Merger Of The Australian Pay TV Operators Foxtel And Austar Approved By The ACCC

From the Sydney Morning Herald:

Pay TV merger approved

AFTER protracted negotiations with the competition watchdog, the $1.9 billion merger of Foxtel and Austar has been approved, after pay TV companies agreed to extra concessions to free up online rights to movies and other content for the fledgling internet television market.

More than 60 channels provided by Foxtel, including Disney, Nickelodeon [Nickelodeon Australia] and Sky News, will be available to IPTV players, with Foxtel committed to refrain from seeking the online rights under an undertaking with the Australian Competition and Consumer Commission [ACCC] announced yesterday.

While internet and content competitors argue that Foxtel and half-owner Telstra still have too much market power - particularly since Foxtel's exclusive rights to key local sports content was not on the agenda - ACCC chairman Rod Sims said the agreement could not consider competition concerns that existed before the merger was proposed.

But Optus said it was disappointed with the decision and remained concerned Foxtel's continued access to some key premium content would help Telstra lock in customers with bundled television, telephony and internet products.

''We still have deep concerns that these proposed changes do not go far enough to address the significant control the combined Telstra/Foxtel group are likely to have on access to premium content,'' Optus said. ''This is important to ensure Australians are not locked into paying prohibitive prices for premium content.''

Optus regulatory spokesman Andrew Sheridan said popular sports content had been targeted by regulators in other jurisdictions after complaints by rivals, citing a 2010 decision by UK broadcast watchdog Ofcom to force BSkyB to allow rivals access to premium sports content at a cheaper rate.

But the undertakings provided by Foxtel to the ACCC were ''not intended to resolve competition or structural issues that may already exist in the relevant markets and are unrelated to the proposed acquisition'', the ACCC chairman said.

Mr Sims said the commission was well aware of competition concerns in emerging and existing markets and would continue to monitor them, ''including consideration of whether exclusive content arrangements have the purpose or effect of substantially lessening competition or involve a misuse of market power''.

''The ACCC will also continue to consider whether there is a need to advocate for regulatory intervention in these markets,'' Mr Sims said.

However, the undertakings agreed to by Foxtel would lower barriers to entry for new competitors, including IPTV players, he said.

The agreements, which last for eight years, include a ban on Foxtel buying exclusive video-on-demand content and exclusive mobile rights to TV shows and movies when those rights are being sought by competitors to combine with IPTV rights.

Foxtel chief executive Richard Freudenstein said: ''We will now be able to create a company of scale that will deliver innovative new digital products and services, and parity for regional and city customers.''

Also, from The Australian Financial Review:

Optus, iiNet raise Foxtel competition fears

Optus and iiNet have attacked the approval of Foxtel’s $1.9 billion merger with Austar, calling it a blow to competition and a failure by the Australian Competition and Consumer Commission that will leave ?customers worse off.

The comments came as Telstra, which owns 50 per cent of Foxtel, welcomed the move, saying it was looking forward to offering its internet television (IPTV) to customers in regional areas.

Optus general manager Andrew Sheridan said the telco was disappointed by the decision and had deep concerns about the merger. But he added that the ACCC was limited in what it could cover.

“You can see this potentially from Telstra’s perspective as a pre-NBN land grab to lock away customers on triple-play services with fixed line, broadband and now IPTV services,” Mr Sheridan said.

“Those customers are going to be very difficult to unlock when the NBN swings around.

“There’s certainly a key debate we need to have on [increasing the scope of the ACCC’s powers] and Graeme Samuel certainly recognised the need for changes in this area in some speeches he made before he left the chair,” he said.

Mr Sheridan said that Sky in the UK had proven that telcos were turning to live sports and premium content to drive customers into high-speed internet services and valuable bundles of services. “Access to premium content on an exclusive basis has the potential to create some competition concerns in a number of markets, particularly in a high-speed broadband environment,” he said.

iiNet chief regulatory officer Stephen Dalby said the ACCC had failed in its duties to promote competition and that it had done nothing to address the monopoly market power Foxtel would gain from the merger. “It means the high 90 per cent of the market will be held by one provider and there will be no real competition,” Mr Dalby said. “The ACCC’s main role is to foster competition and it’s failed that test.

“The entertainment industry is converging with the telecommunications market and broadband delivery yet the ACCC has seen fit to approve this without really considering what the impact is ... and I think they’ve ignored the Telstra issue completely,” he said.

Mr Dalby said that even though Foxtel had promised not to renew its exclusive rights on a range of “linear” channels like Nickelodeon, many of the contracts would take years to expire, giving Telstra a valuable leg-up.

“Some of those exclusivity contracts will run for eight years,” he said. “It might be good for the long term ... but we’ve got to be competitive today and we certainly don’t have eight years.” But he added worse would come for customers in regional areas where telcos like Optus and iiNet were already hamstrung by Telstra’s ownership of infrastructure such as ?telephone exchanges.

“This decision will mean less choice and lead to higher prices, and if you look at Foxtel today compared to the rest of the world they’ve got the lowest penetration and the highest prices,” he said.

“We’re going to fight hard to offer attractive bundles with what we have access to ... but without access to some of that desirable content it’s going to be a challenge.”

FetchTV is the rival internet television service used by Optus, iiNet, Internode and several other providers. Its chief executive Scott Lorson welcomed the decision while admitting it would further cement Telstra’s dominant position in the telco market.

He said while Telstra’s rivals would be hit by the decision, FetchTV would benefit in the long term as Foxtel’s exclusivity contracts gradually expired. “The transaction certainly strengthens Telstra’s position in the market in the short term,” he said. “But we’re playing the long game here.

“The focus is always on premium sports because there’s a lot of interest there but it’s a very expensive proposition and more than three-quarters of households are satisfied with free-to-air content.

“That means the remainder of the market [78 per cent] have elected not to take up those services and so we can reach those audiences with an alternative.”

Also, from C21Media:

Foxtel, Austar $2bn merger goes ahead

The Australian competition watchdog has okayed Foxtel’s A$2bn (US$2.1bn) move to acquire rival pay-TV platform Austar.

The development puts to an end speculation the Australian Competition and Consumer Commission (ACCC) would veto the deal on anti-competition grounds.

Under terms of the greenlight, pay-TV market leader Foxtel has agreed to relinquish exclusive IPTV rights on TV and movies, spanning its 60-strong independent linear channels bouquet and subscription VoD rights for current and past TV series from independent providers.

Significantly, this caveat extends to arrangements with premium channels such as Nickelodeon and National Geographic.

On the feature film side, the deal blocks Foxtel from gaining exclusivity of movie content from more than half of the major US studios and eight independents. It also blocks some SVoD rights.

Furthermore, Foxtel will not be able to acquire a movie on an exclusive transactional VoD basis, and significantly stops the paycaster from taking exclusive mobile rights attached to IPTV deals.

The ACCC hopes these measures will end fears the deal will give Foxtel’s joint-parent Telstra the opportunity to offer Austar’s mainly regional telephony and broadband customer base sweetened triple-play deals and impair competition.

It also said it hoped the merger would positively impact the country’s developing telecommunications networks and “create opportunities for new and existing competitors to develop differentiated more affordable television offerings” for customers.

“By reducing content exclusivity, the undertakings will lower barriers to entry and promote new and effective competition in metropolitan and regional telecommunications and subscription television markets,” said ACCC chairman Rod Sims.

“Taking into account the undertaking which has been offered by Foxtel, the ACCC is satisfied that the proposed acquisition is unlikely to substantially lessen competition,” he added.

Telecoms firm Telstra owns 50% of Foxtel, with News Corp and Consolidated Media Holdings taking two other 25% stakes each. On completion of the deal, Austar’s 54% majority owner, Liberty Global, will exit.

A Public Competition Assessment on the merger will now follow.

The ruling is a welcome boost for News Corp’s Australian business, which is under fire after Fairfax Media’s Australian Financial Review (AFR) published allegations last month claiming that News Corp part-owned pay-TV encryption specialist NDS facilitated piracy against its rivals in the 1990s. News Corp has strenuously denied the claims and alleged that rival Fairfax was seeking to damage its local newspaper, The Australian.

Jesse Whittock
10-04-2012
©C21Media

Also, from Delimiter:

ACCC approves FOXTEL and Austar merger

news The Australian Competition and Consumer Commission (ACCC) has announced it will not oppose the proposed acquisition of AUSTAR by FOXTEL, greenlighting the multi-billion dollar merger of the two pay TV giants and paving the way for Australia’s digital TV sphere to be re-shaped.

In a media release issued yesterday, the ACCC announced that to aid with its approval, it would accept court-enforceable undertakings from FOXTEL, which will prevent FOXTEL from acquisition of exclusive Internet Protocol Television (IPTV) rights for popular programs and movie content.

ACCC had earlier announced that it had initiated a consultation on a proposed undertaking by pay TV giant FOXTEL regarding its proposed $1.9 billion acquisition of Austar, a major pay TV company. Following extensive market feedback and discussions with FOXTEL, the non-exclusivity provisions of the draft undertaking were broadened to address the likely harm to competition arising as a result of the acquisition.

The undertaking is for 8 years and includes more than 60 linear channels supplied by independent content suppliers, internationally broadcast channels including those currently not carried by FOXTEL, movie linear channels, Subscription Video on Demand (SVOD) rights to current/past seasons of television programs and SVOD rights to movies. The merger highlights include:

* Prohibits FOXTEL from acquiring exclusive rights for movies delivered on a Transactional Video on Demand (TVOD) basis.

* Prohibits FOXTEL from acquiring exclusive mobile rights for content where rights are sought by competitors to combine with IPTV rights.

* Prohibits FOXTEL from acquiring exclusive SVOD rights for a broad range of television programs and movie content, including Nickelodeon and National Geographic channels, and companion mobile rights to relevant IPTV content.

* Aims to lower barriers by requiring FOXTEL to provide necessary signal access to linear channels distributed by independent content suppliers.

* Extends FOXTEL’s Special Access Undertaking which makes it possible for content suppliers to gain access to more than 2.2 million FOXTEL and Austar subscribers.

*Does not prevent FOXTEL from acquiring exclusive rights in relation to individual sports, which is considered independent of the acquisition.

The main areas of concern with the proposed acquisition of the two major pay TV giants in Australia were in the national market for retail supply of subscription television services, especially related to IPTV, and in the regional markets for fixed broadband and telephony. The merger would have meant that Telstra, a major shareholder of FOXTEL, would be a superior player in fixed voice, broadband and IPTV services.

ACCC chairman Rod Sims said “By reducing content exclusivity, the undertakings will lower barriers to entry and promote new and effective competition in metropolitan and regional telecommunications and subscription television markets.” He added that the undertaking offered by FOXTEL is unlikely to substantially reduce competition.

As telecommunication networks develop, the ACCC expects that the undertaking will create more opportunities for competitors to develop differentiated and consumer-friendly subscription television offerings combining IPTV services with other telecommunication services. The undertaking however, does not prevent acquisition of exclusive rights to individual sports.

“The proposed undertaking has been offered by FOXTEL to address the harm to competition which is likely to arise as a result of the proposed acquisition,” Sims said. “However it is not intended to resolve competition or structural issues that may already exist in the relevant markets and are unrelated to the proposed acquisition.”

Sims added that the ACCC will remain conscious in regard to competition concerns and misuse of market power, and whether there is a need to advocate for regulatory intervention in existing and emerging media markets.

The move was immediately welcomed by FOXTEL part-owner Telstra. Rick Ellis, Group Managing Director Telstra Digital Media, said the decision was a win for consumers:

“The merger between FOXTEL and AUSTAR will create a pay TV company that will be able to provide innovative content for customers across Australia,” he said. “It will also enable Telstra to expand its FOXTEL on T-Box offering into some AUSTAR areas over time, enabling regional Australians in those areas to enjoy the same high quality IPTV services as those who live in metropolitan areas. Telstra will provide further detail on its plans to expand the availability of FOXTEL on T-Box at a later date.”

However, not everyone is happy about the ACCC’s decision on the matter.

Greens communications spokesperson Senator Scott Ludlam said the ACCC should have delayed its decision in light of the allegations of commercial piracy levelled by the Financial Review newspaper against News Corp subsidiary NDS. Foxtel is part-owned by News.

“The competition impacts of the takeover were troubling enough, and were made infinitely more troubling by the piracy allegations,” said Ludlam in a statement. “This takeover will exacerbate the one-way trend towards monopoly in Australia’s pay-TV sector, and the ACCC should have put any decision on hold until these serious allegations against News Corp entities are resolved.”

“I wrote to the ACCC on March 28th to request a hold on the decision and asked that the ACCC review all relevant material pertaining to the allegations of commercial piracy by News Corp against rival subscription television vendors before coming to a conclusion on the proposed $1.9billion takeover. On that same day it was revealed that the Australian Federal Police are assisting UK police investigating the News Corporation phone hacking scandal. Regardless of the court-enforceable undertakings from FOXTEL designed to limit the acquisition’s negative impacts on competition, the gravity of the pay-TV piracy allegations should have put the decision on hold until they are resolved.”

In addition, Telstra’s telco rivals Optus and iiNet have also publicly repeated their concerns about the merger.

opinion/analysis

To be honest, as a technology industry commentator the merger of FOXTEL and AUSTAR doesn’t bother me too much. In the long-term, content is becoming disaggregated from the platforms which it was previously bound to, and I don’t expect the merger of two pay TV rivals without much of a common geographical footprint to tie up the market too much. The emergence of Apple’s iTunes platform as a video distribution system, coupled with IPTV initiatives delivered over broadband (especially as the National Broadband Network is rolled out) should solve much of these market competition issues over the next few years. God knows, most Australians of my generation (Generation Y) don’t really care about FOXTEL at all. Very few of my friends are subscribers.

Opinion/analysis by Renai LeMay

Also from C21Media:

XYZ chief exits ahead of merger

Bruce Mann, CEO of Australian pay-TV channel operator XYZNetworks for a decade, is leaving ahead of the merger of its parent companies.

XYZ is joint-owned by pay-TV platforms Foxtel and Austar, which are due to merge next month in a deal worth A$2bn (US$2.1bn) after receiving the regulatory green light this month.

Ahead of this, Mann has decided to step down as XYZ’s chief after 10 years, during which time he has overseen nets such as The Lifestyle Channel, Channel [V] and The Weather Channel.

Today he said in a statement: “Foxtel is rightly taking advantage of this opportunity to create a national Foxtel brand which will include both the Austar and XYZNetworks assets.”

XYZ’s director of product, sales and marketing Nikki Warburton – wife of Network Ten boss James – has also announced her departure.

During Mann’s tenure, XYZ expanded its channel bouquet from six to 12. Along with the Lifestyle-branded nets, XYZ also joint-owns Nickelodeon Australia and its sister net Nick Jr, and distributes Discovery Channel in the territory.

Mann said he was leaving XYZ in “great shape,” claiming it was “the jewel in the crown.” He also the company had hit its financial targets in each year he had been CEO.

“We have developed a suite of themed channel brands that are the leaders in their genres, and we have a fantastic team of TV professionals who understand their audiences intimately and consistently produce innovative programming.”

Mann said of his next move: “Media is in my blood, but what I really enjoy is building and growing consumer brands and recruiting, developing and motivating people. My aim is to apply these skills and experience in my next role, whether it be in media or in another industry.”

The Australian Competition and Consumer Commission greenlit Foxtel’s bid to take over smaller rival Austar United Communications after Foxtel agreed to court-enforceable undertakings. The deal goes through on May 24.

Jesse Whittock
30-04-2012
©C21Media

TAGS: Appointments, Mergers and Acquisitions

PEOPLE: Brice Mann

COMPANIES: Arena, Austar, Discovery, Foxtel, Nick Jr, Nickelodeon, The LifeStyle Channel, The Weather Channel, XYZNetworks

SECTIONS: Formats Lab

COUNTRIES: Australia, US