Streaming wars: why Foxtel paid ‘eye-popping rights fee’ to extend HBO content deal

Driven by the desire for premium drama of the calibre of The White Lotus and Succession, Australians are signing up to streaming services such as Foxtel Group's Binge in huge numbers.

Launched almost three years ago, Binge has continued to grow, offsetting the losses Foxtel is having with its residential and Foxtel Now customers.

But Binge has a lot of competition in the streaming wars: viewers have Netflix, Disney+, Apple+, Paramount+, Prime Video and local offering, Stan, to choose from.

However, what gives Binge and Foxtel a competitive advantage is a content deal that allows it access to HBO, HBO Original, Max Original, Warner Bros and Discovery.

Foxtel Group's chief content and commercial officer, Amanda Laing, was celebrating this week after securing an extension on this crucial deal, which the company first signed in 2020.

"It extends our long-term partnership with Warner Bros. Discovery and secures thousands of hours of some of the best and most lauded TV series and movies from around the world," Laing told Guardian Australia.

"The incredible breadth of content that Warner Bros. Discovery has become famous [for] continues to break viewing records with our subscribers."

The deal includes returning seasons of HBO Original series, including Euphoria, True Detective: Night Country, Winning Time: The Rise of the Lakers Dynasty and Perry Mason.

The season two premiere of White Lotus saw a 550% increase on the first season premiere and episodes one to four of The Last of Us had a cumulative audiences of more than 1.1 million viewers each, which is getting close to the sort of numbers free-to-air once pulled for a drama.

January was Binge's biggest month on record based on the total number of people streaming, and 29 January recorded the most hours ever viewed in a single day for Foxtel.

The executive editor of media industry publication Mi3, Paul McIntyre, said the dollar value of the HBO deal was a closely held secret.

"We don't know what the HBO deal is worth but it means Foxtel keeps some of the best high-end content in the world and that's important for keeping high-end audiences and using the typically feverish interest in HBO shows as a halo to lure new subscribers - think Game of Thrones, The Wire and The Sopranos," McIntyre told Guardian Australia.

"HBO is sticking with Foxtel but I suspect that's only because they've figured out launching its standalone HBO Max service here is too hard in a small market like Australia. Every global streaming service and their dog is hitting Australians up, or plan to.

"Foxtel has likely paid an eye-popping rights fee to help the Americans shelve any plans to launch HBO Max here on their own.

Binge was up 45% to 1.4 million subscribers in Foxtel's latest financial results to the end of December. By the end of the month, an advertising-supported tier will be launched. If viewers don't want ads, they may have to move up from the basic tier of $10 a month to $16 or $18 depending on the number of screens they want to stream Binge to.

McIntyre says: "Against what most expected, including me, Foxtel has done a pretty good job at flipping from a pay TV box to a streaming service with Kayo and Binge - subscriber numbers are solid. Many of us thought the old broadcast beast couldn't change fast enough but it looks like it has."

For Nine's streaming service, Stan, the HBO extension is a bitter pill to swallow but its strategy is to focus on original content.

"For Stan it just gets harder to land international content deals as more global streaming services launch their own services here and stitch-up global content rights," McIntyre says. "Stan is dabbling in sport and will have to do more fancy things in the next year or two if it's going to keep pace with global players."

Laing says there is "a lot of competition for subscribers and content in Australia currently" but points to Foxtel's range of assets, which include Kayo Sports and Fox Sports, and its strong subscriber base of 4.4 million.

"There is no doubt that this deal was hotly contested," she says. "Our relationship with Warner Bros. Discovery spans more than two decades and the uniqueness of our business model at Foxtel Group with multiple platforms with which to distribute and monetise content means we can unlock mutual benefits [for] both companies and grow together."

It's unclear what Warner is planning for the Asia Pacific but a stand-alone HBO streaming service is coming, perhaps as early as 2024.

How the most valuable content is divided up between Foxtel and HBO will be the key to retaining customers in the long term but Warner says there is scope for "future collaboration".