Nine Entertainment is understood to be exploring a partial sale of its streaming business Stan after unsuccessful efforts to buy AFL broadcasting rights and a major contract loss.
Nine executives, including chief executive Mike Sneesby, have been in Los Angeles meeting with production companies.
While the meetings covered topics such as content deals, it is understood that broader strategic options for the business were also discussed.
The understanding by some is that the free-to-air broadcaster and publisher is looking to sell a share of the business, in a similar scenario to online real estate website Domain, where it is currently a 60 per cent shareholder.
Sources close to Nine said that the future of Stan had previously been canvassed by the company and there were no immediate plans for a change to its ownership.
Before Fairfax Media was purchased in a buyout by Nine Entertainment, Fairfax demerged Domain to defend itself from private equity bidders, which had included TPG Capital and Hellman and Friedman.
Fairfax owned Domain and newspaper publications such as The Australian Financial Review, The Sydney Morning Herald and The Age.
Market experts say that finding a buyer for a streaming company such as Stan would be a challenge.
Demand for streaming services surged during Covid-19 lockdowns. But the current higher interest rate environment puts pressure on discretionary spending, potentially creating a hit to services such as Stan.
DataRoom understands that during the pandemic in 2020, Nine had been weighing a pitch from investment bankers about an initial public offering of the business to capitalise on the strong demand and take some money off the table.
Content providers in the United States would be the most likely acquirers of Stan, but a major production house like Disney or CBS would want to sell content to their own streaming services, Disney+ and Paramount+.
CBS also owns the Ten Network in Australia.
Market experts believe that Stan has hit its peak when it comes to subscriptions – it currently has 2.5 million – and would struggle to compete with Foxtel, which owns streaming service BINGE, when it came to buying sports rights.
Stan and Nine missed out on winning the broadcast rights to the AFL, won last month by existing contract holders Foxtel and Seven, in what is the most lucrative television sports deal in Australia.
Also bidding for the $3bn contract was Ten and Paramont+, both owned by US broadcasting company CBS.
It also recently lost the content contract from US film studio giant NBCUniversal to Foxtel and Seven West Media.
Foxtel is owned by News Corp, publisher of The Australian, and Telstra, and was itself subject to an initial public offering in the past year through investment banks Bank of America and Citi.
The deal was placed on hold amid volatile market conditions.
Stan is making about $28.5m annually but was previously predicted by former boss Hugh Marks to make about $100m in earnings before interest, tax, depreciation and amortisation.
Stan has previously been seen as the growth engine for Nine, and Mr Sneesby was hired to replace outgoing boss Hugh Marks last year after he previously ran Stan.
Stan, started about seven years ago, is a wholesaler and reseller of content and only a small proportion is produced by Stan itself.
It lags competitors in the market like Netflix, which has 223 million global subscribers, and a key driver to its subscription growth had been exclusive access to drama content.
Streaming giant Netflix told the market in August it was looking to add advertising-supported content after losing subscribers.
But the Wall Street Journal reported this week Netflix reversed the trend, snapping back to subscriber growth in its third quarter.
As reported by The Australian, Foxtel’s streaming service BINGE will introduce tier advertising onto its entertainment platform and allow companies to promote their brands from 2023.
BINGE was launched in mid-2020 and now has more than 1.3 million subscribers.
Nine has a longstanding relationship with Jefferies Australian chief executive Michael Stock for its investment banking transactions.
Two years ago, analysts from Morgan Stanley said the streaming market in Australia is worth $1.7bn, involving 12 million subscribers paying about $12 per month on average.
Of that, Stan, which generates $381.2m in revenue, had a market share of about 18 per cent.
They predicted the number of subscribers would grow to about 3.1m by the 2023 financial year.
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