Foxtel a ‘good fit’ for Nine under streaming rationalisation

The streaming service marketplace in Australia is a crowded one.

Disney’s sustained losses reported in its streaming business on Thursday in the United States highlights the need for industry consolidation.

While it may be considered a dramatic move, some are wondering whether here in Australia it would make sense for Nine Entertainment to buy Foxtel.

Foxtel is the Australian pay television company operating cable TV, direct broadcast satellite TV and streaming services including brands Kayo Sports and Binge that collectively have close to 3 million subscribers.

It is owned by News Corp, publisher of The Australian, and there were plans to float the business last year. Its value was discussed in the market as being somewhere between $3bn and $4bn.

Nine chief executive Mike Sneesby has been exploring content deals and broader strategic options for its streaming service Stan.

Last year, market experts had suggested that Stan had hit its peak when it came to its subscription numbers of about 2.5 million – and would struggle to compete with Foxtel when it came to buying sports rights.

Part of the problem for streaming companies is that the content is watched at a faster pace than back in the days when shows were drip fed weekly by broadcasters which received funding from advertising. Also, the cost of replenishing that content is expensive, with subscription prices not enough to cover the costs.

While it is not under consideration by Nine right now, an acquisition would give Nine an opportunity to build its sports offering by gaining Kayo Sports and provide it with additional content with Foxtel’s streaming service BINGE.

The question is whether Nine would pay the price.

News Corp and Nine do not have much of a history in Australia of sitting down at the negotiating table together, but some believe that News would be a seller.

It will likely offload more non-core assets after it opted against a merger of News Corp and broadcaster Fox Corporation which was initially on the table.

And Mr Sneesby has talked up his interest in building a non-traditional media platform – and streaming service providers need scale.

While global streaming leader Netflix, with a $US164bn market value, may seem like an obvious consolidator, proposed mandatory local content quotas for international streamers would likely be a deterrent for deals here. Its focus right now is cutting costs and boosting revenue through advertising in a quest for profitability.