Foxtel Media CEO Mark Frain dishes on how the customer and advertising experience are shifting amid the proliferation of streaming. Episode TranscriptPlease note, this transcript  may contain minor inconsistencies compared to the episode audio.[00:00:00] Damian: I'm Damien Fowler.[00:00:01] Ilyse: And I'm Ilyse Liffreing.[00:00:02] Damian: And welcome to this edition of The Current Podcast.[00:00:05] Ilyse: This week we're delighted to speak with Mark Fra, the CEO of Foxtail Media.[00:00:10] Damian: Foxtel Media is the advertising arm of the Foxtel Group, one of Australia's leading media companies, with more than 4. 7 million subscribers.[00:00:19] Ilyse: Like many legacy broadcasters, over the last decade, Foxtel has reinvented itself for the Netflix era, building on its pay TV subscription model by adding in streaming platforms such as Binge and Kayo. It supports streaming services.[00:00:35] Damian: And last year, Foxtel introduced an ad tier on the service, following in the footsteps of Netflix and Disney We started by asking Mark about the state of the television advertising model in Australia this year.[00:00:46] Mark: Yeah, I mean, I think like the rest of the world, the TV market here in Australia is, going through significant change with the growth of, all of the streaming platforms with many of the, add tiers and add capabilities starting [00:01:00] to, launch in the Australian marketplace. Probably what is pretty unique, in terms of the Australian marketplace is that there's currently three major freeware broadcasters that all have their own, digital, platforms as well.[00:01:14] so they're managing transition from linear to digital themselves, but at the same time you've just got this enormous groundswell of video inventory coming from the streaming player. So we're, certainly getting towards a tipping point in the trends in the Australian TV marketplace at the moment.[00:01:31] Damian: Mark, could you just, put into perspective the growth of streaming that you've seen at Foxtel?[00:01:41] Mark: Foxtel has been on an enormous transformation for last four or five years. And if I look, probably four or five years ago, just under 10 percent of our subscribers were streaming customers. And if I look at where we are today, that number is just under [00:02:00] 70%. So a quantum growth in the type of customer we've got.[00:02:04] And critically, what that has also meant is that in the last four or five years, the Foxtel customer base Has grown pretty much close to 100 percent from where it was previously, and that's all been down to, the growth of streaming. And secondly, if I look at it from a Foxtel Media, advertising perspective.[00:02:27] And probably only three years ago that seven or eight percent of our advertising revenue came from digital. As we go into the next financial year, that number will be just under 60%. So we're the beneficiary of that change in customer base from Foxtel, from traditional broadcast TV business to one now that is, is leading and driving streaming the Australian marketplace.[00:02:51] Damian: Yeah, in terms of Foxtel, could you talk us through your relationship between, your existing linear model and [00:03:00] your launching of an ad tier on Binge?[00:03:03] Mark: Yeah. So traditionally, Foxtel has been the, major pay TV provider. In the Australian marketplace, with numerous, linear channels from sport, entertainment, news, all the typical, pay TV channels you would have, coupled with, two digital platforms, Foxtel Now, that have really been the IP services of Foxtel.[00:03:26] And then over the last four to five years, the Foxtel Group. Has launched heavily into streaming. Firstly, it launched KO, a dedicated sports streaming platform with over 40 premium sports, including both the major codes locally in Australia and a lot of the global content like Formula One, as an example.[00:03:50] About 18 months, two years after launch of KO, we then launched Binge. which is K. O. 's sister if you like, entertainment [00:04:00] platform backed by a lot of HBO, NBCU, content. So, made a significant jump, into streaming in the last three to four years. And that has allowed the Foxtel group to pretty much double its subscriber count, from being a traditional pay TV company to now one that plays heavily in streaming.[00:04:19] Damian: You know, in the streaming ecosystem, which we all know is highly competitive, right now, everyone's looking for subscribers and numbers, what's the competitive advantage that Binge brings to the table?[00:04:32] Mark: Yeah. Yeah, you're right. I mean, number one, it's enormously competitive. I think table stakes now are a premium level of content. unfortunately from the global content producers that we work with, coupled with our local content, I think we've got a significant library of content that has debt. I think if you, scratch the surface on some of the content offerings, you don't get the depth of premium content.[00:04:59] On [00:05:00] Binge, we've been very strict on running Four to five minutes of ads an hour on very tight on frequency capping just to make sure that, we give those customers that are buying into the value equation of subscription and advertising a very good customer experience, which includes both the content they're watching and also the advertising experience.[00:05:22] Ilyse: would you say Binge competes with other streamers when it comes to like content acquisition, production, and then maybe like ad experience?[00:05:33] Mark: Yeah. I think we're fortunate enough, that the way that almost the origins of the Foxtel pay TV business has given us relationships and longstanding content relationships with the likes of NBCU, Warner Brothers, Discovery, the BBC group, et cetera. So many of the big globally renowned, media businesses.[00:05:59] [00:06:00] So that has allowed us to transition a lot of that content from the traditional pay TV channels. onto an on demand platform like Binge, and then we've been a significant investor in local content. So we've been able to both produce a number of Binge originals but at the same time leverage the existing local content we've already produced across the Foxtel group. Almost, I mean, we often describe it internally as one kitchen with many restaurants. and by that, I mean by the many different points of distribution, whether that be a linear paid TV channel, or whether that be a binge, on demand platform.[00:06:45] so we talk a lot about, watchability as a term in our business and making sure that every platform that we represent, that the ad experience stacks up to be the most watchable experience for customers.[00:06:59] Ilyse: And does the [00:07:00] content you have speak to specific audiences? Or are you finding that your audience is really across the board?[00:07:11] Mark: There's no question. I think that's the beauty of the streaming platforms that various elements of kind of content bringing a very different audience. And we're in the streamer landscape, you're we're in this very much pause play mentality from a customer perspective. So if that content is so appealing for customers, they may come in.[00:07:35] And binge on that content for X amount of weeks or months and then dip back out.[00:07:40] Particularly with the under younger end of the market that come in and out and then maybe into another streaming platform where they've cited another bit of world kind of renowned content that's got heaps of social buzz with it.[00:07:52] Ilyse: Mm hmm. Yeah, right? That's what I was gonna say.[00:07:56] Damian: I think. Not to malign as a Gen X er. As [00:08:00] a millennial, I'm not[00:08:03] Ilyse: anything. Um, and so, that's interesting when you talk about, content in that way. and that has a lot to do with, viewer retention, as you mentioned. Is there anything else that, Foxtail is envisioning or, strategizing? to really hold onto those viewers or attract new ones.[00:08:25] Mark: Yeah, I mean, I, I think from our perspective, we've gotta, we've gotta continue to evolve, the customer and product experience. There is, there's not a moment to stand still in this streaming environment. whether that be improving the. The viewer quality from HD to 4K to 8K. I think customer expectations are so high.[00:08:50] And whatever we do, in terms of the content experience and the ad experience, we just got to make sure that total value equation, stacks up.[00:09:00] Ilyse: Yeah, you know, in the U. S. at least, bundling is very popular. especially if you're a major network like Disney that's bundling like three different of its like streaming services. What about when it comes to like partnerships with you guys? Are you looking into any of those types of offerings when it comes to like bundling?[00:09:22] Mark: Or, or are you looking to like partner with any network or streamer? , is kind of partnership is embedded in our model. whether that be, as I mentioned before, that the content partners, the Warner Brothers, the NBC use, of this world. So we've had a long standing relationships and partners with them moving forward and going back to the earlier points upon the value equation.[00:09:49] even in the core, Foxtel set top box business over time, we've continued to add, all of the streaming platforms to that service, whether it be Netflix, whether it be [00:10:00] Amazon, whether it be Paramount. So, customers have felt they were getting more of their content choices, more of their streaming platforms in, in one place.[00:10:10] So there's been a level of partnership with the streamers right from the outset even, with the core set, top box business, and we've carried that on, to where we are. today, in the last, few weeks we launched, Hubble, which is our, new streaming ion business. and within that, platform we've got a stack and save, opportunity for customers where.[00:10:33] to your point on bundling, the more subscriptions they have they get a bottom line discount and I think there's so many customers out there I put myself in that bracket that you sign up to numerous streaming services and half the time You don't know exactly how many you've got and how much you're paying for.[00:10:50] Um, so we've actually centralized that into One platform, one invoice, with a stack and save, kind of discount position for customers that have multiple [00:11:00] streaming options. So partnership is embedded in our model, no question.[00:11:03] Damian: Yeah, that's[00:11:04] Ilyse: easy. I wish we had that here, honestly. Because there's not one, really.[00:11:08] Damian: Yeah, right.[00:11:09] Ilyse: Kind of have to look back on everything you're charging, and that's, your card, and that's, that's[00:11:16] Mark: it doesn't take long for months to pass and realize you're still paying for Yeah,[00:11:24] Mark: In terms of like your kind of customer research or, your audience first approach, what are you hearing from your customers vis a vis, ads, the ad, not the ad experience per se, but whether, ads are a game changer for them, you know, in this era of kind of subscription fatigue and all of that.[00:11:43] Damian:  Are customers receptive to that ad load you're talking about and is that basically a selling point for Binge and your streaming channels when it comes to advertisers and attracting advertisers to those platforms?[00:11:57] Mark: in everything we do from a, [00:12:00] an advertising perspective to, respect our customers. We've got a very, customer first mentality within the Foxtel group. It's one of our, it's one of our values. And to your point, we test, the various levels. As I mentioned earlier, engagement and attention to our customers.[00:12:17] in terms of their level of response to the content and the advertising. And we kind of, we've seen their perceptions of, the binge brand hold really strong as we've added advertising to that platform. And you've got to look at the economic backdrop here. disposable incomes are under significant kind of, pressure, the hike in interest rates globally over the last.[00:12:43] 12 to 18 months have put enormous pressure on household spending. So I think the introduction of the ad tiers, not just the binge, but for a lot of the global players has been a, another, kickstart to, subscriber [00:13:00] growth levels, across the industry. And it just gives customers optionality.[00:13:06] and probably what was interesting When we added advertising to the binge platform, clearly we've done some modeling on what might be the churn levels of customer out of that tier and what might be the spin up into the next tier without advertising. And in both kind of cases, number one, the actual churn level in terms of those customers pulling out the platform was well under expectations.[00:13:39] in the zero point something kind of percent and a handful of more customers of spun up. So net, we were left with a scalable audience, even probably bigger than we actually modeled for our advertisers. So it was a really good story. So I think the research got us in the right place in terms of the ad experience we put forward.[00:14:00] Ilyse: I know we've written quite a bit about how, like, streaming is democratizing, sports in a way for, maybe perhaps, smaller brands to get in on sports, versus in a linear environment where it's, More expensive, usually. is that what you're experiencing? Is there a difference in brands wanting to advertise on linear versus streaming? Or, and how is that like playing out?[00:14:25] Mark: it's a good question. A lot of our, premium brands have transitioned into streaming at the same time to ensure they've got. Yeah. Brand presence and share a voice across both live linear and into streaming, but you're right that there's no doubt it's given opportunities for smaller brands to get on board and be involved in live sport, which historically may have been, cost prohibitive.[00:14:52] and what I would say in almost summary of that trend, we've, on our, major [00:15:00] sporting, properties here in Australia, whether that be the cricket, whether that be the AFL or the NRL, which I've already mentioned, in the last couple of years, we've had a record number of advertising partners on all of those kind of codes.[00:15:12] And that's been the blend of those big premium advertisers that have always been involved in sport, that have had the financial bandwidth to do so. Plus, A multitude of new brands that have come on, streaming. So we've got more, if you like major sports partners than you've ever had before.[00:15:30] Ilyse: I feel like it's also pretty interesting because when it comes to live sports streaming kind of offers an environment where, I don't know you can watch them at any point. For one thing, and then two, we've, at least we've written about how some more like niche sports are appearing in streaming environments, versus linear, and I'm curious what you think about that. Pickleball.[00:16:01] Mark: Great example. very timely, actually. last night I was, fortunate enough to be out with, wheelchair rugby Australia. and as an example, we brought, their content onto the KO platform, probably four years ago now. And what that has done to that code in particular, it's allowed them to grow exponentially in the number of teams that now play wheelchair rugby in the Australian marketplace, the number of participants they've got.[00:16:36] the number of females that are now playing it, and across those three or four years, the quality of that team has meant that they've been able to, they've won the World Cup, they've won the World Championships, and they're off to, the Olympics, later this year.[00:16:53] So, outside of the big ticket, sports, It's also great to show the impact you could [00:17:00] have on other sports that wouldn't be kind of, that aren't out there of competing for sports rights. It's a very different model about how you support them and their corporate growth moving forward.[00:17:12] Ilyse: know, it, it seems, even in Australia, it's a very fragmented media ecosystem. How are you thinking about measuring audiences, especially now with the rise of, alternative currencies? what's, the Aussie gold standard,[00:17:31] Mark: it's a fascinating question and I, myself and my team spend a lot of time, observing, reading, going to the U. S., the U. K. and observing the trends. And over the last probably three to four years, I mean, there has been a An explosion of alternate currencies in the U. S. when you look at the likes of, video amp and others taking the challenge to Nielsen, we observed that.[00:17:56] And whilst I don't think we're going to get to the [00:18:00] same level of different currencies in the Australian marketplace, I think you will see, publishers Probably grab the accountability of measurement themselves. moving forward. in this market, we've got, post town, which is a kind of, Nielsen supported, service and from a Fox sale perspective, we're part of that.[00:18:24] Industry standard, but we also recognize that we've got, set up box data with IP return path. We've got multiple streaming platforms. So a there's a role for us to make sure We leverage, that data probably more than we ever have. and that's not just to use it, internally in terms of retention and everything else you use your own data for.[00:18:52] But how do we actually use that for not just targeted advertising? How do we use it as a currency [00:19:00] moving forward? Because the depth of that data is so strong.[00:19:05] Now, While you were stating some of the various partnerships that you do have. And I'm just curious because it sounds like so many. how do you possibly manage all the partnerships? Especially with Foxtail's, yearly roadmap. I[00:19:24] it's a great question. I think, fortunately, a lot of, the content deals that the Foxtel business has is, Number one, they're multi year agreements, and therefore, the actual, the start and renegotiation dates, a lot of, a lot of those content deals are spread out across multiple years, so that gives us an opportunity to probably manage the heavy lifting part of those deals, which is often the renegotiation, and the work to move forward to continue a deal.[00:19:58] [00:20:00] But I think, this is not just, on the content side, this is certainly on the advertising side. One piece of feedback that we continually we get and probably more so than ever right now is the importance of senior relationships in the industry. Never have we seen probably an influx of such scale in terms of global streaming competitors coming to the market, particularly on The advertising and add to your side.[00:20:35] And one thing that I think we can, that can continue to stand the same good state is the senior level of relationships that we hold in the industry. And that's not, that's not exclusive to Australia. I think that's in any market. and that's one part that. We take very seriously in terms of how we manage, our partnerships, whether they be content or advertiser [00:21:00] related.[00:21:00] Damian: I guess we'd like to get a perspective of your, year in view. what's exciting you about the next six months?[00:21:09] Mark: I think going back to the point of kind of competition, we'll have, Amazon Prime will launch, its, advertising service, from a streaming video perspective later this year. Um, Paramount Plus have just announced the launch of their, ad tier. So there's enormous activity and interest in the category.[00:21:29] So our focus is number one, to be part of that growth curve in streaming video, if not leading in many, many areas, and probably one of the areas that I'm being truly honest, I wouldn't have forecast that it. Thank you. our involvement as a business, whether that be Foxtel Media or me personally, in audiences and in measurement, I've never been as personally involved, in that area.[00:21:59] And [00:22:00] I think there's a, there's an opportunity to get that right. and most importantly, getting that stands us in great stead for future growth. So seeing an explosion in both currencies and measurement, attention, engagement, and new metrics. So that feels like the new battleground for us moving forward and one that from a Foxtel perspective, we want to make sure that we lead.[00:22:27] Mark: And that's it for this edition of The Current Podcast. We'll be back next week, so stay tuned.[00:22:33] Ilyse: The current podcast theme is by Love and Caliber. The current team includes Cat Vessey and Sydney Cairns.[00:22:39] Damian: And remember I'm Damian.[00:22:41] Ilyse: I'm Ilyse.[00:22:42] Damian: And we'll see you next time. And if you like what you hear, please subscribe and leave us a review.[00:22:47] Also, tune in to our other podcast, The Current Report. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.