News Corp, through its 65%-owned subscription television service Foxtel, is in “serious” negotiations with major sports to reset the fees charged for broadcast rights.
Subscriber numbers for Kayo, Foxtel’s streaming sports platform, fell by a third in April to 272,000 as live sport disappeared in the social restrictions imposed to combat the coronavirus crisis.
News last week wrote down the value of Foxtel’s goodwill and intangible assets by nearly $US1 billion (AUD1.5 billion).
For the three months to March, News Corp reported subscription video services revenue down 14% to $US462 million (AUD711 million). Adjusting for foreign currency fluctuations, the fall was 7%.
News expects the ongoing suspension of major sporting events to adversely impact customer churn, meaning fewer subscribers to sports services including Kayo.
Robert Thomson, the global CEO of News Corp says there needs to be a fundamental reset on the cost of broadcast rights.
“The idea that things will suddenly turn to normal ... is absurd,” he said when briefing analysts after releasing third quarter results.
“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.”
He says Foxtel is in serious negotiations with the major sports on costs.
News Corp CFO Susan Panuccio says Foxtel subscribers have declined in recent weeks with the suspension of the NRL and AFL seasons as well as rugby, motor sports and other international sporting codes.
News plans to defer costs if the NRL and AFL seasons do not resume in the fourth quarter.
“All the sports-based contracts have different terms and conditions, and we are currently in discussions with the leagues around the best way to move forward and to value the season that remains.
The quarterly cost, before the sporting seasons were suspended, was AUD$95 million for the AFL and NRL.
Nine Entertainment earlier this month branded its current deal with the NRL "unsustainable", saying the television network has received no value so far from the money it has already paid for broadcast rights this year.
The NRL has a $372 million a year, five-year deal for broadcast rights running to 2022, and is currently trying to create a shortened season working within restrictions imposed during the coronavirus crisis.
But the sport code has no deal yet on fees for broadcast rights.
Nine has already told the market it will save $130 million this year if the suspended season remains in hibernation. The media group has identified $289 million in costs to be cut, including fees to the NRL.
The savings are critical at a time when advertising revenue is falling during the economic fallout from the pandemic.
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