On the face of it, News Corp (Foxtel) and Seven West Media blinked and bailed on their streaming video joint venture, Presto, leaving the Fairfax Media-Nine Entertainment vehicle Stan as the local winner, but the real streaming service victor is international behemoth Netflix. Presto ended up as the third-placed streaming service behind Netflix and Stan, and it had little chance of moving out of that position as Nine and Fairfax lifted their investment in their service to well over $100 million in 2015-16.

Foxtel (which is managed by News Corp appointees such as CEO Peter Tonagh) and Seven West Media this morning announced that Foxtel would buy Seven West Media’s interest in the Presto and then close it on January 31, 2017. The purchase price was not disclosed, but it would not have been very much.

The deal was done to shut down losses (and will Foxtel’s “more than 2.9 million” subscriber figure at June 30 be impacted?) and to clear the way for the new internet-based service Foxtel plans to start in early December, to be called Foxtel Play. That will have a monthly fee of $10 to $15 a month for a basic package of channels and streaming services. Foxtel is banking on this new product to boost subscriber growth and lower the rising level of subscriber churn from people buying the short-term Presto package and not renewing.

That was driving up costs and cutting revenue for Foxtel, and management are known to have been uncomfortable at the way the Presto subscription packages were eroding the key measure of pay TV income — the average revenue per user (ARPU). The new Foxtel Play product gives the group a standalone streaming product that it doesn’t have to share with anyone else — Foxtel can control the content and still try to drive ARPU higher by forcing subscribers on to longer packages. — Glenn Dyer

Peter Fray

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