While Netflix booms Foxtel busts

As we know, Foxtel is heavily reliant on sports programming for subscription revenue. Thus, the cancellation of most live sporting events across the globe will have a major impact on its bottom line.

Foxtel’s dedicated Kayo sports streaming service will be hardest hit, as advertising revenue is expected to fall sharply as more companies pull back from advertising due to the impact of the coronavirus on consumer spending.

Foxtel has also been reliant on funding from News Corp for the past year, while it is under increasing pressure from streaming services like Stan, Netflix, Amazon and Disney.

Meanwhile, shares in Netflix, which is not reliant on sports content, have gained 16% over the past week, while shares in US cable companies have retreated

From the Brisbane Times:

Take a look at Netflix… Over the past week in particular it has performed strongly – up 16 per cent. Take a look at the stock prices of US cable companies and the trajectory has moved in the opposite direction.

The reason is simple. Cable/satellite companies are reliant on sports programming to attract and retain subscribers. In the space of a week that has dried up.

In Australia there is only one cable company of note – News Corporation’s Foxtel. It also owns the streaming service Kayo. Foxtel’s main broadcast platform is highly dependent on sport and Kayo is a sport only service. Far from a picture of corporate health before COVID-19 hit, Foxtel now faces a bigger crisis.

Marquee sports have disappeared… It is almost certain that subscriptions for Foxtel will be hit badly and Kayo, in particular, will experience a massive decline…

Making matters worse, Foxtel’s advertising revenue will likely also fall into a hole…

[Foxtel] has been operating with the support of its major shareholder, Rupert Murdoch’s News Corporation, for a year. Initially, News lent Foxtel $300 million to repay its creditors. The support has since ballooned to $900 million while Foxtel’s other shareholder Telstra has recently come to the party.

In February, Telstra extended Foxtel a $170 million loan in order for Foxtel to pay Telstra the fees it pays for using its cables to deliver pay TV to consumers…

Foxtel’s traditional broadcast business… [has] been forced to lower its subscription rates to compete with the growing new breed of video streaming companies such as Stan, Netflix, Disney and Prime…

Even before the coronavirus hit, Foxtel had fallen into a deep hole with subscriptions across its various offerings already declining. Specifically:

  • Kayo Sports lost 32,000 subscribers between November 5 and February 5, falling from 402,000 to just 370,000;
  • Foxtel’s traditional broadcast and commercial subscriber base fell from 2.326 million in the September quarter to 2.268 million as at 31 December 2019;
  • Foxtel’s streaming service, Foxtel Now, suffered a decline in its subscriber base from 375,000 in the September quarter to 375,000 as at 31 December 2019.

Given Foxtel was already drowning in $2.3 billion of debt, and its subscriber base and advertising revenues are about to slump, one wonders how long it can stay afloat.

Leith van Onselen
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  1. eh feck, this is why i am not a trader. Buying Netflix was a no brainer 12 weeks ago, innit, when I was stocking up on gloves, masks, food etc

    • Yes and no. Netflix is still not profitable – nowhere close – and has a yuuuge amount of competition from other big cashed-up players. The plusses for the company are that it has first mover advantage and a powerful brand. There will need to be consolidation in the streaming sector for any of them to make any money, I suspect.

  2. If they had dropped the advertising content, more people would have kept it all those years ago.

  3. stop the stoats

    Foxtel pulling out all the stops to keep subscribers:

    Effective from today until 31 May, Foxtel customers will have access to:

    More content with access to Foxtel’s full range of Drama, Entertainment, Lifestyle, Documentaries, Reality and Kids TV channels and on demand libraries.
    Customers will have access to Multiscreen, giving expanded access to watch on up to two additional devices at the same time including casting the Foxtel GO4 app to additional TVs.
    Foxtel Now customers will have Drama Extra, Docos, Pop, Lifestyle and Kids added to their Essentials, Pop or Lifestyle packs.
    Unlimited broadband data for all Foxtel Broadband and Foxtel NBN customers who are on monthly data allowances for streaming and home internet without limits.

    The initiatives are available to Foxtel customers including those that subscribe to Foxtel through Telstra and Optus.

    Customers do not need to activate the changes. The additional tiers of content, multiscreen and unlimited broadband will be opened up by Foxtel this morning allowing customers to enjoy the premium content and features immediately until 31 May.
    What happens if I’m already subscribed to these channels – do I get a credit?

    There will be no change to your package if you’re already subscribed to these channels. We appreciate your loyalty and we hope that you see the value of Foxtel’s extensive range of programming. At this time, we’re focused on opening up all of our general entertainment packs to Foxtel customers as quickly as possible. We’re all in this together and we hope our customers appreciate the intent of these changes.

  4. darklydrawlMEMBER

    I have the most basic foxtel package there is. So basic you need to ask for it as it is not on their options list.

    The I have is I only pay for the IQ box (circa $10 per month) and that used to get you no foxtel channels, but would allow to record all the FTA channels including the HD ones. About a year ago I got about 9 basic standard def channels included at no extra cost. Today I got an email stating the following:

    “In the spirit of working together in difficult times, we are making changes to help you while social distancing.

    From today until 31 May we’re adding Drama, Kids, Docos, Entertainment Plus and Multiscreen~ to your pack, at no extra cost*.

    This makes thousands of hours of additional content available to you, providing an even better entertainment experience at home. You don’t need to do a thing – you can start watching straight away!”

    They do look like they are trying to keep folks on board, but I agree it is going to be a struggle.