Telstra could sell their entire 50% shareholding in Foxtel as the NBN looms as another major problem for the carrier, who is currently having to come to grips with major problems across their mobile network.
Speaking exclusively to ChannelNews earlier today, the outgoing CEO of Foxtel Richard Freudenstein said that he intends to take a “big break” away from the network that he admits in under pressure. He said that free to air TV stations are “dead” and that sport is the big driver for Foxtel going forward. He did not comment on the news that Telstra is looking to exit the pay TV network.
Meanwhile Telstra boss Andy Penn told ABC News Breakfast this morning “I guess as an executive I will always want to be doing better, but it’s [Foxtel] a great asset and that’s why it’s strategically important to us,” in response to the speculation.
But analysts are questioning how long Foxtel will remain a “great asset” as Netflix continues to strip profits away from Foxtel.
CCZ Equities media analyst Roger Colman said “Netflix might use Australia as an experiment to go up in tiers in content service terms, we’ll probably see the same from Stan, and I think Foxtel is nowhere going to be able to maintain its current profitability,” he said.
He added “Foxtel’s under pressure for content, they’re under pressure for customers, they’re under pressure for viewers, they’re under pressure for revenue”.
Media analyst Steve Allen from Fusion Strategy agrees with Freudenstein’s interpretation that sport is the key to Foxtel’s success.
Talking to the ABC Allen claimed that there are those who think crunch time for Foxtel will arrive in about four years when the rights to the two football codes are up for renewal.
Already, cricket’s Big Bash League has departed to Channel 10 to be followed next August by English Premier League football going to Optus, Fetch TV and SBS.
“That probably means the cost for sports rights for Foxtel, indeed the cost of any programming for Foxtel, is only going to rise, so they’re going to have a growing overheads problem,” Allen said.
If that is not enough, Steve Allen said the looming arrival of the NBN spells even more trouble for Foxtel.
“A lot more providers will start to use the NBN, rent space on the NBN, and supply products we haven’t even thought of so far,” he added.
Also hurting Foxtel is that it is expensive, leading to a customer backlash this week when it tried to raise its prices by a dollar a month.
Many Foxtel customers have noticed that, at $25 per month for its basic package, Foxtel is almost three times as expensive as Netflix’s basic offering.
Although Foxtel has 2.7 million subscribers, it has had to rely on the purchase of regional provider Austar for meaningful growth.
Against that backdrop it’s no real surprise that Telstra is weighing up either a sale or float of its 50 per cent stake in Foxtel the ABC said.
However, whatever its intentions for Foxtel, Telstra has a much more immediate issue to deal with – and that is how to make Australia’s biggest mobile network more reliable.
The second major outage in less than a month is a huge blow to the carrier’s reputation.
A reputation it is trying to buy back, again.
“The third of April is the day for free data for customers to in some way apologise for the inconvenience we’ve again caused them,” said Mr Penn.