Last week, Foxtel announced that it has axed 200 jobs, with another 140 positions placed on furlough until the end of June.
The retrenchments were in response to the sharp fall in subscriber numbers amid the global coronavirus pandemic.
With live sporting events across the world cancelled, including the AFL and NRL seasons, thousands of customers have cut their subscriptions from Foxtel’s traditional subscription services alongside its online-only Kayo Sports.
Even before the coronavirus outbreak, Foxtel was already drowning is $2.3 billion of debt. Therefore, the company was forced to cut costs hard in order to remain financially solvent in the face of plummeting subscription revenue.
Foxtel is now planning to launch a new App, code named “Project Ares”, in a rearguard action to ward off streaming rivals and grow is flailing subscriber base:
Kayo Sports takes all the best content from Foxtel’s premium Sports Package and showcases it through its own standalone app…
So, what does Kayo Sports have to do with Project Ares? Well, development on Project Ares – which was originally called Project Jupiter – began at around the same time as Kayo Sports. It’s even been referred to as “Kayo’s sister” by Foxtel CEO Patrick Delaney. While not officially confirmed, it’s our understanding Project Ares will do exactly what Kayo Sports did to the premium Foxtel Sports Pack, but with the premium Drama Pack…
While there is no official announcement from News Corp as yet, it’s our understanding that, initially at least, Project Ares will focus on providing Foxtel’s Drama content.
In particular, it looks like Project Ares will hope to fill the void left in Australia by the absence of the Peacock and HBO Max services…
Our gut feeling is that Project Ares will stick to TV and TV miniseries and not include movies… Plus, it would be home to all the exciting originals coming to both HBO Max and Peacock into the future…
The success of Kayo Sports at $25 a month has drawn a line in the sand for News Corp that we expect it to not exceed with Project Ares… We expect a price around the $14 a month figure for Australia to be much more viable.
I cannot see Project Ares turning around Foxtel’s fortunes. Its offering looks nearly identical to Foxtel Now’s basic package, which provides almost identical content for $25 a month.
While Project Ares may generate subscription growth if priced at $14 a month, it is also likely to see existing subscribers to Foxtel’s more expensive packages downsize to Project Ares, thus shrinking the company’s profit margins.
Ultimately, Project Ares does little to fix Foxtel’s underlying problems, namely that:
- it is tethered to expensive legacy hardware, like set top boxes;
- its broadcast business is expensive to operate;
- it is saturated with advertisements; and
- it is overpriced relative to its streaming peers.
Until these issues are resolved, and Foxtel becomes ‘lean and mean’, it will continue to bleed subscribers (and cash) to its online streaming rivals.
