Monday, September 20, 2004

Telstra’s continuing media ownership debacle

Tilting at taking over Fairfax may the biggest loopy thing that Telstra has ever done, but it’s certainly not the only one. Case in point: the DVD delivery/rental market.

Currently, Telstra is losing about $500,000 (of which 250,001 are taxpayer dollars) each month on its DVD delivery/rental business Fetchmemovies. As Robert Gottliebsen dryly observes, “Posting out DVDs is not a Telstra core business”.

So what is Telstra doing in the biz? In the longer term, delivering movies down the phone line (or other cable) will become a reality – so an argument might exist that Telstra needs to build up its customer base for such an eventuality now. The problem here, though, is that Telstra already has a near-monopoly on the home cable business. In other words, Telstra is spending (and losing) money now in a highly-competitive marketplace, as a preliminary to new-generation technology which will see it holding all the cards. Go figure. More particularly, why isn’t Telstra rolling out the unbeatable-against-it new technology now?

Well, it is – kind of. The trouble with monopolies over killer apps is the extreme visibility of their extreme profitability. Hence, just as with Foxtel, Telstra is prepared to cut its own throat when it comes to broadband pricing – pitching it too high for the mass market, and then using the consequent consumer indifference as a shield against regulatory intervention, as well as an excuse to stint on building infrastructure for the actual roll-out. (That Telstra loves spending/wasting Australian taxpayer dollars should by no means be confused with the inference that Telstra believes in creating jobs for Australians – on the contrary, it appears pathologically averse to this).

In such a confused environment, crossed wires abound. Today, Telstra is reported to be aggressively going down the broadband content path, while only two months ago Fetchmemovies spokesman Craig Middleton was saying:

We're ramping up the business at the moment and soon you'll start to see us being more visible.

What can be safely assumed right now is that, whatever Telstra may actually choose to do in the broadband content area, it will turn out to be an expensive flop – just like every media asset Telstra, the new-Nauru, ever touches. As in the case of Foxtel, there is some, albeit third-party-benefiting, method in its madness – Telstra’s underwriting the pay-TV loss maker is of undoubted assistance to the profitability of the free-to-air TV industry (and so one K Packer, coincidentally a Foxtel junior partner), while the new broadband content venture has More Microsoft Price-Gouging written all over its set-top boxes.

On a less financially-catastrophic – for Australian taxpayers, anyway – note, I was amused to see the following position-vacant ad for a journalist last week:

Regular contributors sought for monthly lifestyle magazine targeting affluent 45-60 age group on wide range of specialist and generalist topics including finance, IT, health and well-being, beauty and grooming, entertainment, food, profiles, etc.

Applications to [Telstra-subsidiary] Sensis.

A lifestyle magazine for rich baby boomers, eh? Gee, I’m sure no one’s thought of that before. And while publishing such a magazine may also not be exactly a Telstra core business, nor a currently unfilled niche, it will at least have the advantage of being a useful cross-marketing tool. Rich (and stupid) enough to pay $80-$100/month for Foxtel? Take a bow, baby boomers.

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