Fairfax may join Nine in streaming

FAIRFAX Media is considering entering the movie streaming space after being approached by Nine Entertainment.

FAIRFAX Media is considering entering the movie streaming space after being approached by Nine Entertainment about partnering on its subscription video-on demand service.

Nine has proposed giving Fairfax a stake in the planned subscription video-on-demand service codenamed Stream Co as part of a joint venture. The Fairfax board will discuss the proposal when it sits for a board meeting on Wednesday.

Nine has tapped several media companies for Stream in the past, including Seven West Media, but the Fairfax link is the most interesting name to emerge, setting up the prospect of the publisher going into direct competition with companies such as pay-TV operator Foxtel and US streaming giant Netflix.

The move comes after a Nine-Fairfax merger was rumoured five months ago. Nine chief executive David Gyngell played down the possibility of any imminent corporate activity at the company’s half-year result, but Fairfax chairman Roger Corbett is known to be enthusiastic about the idea of merging the publisher of The Age and The Sydney Morning Herald with a free-to-air broadcaster.

If Nine and Fairfax team up on Stream, Nine would gain greater scale and the potential to capture more paying customers by streaming its movies and programs on Fairfax’s websites.

A joint-venture model would also enable advertisers to buy cross-platform packages as media companies seek to aggregate as many eyeballs as possible in a disrupted media sector dealing with audience fragmentation.

A partnership with Fairfax would also reduce the cost of Nine’s investment, after the media company revealed at an investor day that costs could blow out to $65 million, from $40m, which raised concerns among some media analysts.

Rising costs are being driven by the cost of acquiring content from Hollywood studios, and overheads such as digital staff.

The Netflix-style streaming service, which will charge consumers for movies and TV programs over the internet, is due to launch in the third financial quarter. It is understood Nine will charge consumers $10 a month with no fixed contract for unlimited access. The pricing model undercuts pay-TV operator Foxtel’s Presto service, which charges $19.95 with no contract lock-in.

Launched in February, Presto offers a deep catalogue of movies, new releases, exclusive premium content and eight Foxtel movie channels.

Last week, Nine emerged as the buyer of a strategic 8 per cent stake in Australian streaming service Quickflix after it paid $1m to acquire all of Time Warner subsidiary Home Box Office’s redeemable preference shares.

“Streaming video is a growth area in which NEC sees potential,” Nine Entertainment chief operating officer Simon Kelly told The Australian. “This investment is held under our Ventures portfolio alongside other minority investments. Separately, we continue to work towards the launch of our own streaming business later this financial year.”

The move comes as Nine prepares to report its first full-year result next month since listing on the ASX in December.

Nine’s two largest shareholders, Apollo Global Management and Oaktree Capital, have an escrow agreement which expires at the result, enabling the US firms to divest their holdings.

It is understood the shareholders are unlikely to substantially reduce their stakes and will remain major Nine shareholders for longer than anticipated.