Binge thinking: What the imminent arrival of Max to Australia could mean for Foxtel

Max fka HBO Max is officially coming to Australia in the first half of 2025.

The announcement ended multiple years of speculation that Max owner Warner Bros Discovery would setup a local operation for their streaming flagship.

It’s particularly newsworthy in Australia as HBO’s content has been the exclusive domain of Foxtel and its entertainment streamer Binge. Foxtel has spent a lot of time and money over the past few years marketing key HBO IP - Succession, Game of Thrones, Big Little Lies, True Detective, Westworld, The Last of Us and Euphoria.

So what is this likely to mean for Foxtel and how could HBO Max arriving on our shores play out?

Max will be available as a standalone service, likely at a sharp price point <$10

Paramount+ has seen strong takeup (1.8m subs according to Telstyle) with an accessible price point and it’s sensible that Max would look at a similar cost, especially as it seeks to steal share from the likes of P+ or positions as a low cost incremental service for households.

A Binge with Max product tier is a smart way for Max to grab immediate volume of Binge customers

It’s reasonable to think that Binge would be open to offering a lower price subsidised Max ‘add on’ to existing Binge customers. This could be a win/win for both businesses as it provides immediate access to Binge’s ~1.5m subscribers and it also for Binge provides a way to keep those more dependant on the HBO programming

Foxtel Media is the sensible choice for Max ad sales

Setting up a sales team locally is challenging, and Max as a standalone service won’t have the scale to really eat into existing budgets at the agency level. As part of the wider Foxtel addressable/streaming ad suite there’s existing demand, existing infrastructure and a team who know how to sell it. This allows Max to have a capital light operation in Australia with minimal headcount.

Losing HBO exposes Foxtel/Binge’s greatest weakness - high reliance on external content

It’s unlikely HBO not being available on Binge (or being available at extra price for subscribers) will be a catastrophic event, but it does demonstrate that for a streamer light on owned content and rights it’s a very hard business. The economics of producing local drama and premium content are pretty lousy (it’s significantly more expensive than sports at the unit level) and there’s just not that much with a meaningful audience regardless. In Stan Binge has another domestic steamer almost entirely dependant on a limited pool of international content. It’s tough to see two streamers without meaningful owned content surviving in a market this small.

Kayo is the most important asset for Foxtel but it has to keep its key rights - especially the NRL

Kayo works because of the breadth of content it has across tier 1 sports, and will need to retain these to continue. The NRL is the next one up and it’s easy to think Nine, Seven, Paramount, Amazon and now Warner/Max will take a very close look at it. The NRL is lucrative as it 1/ provides 30 weeks of content, 2/ drives volume and 3/ performs exceptionally in Sydney and Brisbane which are the two most expensive advertising markets at the unit level. So it drives subscription revenue and very strong advertising revenue. Kayo with its current sport slate could charge up to $60 with consistent price rises through the next 5 years, but without NRL it’s harder to see this happening without commensurate sub losses.

What happens with ESPN?

ESPN is for Kayo what HBO is for Max, not THE driver of the value proposition but a regular firehose of strong content. ESPN in Australia has the NBA, NFL, MLB, Sportcenter and a lot of sports related programming that has a dedicated audience. With Disney seeking to build out ESPN’s revenue in DTC, could ESPN in the future grab this content and seek to either place it as a new premium channel on Disney+ or launch a standalone ESPN streamer locally? Kayo will want to push the case hard with Disney that there’s more money in keeping the ESPN content in the broader Kayo platform.