Last week, News Corp chief executive Robert Thomson and Foxtel CEO Patrick Delany spoke about the media group’s subscription TV division – Thomson at the News Corp full-year results, Delany in an interview with Mediaweek.
Thomson revealed the company was assessing an unspecified offer for Foxtel from a third party. Delany told Mediaweek it was above his pay grade to weigh in on that – his job is to continue to run the business day-to-day and let the shareholders decide the future.
Mediaweek drew up a shortlist of potential bidders last week with Telstra, Nine, and Warner Bros Discovery high on that list.
We didn’t mention private equity interest. The AFR reported a likely buyer could be LA-based Platinum Equity. The investor has a smallish portfolio in Australia and its major media holding globally is post-production house Deluxe.
Foxtel Group’s Patrick Delany
Foxtel under the hood
Patrick Delany spoke to Mediaweek after the release of the full year results. He updated us on the current strategy, which sees subscription numbers rise, and growing ad revenue, plus a glimmer of success for the much-ridiculed Hubbl device.
Subscription revenue
Delany explained: “Foxtel Group streaming revenues and advertising revenues are now back. More than backfilling the loss of subscribers in the Foxtel business. The reason for that is that we’re growing in streaming, but importantly, the number of subscribers leaving Foxtel and the decline in revenue is smaller and smaller as the years go by.”
Foxtel Group streaming numbers
“It really was a tale of two halves last year. In the first half of the year, we had the writers’ strike and we had consumer sentiment really biting hard on retail spend in certain areas. Foxtel traded well because it’s largely older Australians who have never had more money. On the Kayo side, it was a really tough first half.
“In fact, this time last year, we didn’t have anywhere near the momentum we had in the [FY] second half. When the NRL and AFL started again, we really picked up. And importantly, that hasn’t stopped.”
Foxtel Media CEO Mark Frain with Binge executive director Alison Hurbert-Burns. Ads on Binge helped push Foxtel Group digital revenues higher
Advertising revenue
Delany: “Ad revenue is a fantastic story this year. We’re seeing a flight towards digital assets for advertising. That’s driven by younger Australians, single income, no kids, double income, no kids and younger families.
“In ad revenue, we put on $45 million year-on-year, which is good, given that there’s a decline in linear. Advertising revenues are up 6% year-on-year, but digital revenues are up 40% year-on-year. What you’ve got to remember: that is in an advertising market that’s been bashed around a little bit by consumer sentiment.”
Hubbl… the long game
The new consumer device Hubbl has had a number of detractors. Chief among them ABC TV’s Gruen, which had a running gag about marketing the device which can be hard to explain. Tom Gleeson paid out on the marketing campaign too, dressing as a Hubbl device on the ABC.
But in a world where customers and investors want instant gratification and return, Foxtel Group is playing the long game with the Hubbl device.
Delany explained: “We’re very happy with the brand recognition it’s got. This year will be about identifying to Australian consumers exactly what Hubbl does. Importantly, shifting the image of Hubbl from a pure device to a device that gives entertainment and entertainment value.”
Thomson explained to investors some of the progress with the device: “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% of customers of the Hubbl aggregation service purchase an additional Foxtel product along with their device and subscription.”
Tom Gleeson spoofs Hubbl on ABC
Hamish Blake as Hubbl
Next big trend: bundling
In a market in which costs are climbing quickly, Foxtel Group realises consumer value needs to be highlighted.
“We’ll run advertisements and offers this year in and around content,” Delany said.
“That is a unique position we have with Kayo and Binge and, frankly, our other partners like Netflix. The big trend for us this year is going to be bundling. Where we start bundling up packages of Kayo and Binge, packages of Kayo, Binge, Netflix, etc, for a lower rate if you stick with all three.
“Those bundles will probably be inside Hubbl and also outside Hubbl.”
Foxtel Group price rises
Mediaweek’s Jasper Baumann reported last week on imminent Foxtel price rises for a range of products.
In response to a question about price sensitivity in the market, Delany said: “I think people understand that prices are going up, all the input costs are going up. And unfortunately, we’ve got to increase price where we can to reduce costs.
“In our streaming, you’ve seen some under-priced services for the last couple of years and prices are catching up. It really depends on the value equation with what you’re getting for that price. We’re finding that what we’ve done is within the tolerance of our customers and that they’re reacting pretty well.”
British and some of the other new Foxtel channels
Why Foxtel split with the BBC
Foxtel has lost some BBC content recently. Not totally though, as Delany explained: “We’ve maintained UKTV. The BBC Wild Channel didn’t have a huge following. Those documentaries are in most places.
“BBC News is not watched by a lot of people. The interesting thing in my 30-year PPV career is it was one of the first channels in the 20-channel pack of Foxtel, along with CNN. But these days, Sky News is just a giant compared to the others.
“BBC First started out to be a place where you would get the BBC productions first. BBC First was not the channel that was envisaged 10 years ago. It ended up being a channel where, frankly, I can stand in the market and buy the same dramas because the world’s changed so much. BBC makes things but does it in concert with other streamers and other people. They don’t always have the rights to pass through.
“With the majority of our customers now digital, we can see exactly what they’re watching, what their habits are. We know the market pretty well. Sometimes you’ve got to make brave decisions and say, ‘Well, that channel’s not necessarily great value for us, which means it’s not great value for subscribers.‘”
Replacing the BBC First offering will be a channel simply called British that launched on 1 August.
The future of the Foxtel product
British is not the only new channel that Foxtel will curate. Although it will be doing that from a programming department staffed with fewer specialists. Delany: “As Foxtel continues, you’re going to see more channels that are curated by us as we stand in the market buying content. You’re going to see more streaming services that are included in packages in Foxtel.”
The long-term future for the group is a customer having a Hubbl device and then a range of content subscriptions.
“That’s where the trend is, which is why we’ve gone into Hubbl. The other trend is to not do anything. Old habits die hard, and older Australians like the Foxtel service which is familiar to them. It’s still good value. If you add up all the streaming services, they’re way more than Foxtel ever was, even if you take Netflix out, which is new content.
“The decline in Foxtel revenue is the lowest it’s been in the last six years. So is the decline in subscribers, and you’re going to continue to see lower and lower churn.”
Sarah and Lachlan Murdoch with Peter V’landys at Las Vegas NRL weekend
Radio silence on sports rights
Foxtel Group spends most of its money on sports rights but talks about it least. For good reason. Delaney explained: “On all of the rights, we always maintain radio silence. It’s such a competitive area.”
Regarding the proposed “wildcard weekend” the AFL may introduce, Delany said he hadn’t heard anything about it from AFL CEO Andrew Dillon. And if it’s introduced, Foxtel Group might not be paying more for it.
“The rights, frankly, are pretty well already covered by our agreement, and Seven’s agreement, which goes to 2032. I certainly think these branded themed weekends are great. The NRL started that with Magic Round. The AFL’s Gather Round is also great. Now Peter V’Landys and Andrew Abdo have created the Vegas Round.”
Delany said the broadcaster leaves the strategy and running of AFL and NRL to the codes.
See also:
News Corp profits: FY 2024 second best year on record, reviewing potential Foxtel transaction
Another TV great departs: ‘Foxtel true warrior’ Jim Buchan hands in his remote