“Rupert Won’t Die, He’s Immortal!” B&T Chats With Foxtel CEO Peter Tonagh

Last month B&T published a rather provocative opinion piece that suggested pay TV provider Foxtel’s time was numbered. It happened to catch the eye of current Foxtel boss and former News CEO Peter Tonagh. Rather than rage down the phone, the delightful Mr Tonagh asked B&T out for a beer to explain why we’d got it so wrong. Here’s Part One of B&T’s chat with one of Australian media’s most astute minds. Part two tomorrow…

You’ve been part of the News family for some time. You count Rupert as a personal friend. He’s 85, what happens when he finally pops his clogs?
Ha, ha. There’s only one answer to that – he’s immortal!

Aaah, the benefits of marrying women half your age!
I’m not sure he’s going to disappear anytime soon. He’ll be around for a long time yet. He’s obviously stepping back a bit and (sons) Lachlan and James will drive the two (News and Fox) businesses. But he is still very influential.

Won’t Lachlan and James want to make their own mark? Like James (Packer) did when Kerry passed on? Rupert’s passing will fundamentally change media in Australia?
I actually think they are doing their own thing. The two boys are doing their own thing and they work incredibly well together. Many of the things that Rupert stands for so does Lachlan and James, but in a slightly different way. There’ll be no big shift in direction and if there is they’ll do it with Rupert there

You’re a former boss of News’ newspaper business. There’s no denying that side of things is in a bit of strife. What future do you see there?
I think the model in Australia will evolve. It’s not about print, it’s about journalism. News Corp has always created high-quality journalism and I see that continuing. It’s core to the business and it’s core to the Murdochs.

You’ve recently moved over to head the Foxtel-side of the business and that’s not without its own challenges. How do you see the future there?
To my mind, if you think about Foxtel in the past, we’ve had a lot of exclusive content. When you think of Foxtel going forward, yes, there’s a lot of new players coming into that market. We need to be much more selective about which content we really own and become known for. Foxtel’s known for being about live, exclusive sport and that will continue. We’re increasingly about live and exclusive international drama. We’re really ramping-up our investment in local drama and that has a huge fan base and will remain exclusive to us. Then we’ve got a bunch of lifestyle programs and those channels are incredibly strong and we want to focus on those and bring those to life

You can’t deny Foxtel’s business model is under some pressure? You landed the CEO gig back in March, was it all a bit of a poisoned chalice?
No, not at all. It’s context. I was working at Foxtel for 12 years then I went to News for three years but remained on the board of Foxtel. I’d never really left Foxtel. Being on the board allows you to have a reasonably fresh perspective on things. For sure, the business has challenges, but I learned a lot when I was at News. It (News Corp), too, had huge challenges with the digital business; they’re all things that are applicable to Foxtel as well. I love working in businesses that are going through transformation; through disruptive change. There’s no better time to be in television right now because it is so disruptive. Is it a poisoned chalice? Who wouldn’t want to run a business with three million household subscribers? It offers some of the best content anywhere in the world. It has earnings close to $900 million a year. If that’s a poisoned chalice then it’s one I’m happy to have.

B&T recently ran an interview with former News and Foxtel boss Kim Williams who said, “Foxtel is the most profitable media business in the country, but it won’t be for much longer.” What did he mean by that?
I’m not sure. It depends on how you define media.

I should add, you don’t interview Kim Williams, you get lectured to by Kim Williams!
Ha, ha! I Worked with Kim for 10 years and I consider him a great mentor. There’s no doubt the business has challenges and we will remain the most profitable media company. But that depends on how you define “media”? Google could call itself that depending on how they calculate their profits.

Foxtel has been in Australia for 21 years this year. I don’t ask you this as the boss of Foxtel, rather I ask you this as an astute media commentator – would you say Foxtel has been a success in Australia?
I think it’s been a massive success. Foxtel has transformed the Australian television business. Look at the innovation in television, digital television, the advent of personal video recorders, the technology that’s used in sports broadcast, high definition; all those things have come out of the Foxtel business. Australians get a far better TV experience than they ever did before the advent of Foxtel.

A constant criticism of Foxtel is that there are too many ads, considering it’s a subscription-based model. How do you respond to that?
That’s a consumer perspective and I think for consumers there are too many disruptions. Are consumers complaining about too many ads or promos? I think the complaint is more about disruption (to a program) than the number of ads. Viewers also like shows to start at 6pm and finish at 6.30 and to do that you have to fill the gaps somehow, be they promos or ads. And I’m a big fan of moving to more addressable advertising where the ads are suited to the viewer and then I don’t think that’s a disruption.

Another criticism you hear of Foxtel is that there’s a stack of shows but nothing you want to watch…
… I think that’s a criticism of any content provider. People talk about Netflix and all its fantastic content. I’ve asked 50 people in the last month to name me three shows they’ve watched on Netflix and they can’t. I think there’s a lot of ‘halo’ around Netflix; there’s a lot of shows that are great, but there’s a lot of shows that aren’t.

Is Netflix’s time in the sun over?
No, Netflix has done a great job. There’s a ‘halo’ around their brand that has helped them a lot. They probably had 300,000 Australians accessing the US signal before they even came to Australia and so they started from a strong position. It’s priced for irrelevance; you don’t even have to watch it, it comes up on your credit card, but it’s not enough to motivate you to stop it.

There’s a lot of talk about changing the media ownership laws. That could really play into Foxtel’s hands, particularly if they change the rules around sport and what Australians get for free and what they have to pay for?
What the SVOD players have done have proven that Australians will pay for content. There’s less of a reaction to, “Oh, I have to pay”. Secondly, that’s what’s going to happen anyway. Take Seven’s Olympics coverage – if you wanted to watch all the coverage you had to pay for and download the app. You got a bit for free and had to pay for the rest. It’s going to happen whether Foxtel has the content or someone else has the content. All we want is a level playing field. If other (broadcasters) are buying content and charging for it then we should be able to, too. I also need to be very clear that iconic Australian sporting events, that are at the core of society, should be available for free. Things like the Melbourne Cup, the AFL Grand Final, the NRL Grand Final, events like that should remain free. We have never argued or will never argue that they should come off a free service. But what we are saying is that they could be bought by the likes of Google or Netflix or anyone else.

For Part Two of B&T’s exclusive interview with Peter Tonagh, tune in to tomorrow’s newsletter.