News Corp considers selling Australia pay TV and streaming unit

Rupert Murdoch’s News Corp, opens new tab said it may sell Australian cable TV and streaming unit Foxtel after receiving an approach, a deal that would end its involvement in a high-overhead asset that has struggled to adapt to the Netflix, opens new tab era.

News Corp said it was considering the deal in a trading update in which the division posted a 5% profit decline for the June quarter. Overall profit at News Corp, which split from Murdoch’s Fox Corp, opens new tab in 2013, rose 11% in the period, led by its real estate listings business.

A review of the News Corp business units had “coincided recently with third-party interest in a potential transaction involving the Foxtel group”, CEO Robert Thomson said in a statement.
“We are evaluating options … with our advisors in light of that external interest.”

A sale of Foxtel would relieve News Corp, which holds most of the Murdoch family’s print mastheads like the Wall Street Journal and book publisher HarperCollins, of a business that looms large on the Australian media landscape but has faced disruption from cheap, narrow-margin streaming rivals.

With its set-top boxes installed alongside people’s televisions, Foxtel once dominated Australian pay TV but it has shed subscribers who pay about A$100 ($66) a month for that service since Netflix, Disney (DIS.N), opens new tab and Amazon, opens new tab began rushing out streaming offers for a fraction of the price.

Foxtel started its own streaming service in 2020, alongside the set-top boxes. That has offset a decline in higher-paying traditional subscriber numbers but not in subscriber revenue, which was up 1% in the June quarter.

“Selling it would eliminate a strategic dilemma that still haunts traditional media companies: how to milk the still-fat cash cow that is pay TV while trying to manage its decline,” said Morningstar analyst Brian Han.

A drawcard for Foxtel subscribers, sports, leaves the company beholden to rapidly increasing costs to pay for broadcast rights, Han added.

News Corp’s Australia-listed shares closed up 7.6% as investors cheered a better-than-expected result and the prospect of a resolution to questions about Foxtel’s future ownership. U.S.-listed shares of the company were up 4% premarket on Friday.

The company didn’t put a valuation on a sale of Foxtel. Using a valuation of four to six times gross annual profit, as suggested by Morgan Stanley in 2021, Foxtel would be worth between $1.24 billion and $1.86 billion based on its 2024 profit.

A spokesperson for Australian telco Telstra, opens new tab, which owns 35% of Foxtel, acknowledged the News Corp statement but declined to comment further. Reuters