Foxtel has shown us the future
Streaming is key to success
FOXTEL has outlined an ambitious growth strategy targeting 5 million subscribers in the next three years as the media major transitions to a streaming-led future.
Briefing investors at the Foxtel Group’s strategy day, the company’s chief executive Patrick Delany said the development of streaming services Kayo Sports, Binge, and the soon-to-launch Flash, represented a dramatic pivot in the evolution of subscription TV in Australia.
“Today’s Foxtel Group is a very different company to the one-product Foxtel of three or four years ago,” Mr Delany said. “The business has been repositioned as a technologyled streaming company with multiple sources of revenue growth from streaming, a strengthened Foxtel Retail offering and growth in digital advertising.”
Mr Delany said the company was on track to reach more than five million subscribers and $3bn in annual revenue within the next three years, with the cornerstone of the business being “growth through streaming, and to win with world-class content and technology”.
“Importantly, we have high cash generation, supporting investment and returns,” Mr Delany said.
Responding to intense market talk surrounding a potential Foxtel stock market listing early next year, Mr Delany said it was “a matter for our shareholders”.
“We want to make sure the investment community understands the value that we have delivered and the transformative journey that we are on,” he said.
In 2016, just 8 per cent of the company’s subscribers came from streaming. With more than 4 million customers now, some 53 per cent have a streaming service and that number is increasing.
Mr Delany spoke of the company’s ongoing investment in technology, which was highlighted by the recent introduction of the cable-less iQ5 plug-and-play set top box, which removes the need for technician call-outs and scheduling installations.
Launching new streaming products has also allowed Foxtel to target customers we previously couldn’t reach through cable and satellite, Mr Delany said.
“It’s fundamental to our strategy of migrating Foxtel customers off cable and supporting digital advertising growth,” he said.
This transition will be further developed in coming months with a software update that will allow the iQ4 set top box would only require a broadband connection, without the need for satellite.
Foxtel’s chief financial officer Stuart Hutton said Foxtel’s transformation would continue to “ease the capex burden” on the company – as more Australians shift to streaming, installation costs per subscriber are falling sharply which reduces capital costs and boosts cashflow.
Mr Hutton also referenced the significant costs savings that the Foxtel Group executed in the past financial year.
“There was a reduction in costs from the 2019 financial year of approximately 10 per cent or $250m, down to $2.3bn,” he said.
“We took the decision provided by the disruption from Covid to reshape the business for the future.”
Central among those decisions was a “renegotiating of content rights focusing on premium sports and entertainment”, Mr Hutton said.
“This included the implementation of a more disciplined approach to assessing the value of content – decision making which continues
today.” Mr Delany revealed that 53 per cent of Foxtel’s current subscribers have signed up to the company’s streaming services, and that number is increasing.
The boom in subscriptions “also translates into consistent revenue growth … which is now over four times higher than the launch quarter,” Mr Delany said.
The company was also seeing less “churn” – the rate at which subscribers cancel their service – in Kayo and Binge, he said. “An important behaviour we see with subscribers is they come for the new releases but stay for the library,” Mr Delany said.
Flash, which will launch later this month, “is built on the same streaming platform as Kayo and Binge, allowing us to go to market quickly and efficiently”, Mr Delany said.
News Corp (publisher of this paper) has a 65 per cent stake in Foxtel, with the remaining 35 per cent owned by Telstra.
We want to make sure the investment community understands the value that we have delivered and the transformative journey that we are on