When Mediaweek spoke to Patrick Delany recently about the NBL deal with ESPN he talked about the transformation of Foxtel into the Foxtel Group.
Last Friday News Corp revealed details of exactly how well that had been going.
In this transcript of a new Mediaweek podcast with Foxtel Group CEO Delany, he shares further insights.
When asked about a big decision like a possible float or sale of the Foxtel business, Delany noted that sort of decision is very much above his pay grade.
“The company is back, not just in growing revenues and subscribers, but we are back into innovation. Many people around the world think the Kayo and Binge movement is fascinating. We have big plans for Foxtel too.”
Driving dollars higher: 1m+ Kayo customers generate $300m+ annually
Growing Foxtel revenue streams
When I took the helm I said we were going to go hard into streaming. When we launched Kayo some people said we would send the business broke. In the last few years we are seeing the results of that two years of hard work.
The strategy has been to strengthen the Foxtel business and to grow the business through streaming.
The third part of the strategy, and one that is very underrated, is to be the world’s best in technology, platforms and content aggregation.
How Covid fast-tracked Foxtel transformation
People having to stay home and be entertained has helped fast-track our strategy. We have spent a lot of money in getting the platform ready for streaming. Last year we saw an acceleration of Kayo and the launch of Binge. We also saw a true transformation of our cost base.
That wasn’t just dropping a couple of sports and saying goodbye to some employees. It was literally starting to move our systems over to our state of the art IP, which I call our spine, that we had built for Kayo and Binge.
Defining the different income streams
We have the streaming aggregation business which Foxtel which will continue to evolve. Foxtel is positioned as premium and brings together the world’s best content. Then there are our single genre streamers. That is where we are now seeing very strong and stable revenues.
We think there is plenty of room for more single genre streamers and our work has only just begun on the streaming aggregation for the Foxtel retail brand.
Foxtel’s options for pricing and content
Because we now have 4m customers we are able to move into an area where we have been a bit player in the past – advertising. All our ad tech and streaming tech converge on our platforms for Foxtel, Kayo and Binge. We become very efficient with data and advertising.
Being able to continue to transform the cost base of Foxtel and the customer experience are also things we can do.
Patrick Delany with Fox Sport’s Hannah Hollis, Foxtel Media’s Mark Frain and Kayo and Binge’s Julian Ogrin
Future of ad revenues for Foxtel Group
On demand content is ad free for the moment, but we have pre and post rolls. Advertising took a hit last year from Covid, but it has bounced back very strongly. What the advertising market is loving, is the data and addressable advertising we deliver. Some 70% of Foxtel subscribers are IP connected and that will continue to grow.
We don’t break live sports with ads, but we have lots of repeats of sports and shows that do carry ads. Sponsorship is also a big deal for us.
Over the past 12 months we have gone from 1.4m sports subscribers to 2.4m. We see advertising as one of the ways we can grow revenues as we continue to develop our assets.
Reaching the big, bold goal
We are very proud that in the last financial year we refinanced a very substantial part of Foxtel’s debt with local banks. We did it at a lower [interest] rate. For maybe 15 years every Foxtel CEO has said we are in 25% of homes. For 15 years at the executive retreats we have talked about our big, bold goal and we said we’d love to be in 50% of homes.
We can now say we are nearly in 50% of homes. That opens all sorts of optionality in terms of finance, investment and content.
Australian content and unnecessary regulation
We have been releasing four Australian dramas and more than that annually in lifestyle. This year we will release some great Australian drama and we are very proud of our heritage. We have an extraordinary load of content in every genre.
We are committed to telling Australian stories, but more importantly, using Australian production to deliver what we think our customers want.
This is an argument we are having with Australian politicians. We should be allowed to produce what we consider our customers want. At the moment we are forced in one area, drama. The principle is this: If you owned a fish and chip shop or a car shop and government ordered you to sell a certain percent [of Australian content], it can make it difficult for you to compete with others [with no constraints].
You will see announcements about a raft of new shows that are in production, unfortunately they haven’t come out because Covid has been delaying some things.
We are making content decisions based on the fabulous data we now have across our customer bases.
Listen to Mediaweek’s Patrick Delany podcast
On the podcast: How would Patrick Delany feel if Stan started releasing more Australian originals than Foxtel?
PLUS: Kayo is not a “penny dreadful” streamer, growth trajectories for Binge and Kayo, Binge ARPU, Foxtel on whether it could be a future Olympic partner (Spoiler: “Unlikely”) and why Delany rang James Warburton last week.
iQ5 is coming…soon
Our new set top box will be a big step up with a much better chip. The box has been constructed in a very clever way. For the first time we will have a plug and play set top that you can buy at your local retailer. You can take it home and plug it in and be watching content in five minutes. Or you can buy it from the call centre and have it installed if you would prefer.
The usage of apps like Netflix, iview and SBS through our set top box are very, very high.
You will definitely see FTA commercial TV apps and others in the future, but you will have to be a Foxtel subscriber to activate iQ5.
The first iQ5 boxes will go to cable customers in October 2021. They should be delighted with what is a very new age experience. In the new year we will start marketing to general consumers.
See also:
News Corp results: Record news customers, Foxtel streaming subs pass 2m
Foxtel subscribers to get Amazon Prime Video integration later in 2021
