Foxtel’s not doomed, but it’s still on life support

  • May 10, 2020 AEST
  • Team Kalkine
Foxtel’s not doomed, but it’s still on life support

Media and Entertainment (MET) is the greatest obsession of an overstressed society. A billion-plus people are hooked on to various devices, from a mobile phone to TV set, watching some programming. From creativity to commerce it’s an all-enveloping activity. A paradigm shift with a huge surge is seen in the consumption of the online streaming services.

The MET industry has come to a cessation and is witnessing the devastation that the COVID-19 has made it go through. No more enchanting of the golden words - sound, rolling, camera and action!

The world crisis is a hurting blow for the industry and there is no definite end time known to recover and open in full throttle.

The biggest challenge posed in the current scenario is to find enough shows to air, creation of content that gets paid and watch and wooing advertisers back into the game. Meanwhile, the stage is set for a new battle amongst streaming services, gaming platforms and other forms of at-home entertainment services to outshine. One such Australian company battling itself to stay in the game is Foxtel.

Foxtel is an Australian provider of diverse subscription-based TV services, delivering to regional as well as metropolitan areas. It offers its viewers a premium, streamed and live experience to entertainment, movies, news and sports. The services are streamed over broadband and broadcasted via satellite. Foxtel operates Foxtel Now - an over-the-top (OTT) service and Kayo, a sports-only OTT service.

Let’s have a look at Foxtel to see how it is outpacing itself in the game

Under risk from cheaper rivals, Foxtel looks like vulnerable species.

There are numerous streaming services platforms like Netflix, Stan, and Amazon Prime which offer various packages at different prices. One needs to differentiate itself to stay abreast in the market. And to add to the disturbances there are other external threats oncoming as the pay TV industry continues to evolve.

The one distinguishing selling point of Foxtel is the streaming of the live sports, which has hit a screeching halt due to the coronavirus outbreak. Even when its back once things are normal, there is always a possibility that sporting organisation might start offering their content directly to the consumers and if it happens this will make it hard for Foxtel to survive.

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Foxtel struggled to survive pre COVID-19, but the lack of sport is boosting its demise.

The differentiation of Foxtel’s network from competitors was supported by global sports as consumers switch to streaming services like Netflix and Stan for other forms of entertainment. COVID-19 crisis has also constrained Foxtel's key selling points: live sport. No global sports are available for broadcast amid cancellation cause the fled of the subscribers from Foxtel & Kayo.

A pay television- platform's growth pillar, Kayo has disappointed Foxtel by its results as per News Corp’s results announcement on May 8th, 2020. The number of subscribers has come down to 272,000 between Mar’20 and 2 May 2020.

Foxtel' dilemma is the havoc COVID-19 is causing to the economy impacting the discretionary spending, such as on pay TV.

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Acknowledge coping, respond to bloom

With live sport hitting a screeching halt due to the coronavirus outbreak, Foxtel has made deals and given its customers various incentives to lighten the blues with various additions during the crisis.

On 20th March 2020, it announced free access to all 10 movie channels and library of more than 1000 movies on demand until June 30, specifically for the sports subscriber who have not included movies in their pack earlier

Effective 26th March 2020 until 31st May 2020, Foxtel’s customers have the accessibility to additional tiers of content including news services, documentary content including BBC Earth and National Geographic, Drama, Entertainment, Lifestyle, Documentaries, Reality and Kids2 TV channels and on demand libraries, Unlimited broadband data for all Foxtel Broadband and Foxtel nbn customers

Foxtel announced new landmark partnership with ViacomCBS

On 4th May 2020 Foxtel announced a partnership with ViacomCBS Networks International (VCNI) expanding Foxtel music channels with a broader variety of music genres including a new kid friendly music channel. The new agreement will help in creating a new look music line-up starting July 1st, 2020, with broaden boundaries including every music style such as rock and pop, charts and dance, all-time classics, contemporary and country, and urban R&B. This agreement also includes restoration of few channels on the Foxtel platform such as Nick Jr., Nickelodeon, and MTV.

Foxtel – one stop shop for HBO

WarnerMedia who has a history in creation of the world’s best television was known to be eyed by Foxtel and Nine Entertainment's Stan to secure an output deal with HBO.

The one home to the diverse products from Warner Media is Foxtel as it struck the deal on 6th May 2020. The Deal is expected to add major features for retaining existing and adding new prospective subscribers such as its entertainment streaming service Binge, as and when it launches.

The deal is a win-win for both the companies, as Foxtel will get to keep its loyal subscribers by keeping them more engaged, while WarnerMedia will get to acquire more customers through Foxtel. The deal highlights how Foxtel is looking to retain its subscribers by cashing in on the pure dominance of WarnerMedia’s content.

COVID-19 surges stress to Foxtel with Telstra as the victim for some collateral damage.

Telstra announced on 8th May 2020, that it is expecting to make Non- Cash impairment charges of $300 million against this investment in its FY20 results followed by the write down of the carrying value of its 35 percent stake in Foxtel. The value of Telstra’s share in Foxtel is expected to be written down from $750 million to approximately $450 million subject to the Board review and approval of the FY20 results. Also, on a guidance basis, Telstra’s FY’20 results will not have any major impact.

Foxtel Financial Health

News Corporation (ASX: NWS) is a diversified media and information services company which owns 65% Stake in Foxtel. The rest 35% of Foxtel’s share is owned by a leading Australian telecom company Telstra Corporation Limited (ASX: TLS).

Recently NWS published its financial results for the quarter ending Mar’2020 and featured few major highlights about Foxtel’s performance.

Also, Telstra results for the quarter ending Dec’19 are also linked to the fall in its Media revenue (excluding cable) by 7.1% to $382 million due to the performance of Foxtel from Telstra. Additionally, Foxtel from Telstra revenue declined by 5% to $323mn and experiences an exit of 94,000 subscribers in a year emulated with fact that the broader industry is shifting from Broadcast to IPTV.

Foxtel under debt obligations

Foxtel's debt was majorly drawn with News Corp tipping in $610 million Credit Facility and $250 million Term Loan Facility as on Dec’19. Telstra has also protracted a loan of $170 million given to Foxtel for the payment of using its cables to deliver pay TV services. The interest rate of 7.75% has been locked in.

Stock Performance: Now, let’s have a glance at NWS’ share performance. The stock traded at $16.360 on 8th May 2020. News Corporation has a market cap of $ 9.06 billion and approximately 582.76m million outstanding shares. The stock has an annual dividend yield of 1.34 per cent.

 


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