Broadcast options for Australian Rugby

[Strewthcobber]

Interesting to think about the scope of Kayo.

370,000 X 12 months X $25 a month equals a bit over $100m a year. Imagine what the rights for all sports Kayo shows is costing them

Every sport in the country is taking a haircut based on those numbers

 

[oztimmay]

I am nervous that after RA give Foxtel the flick that Newscorp will really go on the attack and RA will become their favourite whipping horse.

Alan Jones gives it a fair crack every Friday. Only got time for Wayne and Panda. Perhaps the king up on the goldie. That's about it.

 

[RedsHappy]

NewsCorp's quarterly results out today.
370,000 kayo paying subscribers as of 5 Feb.

Subscription video services revenue is down 11% year on year. (Currency + Foxtel numbers down)

Major shareholder Telstra loaned $175m presumably because they can't find anyone else interested

And Kayo is now shrinking subs quite materially, not growing them, that is big news in itself. As you say 370,000 Kayo subs as of February 5, 2020, 402,000 as of November 5, 2019 (see afr.com).

 

[barbarian]

From the article:
The only certainty is that Castle's job rests on what plays out over the next month.
No-one steps off a precipice without knowing what the next footfall will be. Castle has two strategists working with her - Shane Mattiske and Michael Tange. For all the uncertainty at the moment, I assume that RAs strategy has been planned well in advance and leaving Fox has been a key plank of that platform.

And of course the strategy would have been signed off by the Board. If it goes to shit there will be plenty of blame to go round I'm sure.
.

 

[Braveheart81]

And Kayo is now shrinking subs quite materially, not growing them, that is big news in itself. As you say 370,000 Kayo subs as of February 5, 2020, 402,000 as of November 5, 2019 (see afr.com).

I wonder how much of that is people interested in the RWC subscribing and then unsubscribing later. Will be interesting to see if this is a trend of just seasonal.

One element of these subscription services is that they are much easier to opt in and out of for all parties because there isn't any hardware required (unlike a Foxtel connection) so they don't need long term contracts (and essentially can't force them on the consumers either).

For something that is in its infancy though, you would think that Kayo should be steadily increasing their customers even if there was a season reduction as speculated above.

 

[RedsHappy]

From the article:
The only certainty is that Castle's job rests on what plays out over the next month.
No-one steps off a precipice without knowing what the next footfall will be. Castle has two strategists working with her - Shane Mattiske and Michael Tange. For all the uncertainty at the moment, I assume that RAs strategy has been planned well in advance and leaving Fox has been a key plank of that platform.

Well as maybe but what is often forgotten in the debate re Optus' interest in rugby is that if Optus takes on 'all-rugby' they have to get into the full-on production origination, feed uplifts, commentating, and all costs of such a domain, that is a whole different set of capabilities, risks and delivery issues than, for example, simply relaying the EPL from the UK (edit: and btw the way they seriously stuffed that up technically and had to handover the IP delivery to SBS).

A business takes on that size of risk and delivery and fixed costs per week burden, they had better be damn sure the incremental advertising and subscription revenue (and maybe mobile phone subscribers growth) is there to support it.

 

[RedsHappy]

And of course the strategy would have been signed off by the Board. If it goes to shit there will be plenty of blame to go round I'm sure.
.

As there is already

 

[barbarian]

As there is already

Is there? There certainly could be, but until we have a conclusion to this saga I'm unwilling to condemn anyone on any side.

The only way this whole 'saga' could have been avoided was if we just re-upped with Fox and 10, and I'm not sure that would have been the best move to make for RA. In hindsight it may well be the best option, but we're not ready to make that call yet.

 

[kiap]

… if Optus takes on 'all-rugby' they have to get into the full-on production origination, feed uplifts, commentating, and all costs of such a domain, that is a whole different set of capabilities, …

Cost, yes. Capability, not so much. That would be largely outsourced. Much of it is now anyway.

 

[RedsHappy]

I wonder how much of that is people interested in the RWC subscribing and then unsubscribing later. Will be interesting to see if this is a trend of just seasonal.

One element of these subscription services is that they are much easier to opt in and out of for all parties because there isn't any hardware required (unlike a Foxtel connection) so they don't need long term contracts (and essentially can't force them on the consumers either).

For something that is in its infancy though, you would think that Kayo should be steadily increasing their customers even if there was a season reduction as speculated above.

Yeah agree. But do we know this was a 'one off' RWC-induced termination phase? And not cross-compensated by February with cricket-induced summer uptake?

The plus of course re your Kayo 'on and off and on again' point for Fox is that the cost of friggin' developing, testing, installing and deinstalling etc of physical STBs is enormous and is never recovered even with consumer charges. Cost of Kayo subs flipping is comparatively tiny.

I'd think Fox would be concerned they were not seeing better sustained growth momentum in Kayo.

 

[RedsHappy]

Cost, yes. Capability, not so much. That would be largely outsourced. Much of it is now anyway.

Sure. But whether it's outsourced or not, it's a really serious fixed cost undertaking/exposure if you're not in that domain already.

Further, Fox Sports is today and gets all sorts of cost production origination and uplift efficiencies as it produces or co-produces TV or IP feeds for so many Aust sports.

 

[RedsHappy]

Is there? There certainly could be, but until we have a conclusion to this saga I'm unwilling to condemn anyone on any side.

The only way this whole 'saga' could have been avoided was if we just re-upped with Fox and 10, and I'm not sure that would have been the best move to make for RA. In hindsight it may well be the best option, but we're not ready to make that call yet.

I guess I meant and should have said '.............blame that's directed at them already for everything else that's gone wrong with the code before we even consider the 2021+ broadcasting outcomes......."

 

[Braveheart81]

Yeah agree. But do we know this was a 'one off' RWC-induced termination phase? And not cross-compensated by February with cricket-induced summer uptake?

More info! They lost more subscribers than that but gained some back in January.

 

[RedsHappy]

T

More info! They lost more subscribers than that but gained some back in January.

Thanks! Looks more like a (worrying for them) consolidation around c. 360,000-ish subs than a clear platform for continuing subs growth. And quite a chunk of this is self-cannibalisation from Foxtel STB cancellations.

 

[KOB1987]

I reckon a lot of the decline would have been people switching it off for the summer. You don't need Kayo for cricket, and TV generally is pretty lean over the break. The figures from about May onwards will be more telling.

 

[kiap]

it produces or co-produces TV or IP feeds for so many Aust sports.

I suspect not as much as you think.

 

[RedsHappy]

Completely true.

Foxtel is dying as a concept. I can't imagine that, in 5 years' time, any of us will have a black box next to the TV.

If you take the concept seriously, then RA should be selling streaming services themselves. We're not there yet but this (Kayo, Optus etc) is the path.

I can't see a situation in which local pro rugby will be getting anything like $57m per year going forward. I think we're going to have to deal with a new reality.

I have to agree. I mean what does the recent Super Rugby and Wallaby-viewing (and related match-attending) Foxtel data imply re how may hard Foxtel subs would Foxtel defs lose if rugby went AWOL to Optus?

Let's say it's, what, in the range of 60,000 - 80,000 subs that are only on Foxtel for rugby - this number must correlate somewhat to the number of Foxtel subs viewing to Super Rugby etc. Let's say it's 70,000 max and Foxtel would lose gross margin $s of say 675 pa on each loss. That's $47.3m in income loss (and my $675 may well be too high given discounts and promos and personally I doubt that 'only for rugby' Foxtel adherents that would defs cancel if no rugby is as high as 70,000 but hey let's be optimistic re the code's adherents).

OK add to that advertising that is solely on Fox for rugby and would leave Foxtel forever if no Foxtel rugby - say $7m pa?

So say total 'at risk' loss of rugby income is c $55m. Off that comes a lot of cost for production, editors, commentators, IP and TV uplifts, studio time, etc. Would have to be what $8m pa all up?

So that speculative piece of rough financial modelling yields a net 'at risk' Foxtel income of say c. $47m pa. (Noting rugby viewership is falling markedly pa. so Foxtel would have to factor those risks in big time over a 5 year deal period.)

Foxtel is meant to exist for shareholders not rugby fans (esp now Foxtel is in real financial trouble) so if the above is broadly right then the prudent absolute max that Foxtel could afford for rugby would be c. $A38m pa to yield a c. 25% code net profit _before_ allocating any central Foxtel overheads which of course diminishes this code NP pro-rata and _before_ an assessment of annual rugby-driven income decline risk over a long 5 year deal period.

Summary: Foxtel is slowly going broke on all current trends so they simply cannot afford to take financial risks on a declining code so it's inconceivable IMO that Foxtel's final bid to RA (if it makes one) cannot be anything even vaguely close to the 2016-2020 $s levels.

 

[RedsHappy]

I suspect not as much as you think.

Really? Maybe they're exaggerating but this is what they say of themselves and I think it's not too wrong in fact:

"FOX SPORTS compiles and produces live content across seven dedicated high definition channels – FOX CRICKET, FOX LEAGUE, FOX SPORTS 3, FOX FOOTY, FOX SPORTS 5, FOX SPORTS 6 and FOX SPORTS ................​

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FOX SPORTS, which broadcast over 14,000 hours of live content in 2018, involving over 900 outside broadcasts and seven studios, is the largest production company in Australia."​

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[kiap]

Really? Maybe they're exaggerating but this is what they say of themselves and I think it's not too wrong in fact:

"FOX SPORTS compiles and produces live content across seven dedicated high definition channels – FOX CRICKET, FOX LEAGUE, FOX SPORTS 3, FOX FOOTY, FOX SPORTS 5, FOX SPORTS 6 and FOX SPORTS ......​

​

FOX SPORTS, which broadcast over 14,000 hours of live content in 2018, involving over 900 outside broadcasts and seven studios, is the largest production company in Australia."​

Sure. But that doesn't contradict what I'm saying, even the last sentence.

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Compiles and produces. How many in the production chain do you say are exclusively in-house Fox staff?

 

[GTPIH]

More info! They lost more subscribers than that but gained some back in January.

The uptake in January could well be cricket followers as the ODI Tour to India was only on Fox/Kayo