Foxtel is making an audacious attempt to attract new customers and dissuade money-conscious existing customers from cancelling subscriptions.
The pay TV operator is offering subscribers a year's free use of one of its iQ digital video recorders, waiving the usual $10 monthly fee.
It is the second major revamp of Foxtel's offers in the past month, which began with the company offering free installation to new customers and cutting the contract period from two years to one year.
"We've made no secret of the fact that our objective is to see an iQ for every subscriber," chief executive Kim Williams told BusinessDay.
"We listen to customers and they've told us what they think, and on the iQ there's a substantial body of people who want to try it, so we're saying 'OK, we hear you'."
Foxtel's primary incentive for wanting to expand the penetration of its iQ recorders, which made up almost a quarter of its 1.54 million subscribers as of June 30, is the positive impact it has on subscriber loyalty.
While Foxtel's latest reported churn (disconnection) rate was 13.4%, the rate for subscribers with iQs — which can simultaneously record across multiple channels — was below 5%.
Existing subscribers who have basic set-top boxes can upgrade to an iQ and not pay any monthly fees for the first year, although they will need to pay an $100 installation fee. They can also get the high-definition iQ2 recorder for $200, which includes seven months' free access to Foxtel's five HD channels. Mr Williams denied the offer would inevitably result in higher capital expenditure and customer acquisition costs (because iQs cost more than basic set-top boxes), or lower average monthly revenue from Foxtel forfeiting the usual $10 fee for iQ.
While acknowledging that "some people in the company were a little bit nervous" about the offer, Mr Williams insisted it was "all absolutely within budget".
"I'm certainly confident it will deliver good results," he said.
Regional pay TV operator Austar also has a personal video recorder, called MyStar, although the company said it would not attempt to match Foxtel's offer.
Mr Williams said he did not believe the offer would be resented by existing iQ customers, who will continue to pay for the service.
"I think people understand that we're … always taking different initiatives to activate growth," he said.
(Credit: The Age)
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