Foxtel sale a Christmas miracle for the Murdochs

Flogging Foxtel for $3.4 billion is nothing short of a Christmas miracle for News Corporation and the Murdochs, who are not only freed from the millions they have poured into propping up the business, but also land a stake in what is becoming an influential global streamer.

With Foxtel’s local executives, led by chief executive Patrick Delany, pulling all levers at their disposal to bring the pay TV business up to speed in a world dominated by streaming media, another billionaire-backed entity, DAZN, has handed the Murdochs the keys to an escape hatch.

It’s quite a lucrative one. While the deal values Foxtel at $3.4 billion, DAZN isn’t putting that sort of cash on the table. Instead, the UK streamer will pay off Foxtel’s outstanding debt ($578 million to News Corp and $128 million to Telstra). News Corp also gets a 6 per cent stake in the merged entity while Telstra pockets a 3 per cent stake.

Foxtel has found a new home. Credit: Aresna Villanueva

Frankly, it’s a great deal for Foxtel, which has been mining its ever shrinking pool of premium set-top box customers (where the money was) for revenue and has hit the ceiling on adding more paying customers to its streaming platforms (Kayo and Binge).

While many inside the News Corp camp would love to take credit for this deal, Delany can take some satisfaction in taking Foxtel from an ailing legacy pay TV broadcaster to a business that allowed the Murdochs and junior partner Telstra to recoup the money they had sunk to keep Foxtel afloat.

DAZN’s rationale, while taking on Foxtel’s debt load, is that the deal should give the British firm a major boost as it gears up for a public listing, having posted years of successive losses. It is in DAZN’s interests to keep milking the Foxtel cash cow for now, and that’s likely to insulate Foxtel from any kneejerk changes that its new owner may want to make, provided the deal gets the tick from regulators and the Foreign Investment Review Board.

Delany told Foxtel’s staff on Monday morning that it would be business as usual for the company stitched with the Murdoch name. But deals often come with change – and cuts. Early whispers suggest Foxtel may have to shed hundreds of staff in the early days of its new ownership, as often occurs with media consolidation.

From the DAZN side, they say Delany is integral to their plans for the business and are backing in the company’s existing strategy.

DAZN will probably want to reconsider Foxtel’s investments in assets that don’t align with its global strategy.

As for the 1.2 million Australians with a Foxtel set-top box, they won’t see any immediate change once the deal is approved. Kayo, for now, will remain Kayo and will not become part of the existing DAZN platform, sources close to the deal not authorised to speak publicly say, given the millions of dollars Foxtel has invested in cultivating the Kayo brand.

But further down the line, DAZN will probably want to reconsider Foxtel’s investments in assets that don’t align with its global strategy of becoming the one-stop-shop for sports streaming.

Foxtel has spent many millions of dollars on its streaming aggregation business Hubbl, with its boxes still half-price at most JB Hi-Fi stores. Its entertainment platform Binge is set to lose HBO shows such as The Last of Us and House of the Dragon in some form when Max is launched locally in 2025. Years also remain on Foxtel’s costly output deal with NBCUniversal, which provides The Day of the Jackal among others.

While still profitable, maintaining the infrastructure for the Foxtel set-top boxes will become harder to contend with as paying customers dip beneath the 1 million mark (and continue to dip) for the first time in two decades in the next 18 months.

Whatever the initial messaging, moving Foxtel into the hands of an owner unsympathetic to the Australian market will also have an impact. While already part of a global firm, Foxtel’s history is tied to the Murdochs, an Australian-founded company, while Lachlan Murdoch, who runs News Corp, resides in Sydney, a city that lives and breathes NRL.

While DAZN has a record of investing in domestic sports rights in major markets such as Japan, Germany and France, the likes of the NRL’s Peter V’Landys and the AFL’s Andrew Dillon may eventually appear too small fry for the streamer cosying up with FIFA boss Gianni Infantino and oil-rich Saudis.

Those behind the deal at DAZN say the company’s resolve for the NRL and its like, which is about to kick off broadcast negotiations for the 2027 season and beyond, has only strengthened, but V’Landys may have to adjust expectations for a bumper deal in the region the AFL managed to land in 2022.

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