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Foxtel's innovator turns up heat

The Age

Thursday November 5, 2009

Adele Ferguson

For Kim Williams, it is all about being competitive, writes Adele Ferguson. KIM Williams is excited. On November 15, he will see years of hard grind and intense lobbying pay off as he launches the new Foxtel Next Generation, increasing competition between pay TV and the old networks.The launch will open the floodgates to the next wave of competition in media: consumer personalisation. It is a concept that poses the biggest threat to traditional media companies and their fragmenting audiences.Williams describes fragmentation and personalisation of the media as inexorable.€śPersonalisation is the centrepiece of media, to deliver what consumers want, when they want, on a device of their choosing. That's what will win the day,€ť he says.For Foxtel, the decision to develop the Next Generation was a no-brainer; it also reflects Williams' long-held philosophy of being an innovator rather than a protectionist. It is a philosophy he has applied throughout his varied career, in film, TV and the arts.€śInnovation is in our DNA. As a sector, we believe what doesn't kill you makes you stronger and we have learnt to do something the old networks don't do well and that is compete."Everything I have seen says challenge makes you better, and protection has the opposite effect.€ťFoxtel is billing its Next Generation launch as its biggest initiative since the launch of its digital service in 2004.The service will include 12 high-definition channels and eight time-shifted channels, as well as 12 new channel brands, programs available for Foxtel customers to download and view free, as well as paid movie downloads. What Next Generation really means is that convergence of the internet, media and telecommunications has finally arrived in Australia €“ legally €” through pay TV.Foxtel's latest technology allows customers to download movies from the internet without breaching copyright. TV shows can be watched, paused, rewound and the ads skipped.For Foxtel, it means more subscribers and that means more revenue. For free-to-air networks, which are struggling under a sea of debt, it is one more headache as audiences continue to fragment and advertising revenues dwindle. (Foxtel generates 95 per cent of its revenue from subscriptions and other charges such as installation. The rest comes from advertising.)It goes some way to explaining why the valuation of Foxtel keeps going up, and the valuations of the free-to-air networks, or old media, continue to go down.It also goes some way to explaining the move by Seven Network's Kerry Stokes to buy 19.9 per cent of Consolidated Media Holdings in July, which has 25 per cent of Foxtel and 50 per cent of Fox Sports, and is 40 per cent controlled by James Packer.The reality is Williams, with help from his three shareholders, News Ltd, CMH and Telstra, has set Foxtel up to become an unstoppable force.It is Williams' strong negotiating skills, endless determination to please customers and a desire to push the boundaries that have helped Foxtel get where it is today; all traits he drew on and honed in his early years as general manager of the non-profit performing arts group Musica Viva, where sponsorship and patronage were all part of the game.Since his appointment to Foxtel in December 2001, Williams has more than doubled its subscriber base to 1.63 million and transformed Foxtel from a loss-maker into a highly profitable business that pays its shareholders a total of $200 million in €ścapital returns€ť a year.Williams has also increased Foxtel's penetration from 20 per cent to more than 30 per cent of possible households, overseen the transformation from analog to digital, negotiated a content-sharing deal with Optus, boosted the number of channels from about 40 options to more than 200, and introduced the revolutionary iQ video recording system.Indeed, during the global financial crisis, Foxtel managed to buck the trend of the old TV networks and newspaper groups, lifting revenue 11 per cent to $1.8 billion, boosting earnings 16 per cent to $406 million and lifting subscription and advertising revenue.Williams has a strong background in film, having spent seven years running the Australian Film Commission, Southern Star Entertainment and chairing the Australian Film Finance Corporation.No doubt this big-screen experience has had a large influence on the country's biggest pay TV operator becoming a strong supporter and backer of new Australian drama, film and documentaries.€śIt's an imperative. Our programming is not about me too, it is about stretching the boundaries and doing new things."For example, The Contender is about a match-off between a body of six Australians and three New Zealand boxers and the winner gets to fight Tony Mundine. It captures the essence of boxing, the big opportunity,€ť he says .But he doesn't let his passion for the arts get in the way of sport. He is smart enough to know that sport is the key driver of subscriptions."Sport is one of the most satisfying of live events on TV. It is definitely the centrepiece of event TV. We have worked long and hard to develop a good relationship with the AFL and we carry over half the NRL competition."For all of Williams' bullishness, the war with traditional media is far from over.As one critic points out, pay TV in Australia has failed to get near the penetration rates of 55 per cent in Britain and almost 90 per cent in the US. Then there is the new competition from digital channels being introduced by the free-to-air networks.Another challenge is the anti-siphoning rules on sporting codes and events, which cover 12 sports and 1300 events that must remain exclusively on free-to-air TV. The list is up for review, and Williams has been lobbying as hard as anyone.€śIf we could compete, Australia would have a better broadcasting market, a better outcome for sports competing for cash and better outcomes for viewers because they would see more live sport,€ť he says.With so much interest in Foxtel, is an IPO on the agenda? Not according to Williams. €śAn IPO has never come up in active discussion in our boardroom. Theoretically, it is one of many possibilities but it is unlikely. But then again, never say never.€ťThe hard questionsOn dealing with three different shareholders: Telstra, Rupert Murdoch€™s News Ltd and James Packer€™s Consolidated Media Holdings?Sure, there are times when a bit of diplomacy is called for but generally I am a great believer in good oldfashioned Australian directness in these things and, frankly, the only way to manage this business for them is with real transparency.On the potential impact of Kerry Stokes buying into CMH. I serve my owners, if my owners want to make comment, should I makecomment about my owners, absolutely not. We have three strong owners, theyare getting rewards from it. Biggest challenge at Foxtel?The rise of the digital economy and the associated profound changes inconsumer behaviour. We will continue to invest and innovate.Biggest frustration?Media policy settings continue to reward and protect the old television networkswhile not recognising the billions of dollars of investment our sector has made in transforming television for Australians, driving digital television take-up, creating jobs and investing significantly in Australian creativity.CVEDUCATION Sydney University (Bachelor of Music); Honorary Doctorate of LettersHonoris Causa from Macquarie University.CAREER HIGHLIGHTS: 1977-84: GeneralManager, Musica Viva Australia.1984-88 Chief executive and commissioner,Australian Film Commission.1988 Founded Australian Film FinanceCorporation.1988-92 Chief executive officer SouthernStar Entertainment and part-time chairmanof the Australian Film Finance Corporation.1992-95 Senior executive at the ABC.1995-2001 Chief executive of Fox Studios.2001-present Chief executive of FOXTEL.2005-present Chairman of Sydney OperaHouse.2006 Appointed Member of the Order ofAustralia.INTERESTS: Literature, chamber music, film,television and theatre.

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