Who’s going to buy Foxtel?
Yesterday morning, News Corp’s CEO Robert Thomson flagged “third-party interest in a potential transaction involving the Foxtel Group” during the company’s quarterly results.
In other words, we’re selling up, shareholders. Time to hand in your remotes.
News Corp owns 65% of Foxtel, with Telstra owning the remaining 35%, and the “third-party interest” suggests its not Telstra looking to do the buy out. We could speculate endlessly about who might be making the play – it could be Elon Musk for all we know, or Wesfarmers looking to diversify – but what exactly would they be buying?
A great legacy media brand, for one thing.
Now, you’re currently at your child’s soccer match, so we don’t have time to go into the history of subscription TV in Australia, but whether your gateway drug into the joys of pay TV was technically Austar, Optus Vision, or even Galaxy, by 2012, Foxtel had swallowed them all up, absorbing Australian TV stations like TV1, Arena and Max and spitting out the stuff that didn’t work.
But they mostly bought up the subscribers, and soon became everyone’s pay TV provider. And, like Esky or Chapstick or Band-Aid, Foxtel became the catch-all term for all pay TV and satellite TV, successfully wiping terms like Austar and MyStar HD from the collective national memory.
Seemingly, the name ‘Foxtel’ holds none of the baggage of Fox or Telstra, despite the constant reminder in each half of the name, yet retains all the nostalgic glow of Channel [V] after-school sessions and weekend FOX8 Simpsons marathons.
Pay TV launched in Australia in 1995, and for those of school age at the time, it was the first window into something outside the monoculture. We finally had access to American-style cable, despite cables not being part of the broadcasting method, and there was a Disney channel and a Nickelodeon channel, and MTV, and the Australian version of MTV, Channel [V], which was even better, and arguably did as much as triple j to elevate Australian music throughout the 90s and 00s even if its reputation has faded somewhat.
Foxtel holds special memories for a lot of people – even if they’re actually remembering Austar. And of course, many Australians aren’t merely remembering, some 1.2 million households currently have a Foxtel box sitting in their lounge rooms. Many have had them since before the turn of the century. That’s a hard habit to break.
Take a look at Binge, Foxtel’s streaming service, that offers basically the same content as the box/satellite at a fraction of the price – but without the tactile pleasure of the menu system/remote, nor the inbuilt habits of a quarter-century. It’s a good offering, $10 for the basic package, $22 for premium. Currently, the cheapest Foxtel broadcast package is $70, with the Platinum Plus costing $140 a month. It would reason that customers would lose the box/satellite and move to streaming, right? They aren’t though – not at the rates you’d expect.
During the past three months, roughly 155,000 people left the service – a churn rate of 11.7%. That may seem like a lot, but Foxtel’s streaming services added 200,000 subscribers during that same time so it’s fine for Foxtel, in terms of customer base.
Sure, Foxtel lose those pricey box subscribers, and some of these customers are lost forever, but that’s not where they are making their money these days. Those legacy customers are nice, and pay an average of $90 each, according to Foxtel’s quarterly financials, but Foxtel is now about streaming advertising.
Over to you, News Corp CEO Robert Thomson.
“Digital advertising now represents more than 40 percent of Foxtel’s total advertising with Kayo growing 42 percent compared to the prior year and the recently rolled-out ad offering at BINGE growing fourfold. Back to you, Nathan.”
Okay, so that above quote, minus a minor embellishment, was from a press release, but the point stands: 40% of the company’s advertising is a significant slice.
Plus, 1.452 million residential and commercial broadcast subscribers (pubs and that), paying an average of $90 each for an ergonomically pleasing remote, and the comfort of regularly scheduled programming, is certainly nothing to sneeze at.
So, Foxtel has customers baked in over a quarter of a century who aren’t going to leave any time soon, but eventually those, like myself – who stubbornly cling to the old up/down menu and the comfort of juuusst enough stations that I feel spoiled for choice without suffering decision paralysis – we will either die out, move to nursing homes where one Foxtel sub feeds a linoleum rec. room of 50, or we will (eventually) stop being able to justify paying over one hundred dollars a month for a package that cost over four times what Binge does.
But we might not be moving to Binge, because that’s just another Netflix or Disney or Amazon or Stan or Paramount or Apple and we have enough of those guys on our smart TV, thanks.
That’s where Foxtel’s big 2024 play, Hubbl, comes in.
Now, for the un-Hamished among you, Hubbl basically scoops up Foxtel’s entire content suite, plus all the other streaming services money can buy (Netflix, Disney+ et al.) and dumps it all into one menu system. No jumping in and out of apps. No remembering which app currently has Australian broadcasting rights to which programs, because this is knowledge that only those involved in the world of television syndication should have to memorise. It’s an aggregator, basically and we bloody love a good aggregator.
It’s TV Spotify.
Robert, are you still there?
“Our launch of the Hubbl service is still in its early days, but, encouragingly, more than 30% of Hubbl customers are new to Foxtel, which is significant, given our existing presence and profile in the Australian marketplace.
“About 75 percent of customers of the Hubbl aggregation service purchase an additional Foxtel product along with their device and subscription.”
That is significant. Firstly, it’s not just old Foxtel customers making the shift, it’s new customers, which is amazing for a legacy brand. And three-quarters of all customers are bolting on another Foxtel product, which presumably means Hubbl’s growth is helping Kayo Sports and BINGE grow.
Kayo Sports is the real viable runner in the stable though, the thoroughbred yearling, to borrow from horse racing parlance. Although the inevitable drying up of the $300 million in sports gambling advertising that Australian broadcasters currently share between them will be a hurdle that Kayo Sports will have to leap, it may simply make sporting rights more affordable.
The value of televised sporting rights keeps climbing – Seven and Foxtel will pay a cool $4.5 billion between them to screen the AFL until 2031 – but these rocketing prices are anchored by the guaranteed gambling advertising that surrounds this televised sport. That’s changing, though. Societal attitudes are shifting, and quickly. There’s been a parliamentary inquiry. The Prime Minister called gambling ads during the footy “pretty reprehensible”. Opposition leader Peter Dutton, indeed confirmed that “footy time is family time” – CTE aside – so it’s only a matter of time before gamblings ads are restricted, then banned, and we’ll soon look back at them with the same wry astonishment as we do those ads where Fred Flinstone is shilling smooth, smooth cigarettes to kids.
Anyway, Kayo’s business model is not a problem for us here at your child’s soccer match to figure out – but safe to say, a subscription service that offers any of the major sporting codes at all will be a viable prospect for some time to come.
It is at the moment. Kayo added 108,000 subscribers over April, May and June. Admittedly, these are some of the most footy months in the calendar, so these may be fair weather NRL/AFL fans signing on and off seasonally, like farm workers — but it’s probably just the natural growth that comes with offering up sports – any sports, and the slow realisation by the public that there’s this thing where you get 50 sports for less money each month than it costs for a single ticket to an AFL game.
Earlier this year (at an AFL game, funnily enough) Rebecca McCloy, executive director of sport for the Foxtel Group described the entire company as “a sports-led business.” She told Mumbrella that the average Kayo subscriber watches nine different types of sports.
“So in terms of growing the pie, when people say, ‘who are you going to target’, I’ll say ‘sports fans.’ Our objective is just to grow the sports fan universe as broad as we can, and then cross-pollinate between the sports and keep people on the platform for longer.”
While gambling is still allowed, I’m going to put an outside bet on Optus parent company SingTel being the third-party looking to buy out News Corp’s Foxtel majority.
With Optus Sport, they currently own the country’s number two sports streaming service, which they could fold Kayo Sport into and eliminate the competitor- and with Optus Vision they actually launched their own pay TV service a month before Foxtel, back in September ‘95, and put up a decent fight until the mid 00s.
Plus, the idea of Optus and Telstra working together would be a nice warm business story.
It’s probably Elon, though.
Enjoy your weekend.
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Foxtel must reduce its PRICE regardless of what the new incarnation of the company will be.I’m paying about $90 for an old box.I don’t want to stream as I do have buffering issues.But being a sports nut, especially soccer how can I justify that amount long term when I get Optus Sport essentially “free” as an Optus telco subscriber and Paramount costs $10 for A-League and Stan with Euro soccer, Rugby and tennis is about $30.And then there’s beinsports for more soccer about $15.Logically, there must be some “aggregation” for us sports nuts and I believe Foxtel must reduce its price to lower than $50, probably $40 for the “box lovers” and news freaks like myself.Fantastic overview of the history by Nathan Jolly by the way!!
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Most of the US based media conglomerates would be out.
Warner Discovery is launching Max in Australia in the coming years and only needs to wait out it’s HBO license ending with Foxtel. They’re also not having a great year with a 9.1 billion dollar write down.
Paramount is out, since they just got bought themselves by Skydance and wouldn’t want to invite further scrutiny to that deal and will wait for seas to calm. They’re also not in the best financial shape to be buying an overseas cable network.
Disney wouldn’t touch it since they’re softening on streaming investment, whilst they have to pony up the cash to buy the remainder of Hulu off Comcast.
NBC Universal is extremely unlikely.
Amazon is doing fine with their current strategy and already has a strong subscriber base through Prime.
Hard to see who would benefit from buying Foxtel unless it was being picked up for pennies on the dollar.
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Does anyone at Mumbrella that Optus Vision was a thing? Why would Optus want to take on an asset it happily rid itself of years ago.
Unless Foxtel would split out the Hubbl/Streamotion assets, there’s no point in speculating.
I also find it a ridiculous suggestion that Elon Musk would buy Foxtel. An atrocious man who doesn’t need any ideas about entering the Australian market.
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Typical Murdoch fan boy piece. No mention of the mixed channel options where you had to buy multiple packages to get sport channels you wanted.
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Foxtel is shooting themselves in the foot though by continuing to increase prices even as the lose the rights to more shows. With Binge and Kayo growing, Sky News having its own subscription service and deals with LG and Samsung for smart TVs, the linear Foxtel business is looking bleak.
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Optus also own and operate the satellites that Foxtel (still) use to broadcast on. The same satellites that already carry Optus sport. Some good synergies there, even if that is a legacy delivery method nowadays.
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Chris,
Elon would have no need to buy an antiquated company like Foxtel.
Old iron companies can be worthless to elite tech billionaires.
“I also find it a ridiculous suggestion that Elon Musk would buy Foxtel. An atrocious man” – What colour is your self landing rocket Chris?
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The satellites referred to by Jurgen are redundant now.
Foxtel’s almost completely IP / internet driven these days with the iQ5 being IP only. Rollout of newer dish and cable-less iQ boxes to customer base is almost done.
The irony is that ‘killing the NBN to maintain their cable dominance’ conspiracy theory would actually be an own goal.
Foxtel Now relies on improved internet for all the devices customers now receive it on – phone, tablet, PC and TV.
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