Quickflix partners with Foxtel's Presto

UPDATE: Quickflix has entered a reseller partnership with Presto, the steaming video on-demand service owned by Foxtel and Seven West Media.

The company was put in a trading halt ahead of the announcement. When it resumed trading, its shared jumped 200%, albeit off a low base (Quickflix' market cap has cratered over the past two years from $A70 million to just under $A2 million going into today's announcement). While Quickflix has made steep losses (it was $A8.6 million in the red in the six months to December 31), new partner Foxtel is solidly profitable (it had 2.8 million subscribers as of March 31 and  earnings of $163 million for the quarter).

The partnership will directly impact Quickflix Australia subscribers, who will see Quickflix' streaming video on-demand (SVOD) content replaced by SVOD content supplied by Presto. Quickflix' options to rent or own video will remain alongside the new Presto-supplied content.

For Quickflix New Zealand subscribers, it will be business as usual, with no change in content related to the deal.

A person close to the deal told NBR it was a positive for Quickflix given Presto has a much wider range of SVOD content, including TV series from HBO, Showtime, eOne, 21st Century Fox and a large selection of movies from major Hollywood studios. 

No shares changed hands in the deal. Neither Quickflix nor Presto has commented on the funding details at this point.

All eyes will now be on whether Quickflix will pursue a similar partnership on this side of the Tasman. NBR understands SVOD, free-to-air and ISP alliances are all potentially on the table.

Presto content will be added to Quickflix Australia with an interface upgrade due in the next few months. The NZ version of the service will also get a new look, albeit without the new Presto content.

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EARLIER: Another day, another shakeup in the streaming video on-demand (SVOD) market.

Quickflix, which operates across Australia and NZ, has been placed in a trading halt on the ASX.

The halt comes as rumours fly the company will be sold to Presto, an SVOD service owned by Foxtel and Seven West Media.

123,000 paying customers
Although it has struggled financially, a trading update issued April 20 said Quickflix had 123,533 paying customers as of March 31, 2015 (and 140,901 in total, including those trialling the service); a modest increase over the 122,826* it reported in June last year. It has also developed support for the biggest range of viewing devices, from smart TVs to game consoles to Google Chromecast, outside of Netflix.

Quickflix has struggled to make a profit or raise significant capital over the past three years. And over the past few months it has faced significant new competition with Netflix ANZ’s arrival; Presto and Stan (owned by Nine and Fairfax) entering the Australian market; and Spark’s Lightbox and Sky TV’s Neon launching on this side of the Tasman. It doesn’t help that all the newcomers are offering free-trial deals (a staggering 12 months for Spark customers, in Lightbox’ case).

Heavy losses
Quickflix says the new arrivals have helped it by raising awareness of SVOD but profit remains elusive. In the half-year to December 30, 2014, it doubled its loss to $A8.6 million on revenue that increased 7% to $A9.2 million.

Its financial challenges, and the increasingly crowded market, have seen Quickflix’ market cap plunge from $A70 million two years ago to just $A1.9 million today.  

Fish hook
On the face of things, a buyer could pick up a growing library of content, an excellent SVOD technology platform and 122,000 customers (not to be sniffed at in the ultra-competitive SVOD market) for next to nothing.

But there is a fish-hook.

Last year, HBO sold its minority shareholding in Quickflix to Nine (frustration had built because although HBO produces Game of Thrones and a mother lode of other top pay-per-view content, local rights deals meant HBO content was thin-to-none on Quickflix. Sky TV recently renewed a multi-year exclusive deal with HBO).

Nine included a warrant in its $A1 million investment that requires it must be paid $A10 million by anyone who launches a full takeover.

If a sale does go ahead, an interesting twist would be if Quickflix’ new owner carves off Quickflix NZ and on-sells it to Spark or Sky TV.

Through its New Zealand managing director Paddy Buckley, Quickflix declined comment.

NBR understands an announcement will be made to the ASX this afternoon.

Quickflix NZ MD Paddy Buckley won't comment on local active paying customer numbers but recently told NBR, "We have about 100,000 devices registered to use Quickflix in NZ."