TECHNOLOGY SPECTATOR: Why Demetriou is right about Optus

Optus has lost its bid to gag AFL boss, Andrew Demetriou, from speaking out against its "TV Now” service, which allows customers to watch AFL or NRL broadcasts near live. Demetriou described it as "akin to stealing” as Optus is not paying for the content.

The dispute between Demetriou and Optus flared with a Federal Court judgment that said the telco was not in breach of copyright laws with its TV Now operation.

After the Federal Court ruling, Optus took out full page newspaper advertisements declaring it "didn't think it was right, or indeed Australian” to be prevented from offering the TV Now application to its customers.

For now the Federal Court says the Optus service is legal; but is providing content for free morally "right” or "Australian”? Many would say it is as Australian as coming back from a holiday in Bali with a suitcase of cheap DVDs.

In fact, most Australians have now come to expect, even demand, that news, entertainment or computer software be free. But we seem to forget that no content is entirely free, that someone always pays.

Great expectations

These issues are nothing new, but many companies are struggling to find a way to deal with it. Major newspapers are now belatedly trying to convince their readership that online content has to be paid for. Since 1995, Foxtel has been selling subscriptions for television, a service many Australians (supported in part by legislation) feel they should get for free.

Former Foxtel CEO, Kim Williams, was promoted to become chief executive officer at News Limited last November, not because he knows how to operate a printing press, but because he understands how to run a subscription-based media business. This is most recently demonstrated by the latest changes in access to the Herald Sun website.

Big deals

Unlike the model of compelling content attracting advertising, the key to a subscription business is the continuing engagement of its customers. The content that does that best is live (or near live) sport. As Rupert Murdoch is famously reported to have said, "if content is king, then sport is emperor.”

That is why the Federal Court ruling was so significant for Optus. By giving its customers access to sporting rights, particularly the major football codes, engagement and satisfaction go up, while churn – the number of customers who sign up and then leave – drops.

Foxtel is 50 per cent owned by Telstra so it knows only too well what the rights to popular sports means for customer retention. That is why it paid $153m to the AFL for what it thought was the exclusive mobile and digital rights.

This is not just a stoush between two telephony heavyweights where Optus was clever enough to give Telstra a black eye. The AFL is shouting the loudest because it is the sporting organisation that has the most to lose. Telstra has hardly said a word. It can afford to honour its deal with the league and take on Optus at its own game. It's a game society should not allow to happen.

Nothing's free

During this year's Australian Open tennis tournament, there were numerous reminders during the Channel 7 coverage, that Optus customers could watch the tennis on their mobile phone. Optus paid for that right. Telstra could, if they invent their own version of TV Now, offer its customers tennis coverage next year without paying a cent for the rights – if the Federal Court judgement stands.

Foxtel and the Nine Network spent millions of dollars buying the rights to this year's London Olympic Games. They will spend several million more, sending teams of production staff to London.

What is to stop Channel 7, through its Seven West affiliate, Vivid Wireless, from offering its customers access to the Olympic Games? Apart from the cost of the infrastructure and customer service, it will cost Seven next to nothing.

Flow-on effects

If the revenue sporting organisations, like the AFL, receive from exploiting media rights is slashed, there will be a reduction in the number of community-based programs those sports offer. The social capital of sport will be irrevocably eroded.

Once again, whenever content is offered for free, someone else pays.

Journalists long ago made the connection between the ability of their employer to make money from what they write and their own job security. If tomorrow there is an "app” that allows readers to leap over the newspaper pay-wall, is society prepared to accept that journalism will, in future, have to be publicly funded? Governments may need to fund not only the ABC and SBS, but a National Journalism Service too.

The morality of stealing from the rich

The pace of technological change has opened up a huge lead on the law. Technology is a lap ahead. Copyright legislation may be updated to bridge the gap, but the real solution lies within society.

The public can decide what tomorrow looks like rather than leaving it up to the corporate giants. It might be Australian to beat the system and get something for free, but there needs to be a financial value placed on content. That is what is right.

David Lowden is a senior lecturer, sports journalism at La Trobe University. He consults to Foxtel and Channel 7. This article first appeared in The Conversation on February 29. Republished with permission.