Hey Presto! Closing will cost $21 million

Angus Kidman 9 November 2016

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Running a streaming service turns out to be an expensive exercise, even when it fails.

So we learned last month that Presto was closing down, effectively being replaced with a revamped version of Foxtel Play (now known as Foxtel Now). Now we have more insight into just how expensive the Presto experiment, originally a joint venture between Seven and Foxtel, has turned out to be.

Annual results for News Limited, which owns half of Foxtel, were released yesterday, and show that the decision to close Presto will cost $21 million. As of the end of September, it had 130,000 subscribers. That in itself is a drop from the 142,000 estimated customers in May, which in itself offers an insight into why Presto is being closed down. With tough competition from Presto and Stan, plus niche players like hayu and increasing options for streaming free-to-air, shrinking is not an option.

Let's crunch the numbers. With 130,000 subscribers, Presto would potentially bring in somewhere between $17 million and $25 million in annual income (depending on whether customers are on the $9.99 or $14.99 tier). The total figure is likely to be lower, since you can switch your account on and off at will.

Even $25 million is not a whole lot of money to acquire streaming rights, develop the occasional show yourself, and build a platform so people can view all those shows on a range of devices. The strain showed; Presto's mobile apps quickly developed a reputation for being unreliable, to put it kindly.

When the costs of shutting a business down are essentially identical to its annual income, it's clearly not a viable business. The next challenge for Foxtel? Making the numbers work for Foxtel Play. Interesting times ahead.

Angus Kidman's Findings column looks at new developments and research that help you save money, make wise decisions and enjoy your life more. It appears Monday through Friday on finder.com.au.

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