Earlier this month, NewsCorp announced their financial year results with the company reporting a $US1.5 billion loss.
Of particular interest, NewsCorp’s subscription television services – dominated by Foxtel – recorded a 14% revenue decline, suggesting that it contributed significantly to the company’s losses.
Foxtel lost a total of 460,000 subscribers in the 2020 financial year.
Foxtel’s traditional broadcast subscriber base contracted by 420,000 to below 2 million, whereas Foxtel Now also shed 133,000 subscribers.
However, these subscriber losses were partly offset by decent growth in Foxtel’s Kayo Sports and new Binge online streaming services.
In the final three months of the financial year, Kayo Sports expanded its paying subscriber base from 331,000 to 419,000. Whereas the new Binge streaming service attracted 185,000 paying subscribers since its May launch:
While the loss of subscriber numbers is bad, the revenue impacts are even worse. This is because Foxtel’s traditional broadcast service is high margin, whereas its cheaper streaming options are low-cost and low-margin.
Thus, Foxtel has been cannibalising its subscriber base in a bid to compete head to head with online streaming rivals, including Netflix, Stan, Amazon and Disney.
As noted by the New Daily:
A Foxtel subscriber can pay as much as $109 a month, with the lowest-priced package putting Australians back $49 a month. But its SVOD offerings are significantly cheaper – between $10 and $25 monthly.
Even within the SVOD space, subscribers are moving from the $25 per month Foxtel Now to the newly launched $10 a month cheapie, Binge.
Not only is Binge cheaper, it doesn’t carry advertisements which restricts another potential revenue stream for the struggling TV provider…
So Foxtel is going to have a big margin squeeze as more of its business migrates to SVOD and away from big subscription prices and ad revenue.
For now, Foxtel’s management continues to talk up the company’s prospects using management speak like “rightsizing” and becoming a ‘content aggregator’:
Foxtel which is fast becoming a technology Company that delivers content, has restructured, cutting costs, securing new content deals while expanding their management team to take on a new wave of International competitors…
According to a staff memo, the Company is now in a strong position to take advantage of a move to streamed content over free to air TV by delivering content without the need for a set top box which has in the past been a major cost item for the Group…
CEO Patrick Delany said We have repositioned Foxtel as Australia’s premium aggregator of content and entertainment services “all in one place”…
The repositioning of Foxtel has seen up to 200 people retrenched as unproductive channels, dropped and new services introduced…
By creating a leaner, more efficient company and right-sizing their cost-base and by doing smart content deals in entertainment and sports Foxtel appears to be in a very strong position to compete…
However, the writing is on the wall for Foxtel. It is firmly locked in a death spiral of subscription cannibalisation and falling profit margins.
