Seven West likely to withdraw from Presto joint venture

Seven West Media is expected to pull out of its digital streaming joint venture with Presto.

Presto drama series Mr. Robot, stars Rami Malek

Seven West Media is expected to pull out of its digital streaming joint venture with Presto, which is under extreme pressure from US giant Netflix and the Nine ­Entertainment and Fairfax Media service, Stan.

Free-to-air television, print and digital group Seven and its JV partner Foxtel, owned by Telstra and The Australian’s publisher News Corporation, have agreed on a six-month budget rather than a full ­financial year agreement, as revealed by this newspaper.

The budget does not exceed a previously agreed funding commitment and sources said Seven was reluctant to invest any more money into the venture.

Seven pulling out of Presto could see the service become the first casualty of Australia’s digital streaming war. It is believed funds committed to the JV would last around three to six months if Presto aggressively invested in content and marketing to try to claw back the gap between itself and Stan and Netflix.

If the business was run conservatively the funds could be drawn out to a year, sources said. However, Seven has not indicated to Foxtel that it plans to exit the joint venture and decisions are not expected to be made while the FTA network’s executive team is in Rio de Janeiro for the Olympic Games.

Seven chief executive Tim Worner this month pointed out that Presto posted subscriber growth of 193 per cent in fiscal year 2016, powered by a movie-length episode of Home and Away.

“This business is benefiting from Seven’s content production strengths and there are more commissions in the pipeline,” said Mr Worner.

Fairfax last week said Stan had reached 500,000 active subscribers and was expected to break even in fiscal year 2018, while research firm Telsyte said Presto had 112,000 paid subscribers in June.

The news comes after The ­Australian revealed Seven and Foxtel were considering strategic options for Presto.

One option under consideration is folding the Presto streaming service into one of Foxtel’s other broadcast platforms, such as the Foxtel Play system that allows the subscription TV group’s channels to be streamed over the internet without a set-top box. It is understood the Play product will be shaken up with a new price point by the end of the year, regardless of whether it is merged with Presto.

Play’s entry price is $25 a month and the most expensive option costs $50, while Presto ranges from $10 to $15 a month.

Seven had originally planned to be a partner in Stan but was reluctant to invest as much cash as Nine believed was necessary to see through its first years of development costs. The fierce rivalry between the free-to-air television networks also contributed to the talks falling through.

Seven is more focused on its program sales and third-party productions business, which resulted in a revenue surge by 92 per cent to $88 million in fiscal year 2016.

Seven can still generate revenue from the streaming industry by producing content for platforms. It’s Home and Away movie-length episode was a major driver of Presto subscriptions, while the network also funded the production of animation Beat Bugs, which was picked up by Netflix.

New Foxtel CEO Peter Tonagh has moved quickly to revamp the company strategy, with a greater focus on new forms of viewing. Mr Tonagh took the reins in March.