Poor old Foxtel cannot win a trick.
Before the COVID-19 pandemic hit, it was already bleeding subscribers while its streaming rivals experienced strong growth:
Now with the COVID-19 lockdown in full swing, Foxtel’s situation has gone terminal.
With sporting events across the globe shut down, including the 2020 AFL and NRL seasons, customers are reportedly cancelling their subscriptions to Foxtel’s broadcast and online Kayo services in droves.
This revenue loss could not have come at a worse time. Foxtel was already drowning in $2.3 billion of debt. Foxtel’s exclusive rights contracts are also typically negotiated on a fixed-cost rather than a per-subscriber basis. Thus, as its subscriber numbers have declined, its costs per subscriber have risen – a nasty financial pincer.
These dynamics forced Foxtel’s management to cull 200 jobs and place a further 140 workers on furlough earlier this month.
Last week we reported on rumours that Foxtel was planning to launch a new drama-focused streaming service, codenamed “Project Ares”, in a desperate bid to grow subscriber numbers.
Today, further rumours have emerged that Foxtel will launch this service, named “Binge”, as early as next month, which will include exclusive rights to HBO content:
Sources told The Australian Financial Review that Foxtel will not include Fox or Foxtel in the name of the new service and said it may use a name it already has a trademark for, suggesting Binge…
Foxtel would not comment on whether its new service would be called Binge, however, a spokesman said: “We’re still on track to launch our entertainment streaming service in the final quarter of the financial year.”
This “Binge” service will reportedly focus on Foxtel’s drama content. Thus, it is effectively a rebranding of its existing “Foxtel Now” streaming service; albeit will likely offer a lower monthly price than the current $25 per month charged for Foxtel Now.
For this reason, I cannot see “Binge” turning Foxtel’s fortunes around.
While a lower monthly price may generate some subscription growth, this will likely come at the expense of Foxtel’s profit margins, since existing subscribers will likely downgrade from more expensive packages to “Binge”. Thus Foxtel will essentially cannibalise itself.
Instead of applying band-aids, Foxtel’s management needs to address the company’s underlying problems, namely that:
- it is encumbered by expensive legacy cable television hardware;
- its broadcast business is expensive to run;
- its programming is saturated with ads; and
- its pricing is uncompetitive against its streaming peers.
Until these issues are addressed, Foxtel will continue to bleed both subscribers and profits.
