ANALYSIS - Stan is Nine’s hottest play with its streaming sport move

Chris Pash
By Chris Pash | 11 November 2020
Screenshot from Stan website.

Stan, Nine’s streaming platform valued by analysts between $900 million and a $1 billion, just became an even more valuable part of the media group with its sports play.

The subscription video-on-demand (SVOD) business will have in Stan Sports a real differentiator against the global players, such as Netflix and Amazon Prime.

Stan Sports is launching after Nine took the broadcast rights to rugby from Foxtel in a $100 million deal.

The live and on-demand premium sports package will be offered as a bundle to Stan’s customers from 2021.

For Foxtel, say industry insiders, this could mean more cord cutting on its main service.

“Stan’s announcement of its deal with the Rugby Union heralds a shift in the competitive landscape for TV,” says David Kennedy, head of research at Venture Insights.

“This move has been long anticipated. If Optus can offer SVOD sports, why not other SVOD players?”

Stan is well-placed to develop a sports offer that can set it apart from global content providers.

“The question now is whether global players will start to build a local sports portfolio of their own,” says Kennedy.

“Second, the SVOD push into sports means a new channel to audience for sporting codes. But we don’t expect this to result in a bonanza for sports bodies.

“Our consistent view has been that sports rights have been overvalued and due for a correction. Even with new interest in sports rights, we don’t expect licensing revenues to rise, indeed we still expect them to fall.”

Stan Sport will no doubt attract subscribers from current and new viewers. But will it be enough to carry the $100 million price tag for rugby?

Analysts at investment bank UBS expect Nine to book the majority of rugby broadcast, and associated production, costs in Stan. This will mean that Stan Sports is likely to be initially loss-making.

Pricing for Stan Sports hasn’t yet been announced. But if it was around $10 a month, then 250,000 or so subscribers would be needed.

UBS says calculations are more complicated with various factors at play including that Rugby Union is not broadcast throughout the whole year, meaning likely churn during the off season.

Early SMI (Standard Media Index) data suggests metro TV bookings were up 11.5% in October, boosted by a loaded month of major sporting events.

Analysts at Goldman Sachs say the Stans Sport announcement is consistent with previous statements by Nine and is a way to drive Stan active subscribers above its 3 million to 4 million subscriber target.

Morgan Stanly believes Stan and catchup 9Now are both under-appreciated by the market.

“It's rare for a FTA TV broadcaster anywhere around the world to have developed fast-growing and already meaningfully profitable SVOD and AVOD businesses, to run in parallel with the traditional FTA business,” write Morgan Stanley analysts in a note to clients.

“Strategically, we consider them as well placed for continued high growth.”

The Stan assets is one of the reasons many analysts think Nine is the outstanding media player in Australia and will benefit from a lift in advertising post-COVID.

“The data we look at regularly -- app downloads, internet traffic, Google analytics/key word search -- all points to a sharp lift in consumer time spent with each of the major streaming TV/video services in Australia during the COVID-19 induced stay-at-home period,” says Morgan Stanley.

“We believe NEC (Nine) is a direct beneficiary. Its two TV/video streaming businesses have benefited in terms of higher subscriber growth (Stan), higher usage, and higher audience delivery (9Now), and both therefore delivered higher than expected FY20 revenues.

“We think the consumer shift to streaming TV/video has accelerated and will continue to fuel strong user growth and revenue growth. We view this as structural, not cyclical growth, for which NEC is well placed.”

Nine is also well regarded as a media player because of its spread of assets and its increasing returns from digital, rather than traditional, media.

Nine’s revenue from digital business continues to rise as the fortunes of print decline.

And analysts were impressed with Nine’s full year results and its ability to pay a dividend in the face of the economic fallout from the pandemic.

The media company in August posted a $508.78 million loss mainly on impairment of goodwill. Excluding special items, profit fell 17% to $155.4 million for the year to June.

A trading update on Nine is expected to be given at the company’s AGM Thursday (November 12, 2020).

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