Australian pay-television broadcaster Foxtel will save A$180m ($129m/€109m) over the next three years in reduced fees negotiated for its sports media-rights deals.
The figure was revealed by Robert Thomson, global CEO of parent company News Corp, during an analyst briefing on the company’s fourth-quarter results.
“While negotiations with some sports continue, deals already completed will reduce the cost of sports rights at Foxtel by at least A$180m over the next three years as compared to the prior contracted value,” he said.
“This reset will have a positive long-term impact on Foxtel’s profitability.”
Foxtel is Australia’s biggest spender on sports media rights. Since Covid-19 struck, it has renegotiated deals for the country’s two most valuable properties, the Australian Football League and the National Rugby League. It has also renegotiated its deal with Rugby Australia, terminated its deal with the Football Federation Australia, and is in the process of renegotiating its deal with the Supercars motor racing series.
Foxtel was struggling financially even before Covid-19. It has taken other cost-cutting steps since the start of the year, including laying off 200 staff and furloughing 140 others in April. Its sports business has been particularly badly hit by the pandemic – its sports streaming platform Kayo lost a third of its subscribers in April as live sport dried up.
Earlier this year, Thomson had said that the cost of sports media rights in Australia must come down because of the pandemic’s impact on the staging of sport. Ad News reported that he said: “The idea that things will suddenly turn to normal…is absurd. It’s not just the quantity of games, it’s the quality of the experience, and that has obviously been diminished.
“And that reset has to apply longer-term to rights in Australia. In essence, there is a new reset reality.”
Other Australian sports broadcasters have also moved to reduce their sports rights spending. The NRL and the AFL’s free-to-air partners, Nine and Seven respectively, renegotiated their deals with the properties at the same time as Fox.
Nine’s chief executive Hugh Marks told the recent APOS Virtual Series media industry conference: “What sports are being forced to do through Covid is to accept they’re probably going to have to reset their businesses to a lower level…
“In the next three to five years, there’s going to have to be some resetting of expectations. The rights fees that traditional broadcasters have been paying can’t be sustained or those businesses will go broke.
“Covid’s really been an abrupt driver of that change. You’re seeing significant reductions in rights fees across rugby league and AFL, which are the two biggest sports. And some of the second-tier sports like rugby or soccer are really struggling to get much traction with traditional broadcasters. So there’s a huge shift going on in the sports market.”
News Corp’s revenue in the fourth quarter dropped 22 per cent to $1.9bn, mainly due to the pandemic. Revenue for the full year was down 11 per cent to $9bn. The company made a net loss in the year of $1.55bn.