategy was ultimately successful. In this instance however, the LEA is not positioned as a cheaper alternative to Netflix or Amazon Prime or even Stan. It is only cheaper than Foxtel Now.

Binge is set to position itself at an entry price point of $10 per month on the cheaper end and $18 per month at the top end. How does this compare to its competition?

A quick market benchmark reveals the price positioning, while comparable to Stan, still rates as most premium among its competitor set (with Binge not offering 4k quality, the tier 3 comparison is not like for like).

The benchmark exercise interestingly reveals only Stan and Foxtel use rounded price points, with the US giants all using the more sophisticated pricing psychology of 99c. Amazon, Apple and Disney also do not offer any tiered options for subscribers, rather aiming for a single price point. The aim here is both one of low-cost positioning, they are all below $9, and simple communication.

When assessing price, one should always contrast it against value. Of course, comparing catalogues would be an extremely biased exercise subject to individual preferences. Three companies however benefit from key differentiators. Netflix has the largest catalogue and subscriber base. Amazon bundles its delivery service with its streaming service, leveraging a unique selling proposition no other streaming platform can compete with. Finally, Disney + with its Disney, Star Wars, Pixar and Marvel catalogue presents the best positioning against a younger demographic and parents.

Does having 3 streaming services seem like overkill? Well, having Netflix, Disney + and Amazon Prime will only cost you 97c more a month than just having Foxtel Now… and you get to enjoy free shipping under 2 business days.

With a new entrant in an already concentrated category, here are 3 relevant marketing questions these companies should be considering:

1.      What need does your offering solve for and who is it targeted to?

You should be going one step further than just thinking about offering unlimited content to users. Original content needs constant production and re-investment to keep the subscriber based loyal. As a company, do you have a clear needs-based segmentation and targeting strategy? Disney + has a great positioning with its content answering a clear entertainment need for a specific demographic (who does not necessarily mind watching Frozen twice a week). Foxtel on the other hand should consider whether it makes sense to carry all of its current brands and whether each product is tailored to answer a certain customer need or segment. How are they managing channel conflict and content offering at different price points? Should they retire certain products in this ecosystem?

2.      How much content do customers need and how much are they willing to pay for it?

Not all customers are equal, and they certainly display different behaviours. There is for the lion-share of the market however, a number of subscriptions we will not go over; there is an amount of money we will not accept to pay. To my earlier statement around whether having 3 streaming services was overkill, the answer is ‘it depends on your needs and behaviours’. Therefore, a needs-based segmentation can help companies understand how to make their offering compelling to a specific part of the market to capture share. Your content needs to be differentiated and targeted to get any significant loyal customer base, and to win at the streaming wars your content will need to be deemed essential to a large portion of the market.

3.      How do I attract and retain subscribers?

Ever joined a service just to binge watch a particular show? I personally subscribed to Foxtel Now to watch Game of Thrones and to Disney + for The Mandalorian. I have also cancelled my subscriptions as soon as I was done with these two shows. I am sure I am not the only one doing this. Content attracts customers but companies need to keep them loyal. Barriers to exit may lead to subscribers to be reluctant to join in the first place, so you need to use carrots, not sticks. These companies already have low barriers to entry though free trials, but they have not yet figured out how to incentivise loyal subscribers.

In summary, those companies with the best marketing strategy and execution stand to win big in the streaming wars. Breadth of quality of content are just table stakes. Market concentration is now forcing companies to think more strategically about which customer segment they are targeting and how to position themselves effectively. Do they have the right mix of products offered at the right price to be competitive? And finally, are they thinking about making the subscriber sticky and loyal enough to remain a paid subscriber with so much content temptation. One thing is certain, as consumers we are lucky to be living in the golden age of content.

What are your thoughts?


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