News Corp reported a $US23 million ($32 million) profit for the March quarter, on revenues of $US2.6 billion. Yet the results revealed Foxtel lost about 100,000 subscribers from its traditional pay TV product over that period.
Foxtel has in recent months has been looking to raise billions of dollars in debt, according to market sources, to refinance existing loans and also deepen its push into online streaming.
There has been intense market and industry speculation about whether Foxtel can successfully raise these funds from banks and debt investors on attractive terms.
Ms Panuccio said News Corp continued to look at “numerous options to provide Foxtel with more financial flexibility and an optimal capital structure” during the analyst call.
“To that end, we have contributed $300 million via shareholder loans, which cover the repayment of April maturities,” she said.
The pay TV company said earlier this year it has total borrowings of $US1.68 billion. It had a $US211 million credit facility that expired on April 7, and $US744 million in debt falling due this year.
Telstra and News Corp have long clashed over Foxtel. The telco has signalled its desire to exit its Foxtel shareholding through an eventual IPO, and sources said its decision to not tip any more money in was a sign of its desire to distance itself from the pay-TV platform.
Foxtel’s total subscribers were up 5 per cent year-on-year to 2.9 million, with growth in the cheaper, newly launched sports streaming platform Kayo Sports and entertainment option Foxtel Now. While Foxtel typically costs at least $50, Kayo is priced from $25 a month.
Revenues for News Corp’s subscription video services fell 13 per cent compared to the year before, with 9 per cent due to foreign currency fluctuation and the rest due to lower numbers of subscribers to the higher-priced Foxtel package.
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News Corp said there were 2.4 million people with Foxtel broadcast and commercial subscriptions. This was down from 2.5 million in the previous quarter.
Kayo Sports had 209,000 paying subscribers as of May 8, with 505,000 paying subscribers to Foxtel Now.
Foxtel chief executive Patrick Delany said Foxtel subscribers were not downgrading their packages to Kayo. He said a price rise in October was one of the reasons subscribers to Foxtel’s core, traditional product declined.
“The dual brand, dual product strategy is working well,” Mr Delany said in an interview.
Ms Panuccio said 2019 was “always going to be a big transition year for the new Foxtel” with a longer payback period for re-investments.
She said the new streaming platforms were expected to be a “big revenue driver” for the company and was confident about stopping subscriber losses.
Foxtel and Seven West Media together spent $1.2 billion on cricket rights last year.
“As we lap the cricket investment, we would expect programming costs to grow at a much more modest rate after this year, and we will continue to thoroughly review our content lineup for additional savings,” she said.
News Corp chief executive Robert Thomson said Foxtel’s streaming subscribers were up 80 per cent since January with “investment in streaming … starting to pay off”.
Shares in the media company closed 17¢ higher on the ASX at $16.75.
Jennifer Duke is a media and telecommunications journalist for The Sydney Morning Herald and The Age.
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