Streaming no-show leaves Marks far from content

Nine Entertainment CEO Hugh Marks Picture: Gary Ramage

Hugh Marks let the cat out of the bag at the Macquarie conference on Tuesday.

Asked about the potential of a Stan/HBO content deal, the Nine Entertainment CEO did not sound particularly optimistic.

“No one deal will make or break Stan, it will be an aggregation of the relationships it has,” Marks told investors.

The deal between WarnerMedia and Foxtel had already been signed on Sunday night and Marks knew the news was coming.

For Foxtel (majority-owned by News Corp, publisher of The Australian), which has been undergoing a major restructure from pay-TV to streaming, a loss of sports subscribers due to COVID-19 bans, and redundancies, this deal is a much-needed win.

Guaranteeing HBO content such as Game of Thrones, Succession and the ever-popular Friends, the deal is an excellent starting point for Foxtel’s entertainment streaming service and also means HBO Max won’t be set up as a rival.

Where it leaves Stan in the context of a network looking to save money and still with no 2020 NRL broadcast agreement would be concerning for Marks.

On Tuesday, Marks announced that Nine would be looking to save another $50m over the next three years, bringing cost savings to about $290m by the end of the 2021 financial year.

Stan has cost Nine and its previous owner Fairfax about $250m since its creation in January 2015. It first turned a half-year profit of $14m for Nine this year with 1.8 million subscribers.

Stan has — like Foxtel and other streamers — experienced substantial viewing growth during COVID-19. But content deals are about to get a lot more expensive in a crowded streaming field.

How can the Nine Network, which is ultimately still reliant on advertising, continue to fund Stan’s content deal as its own revenues fall off a cliff due to an already soft advertising market exacerbated by COVID-19?

Marks repeatedly told investors the answer was that Nine would increasingly turn itself into a subscription revenue model through Stan to sidestep reliance on advertising. But as Foxtel could tell you for free; to be a subscription service you need good content to sell and money to buy it in the first place.

The streaming market in Australia is now fiercely competitive and quality content (like HBO) is only going to get more expensive.

Stan now competes with Disney+ and, along with Foxtel, lost the Disney content that went with it. Netflix still dominates in terms of original streaming content and, importantly, price point at the top end, keeping the cost of Stan subscriptions lower.

Amazon Plus and Apple TV+ are both owned by tech giants, to whom making money off streaming is a secondary consideration.

Foxtel will soon launch its own streaming service with HBO and other content at its disposal. It will be rolled out by the same team that brought out Kayo and compete at a $10-$14 price point as well as having the ability to offer discounted or free trials to Kayo customers.

Foxtel’s service will also be able to show two hits previously in the Stan catalogue in Friends and Big Bang Theory. If this sounds marginal, keep in mind Warner recently chose to forgo $US80m in annual revenue from Netflix to get back the world’s most popular sitcom for its own HBO Max.

Having missed out on HBO, Stan’s major quality content deal is with ViacomCBS’s Showtime, which makes hits like Billions. This deal reportedly runs out next year and, with ViacomCBS now owning Network 10, it’s possible the US parent would look to boost 10 with Showtime in its own streaming service CBS/Ten All Access.

In the midst of this Nine has committed to saving $150m from its free-to-air network whose success is largely built around the precarious popularity of reality dating show Married At First Sight.