News Corp considers selling off Australian pay TV operator Foxtel

The Rupert Murdoch-backed media conglomerate News Corp will consider offers for its Australian pay television platform Foxtel, as it looks to reorganise its business in a volatile trading period for news outlets.

News Corp’s chief executive, Robert Thomson, said in an earnings release that potential buyers had emerged for the Foxtel business during a review of the company’s assets.

“That review has coincided recently with third-party interest in a potential transaction involving the Foxtel Group, which has been positively transformed in recent years,” Thomson said.

“We are evaluating options for the business with our advisors in light of that external interest.”

The Foxtel business includes the Kayo and Binge streaming services and the new Hubbl service.

Once a status symbol, Foxtel’s set-top boxes have been disappearing from Australian homes, eroding value from what was once a highly lucrative revenue stream.

Foxtel now competes in the Netflix-led streaming era through its online platforms which operate on much narrower margins than its legacy business.

It has been leaking subscribers from its Foxtel Now service, while boosting numbers for its Kayo and Binge platforms, according to disclosures in its earnings results.

Graeme Hughes, a consumer expert from Griffith University, said the rise of free and advertisement-supported services as well as increasing living costs for consumers meant competition was intensifying.

“It’s a very competitive landscape and will continue to be so for the foreseeable future,” Hughes said.

“When you consider that consumers have less discretionary spend, it is potentially a business to look to offload.”

News Corp, which reported its full year earnings in the US, owns a majority share of the Foxtel Group, alongside minority holder Telstra.

News headwinds
The release of the full year results come amid a tussle for future editorial control of News Corp, as well as Fox Corporation, after a move by the media mogul Rupert Murdoch to give his eldest son, Lachlan, full control upon the patriarch’s death.

His other adult children – James, Elisabeth and Prudence – will still receive equal shares of profits, but they would be prevented from exerting influence over how the companies are run in a move designed to retain its conservative voice.

There were mixed results among the various divisions of the US-listed company, which owns mastheads in the US, UK and Australia, along with book publishers, subscription television and real estate advertising assets.

Earnings from its news media division plunged 23% over the year, weighed by weaker revenues generated in its Australian business, where circulation and subscription income fell.

The trading period, marked by high inflation, has proven difficult for publishers around the world, due to subdued demand from advertisers and subscribers.

News Corp has recently cut jobs in Australia, where it publishes news titles including the Australian, Daily Telegraph and Herald Sun. Its expired content licensing deal with Meta also dented income streams.

The company’s newspaper stable also includes the Sun and the Times in London, and the New York Post.

The Sun’s digital reach plummeted during the year as it grappled with the fallout of the phone-hacking scandal, with its 159 million global monthly unique users falling to 112 million.

Over the 12-month reporting period, advertising revenues decreased by US$73m, or 8%, mainly due to lower print and digital advertising at News Corp’s Australian and UK news divisions.

Bright spots
News Corp recorded a jump in full year revenue, driven by robust results delivered by its business focused Dow Jones unit, book publishing arm and Australian real estate portal, which all helped offset the weakness in its news division.

Subscriptions and advertising revenue increased for Dow Jones, publisher of The Wall Street Journal, which contrasted with the fortunes of many of News Corp’s non-business titles.

Overall, it reported $US10.1bn in full year revenue, up 2% from the prior year. Its net profit also bounced back.

Its controlling interest in REA Group, which runs the realestate.com.au portal, has proven valuable as a robust property market continues to underpin strong listing numbers, which drives revenue.

News Corp is also upbeat about its tie-up with ChatGPT developer OpenAI, which involves a deal that provides access to all of News Corp’s current and archived content.

Thomson said he expected the deal would prove “lucrative”, but he warned against AI aggregators accessing News Corp content for free.

“Meanwhile, we have begun to take legal steps against AI aggressors, the egregious aggregators, who are predatory in the confiscation of our content,” Thomson said.

“Open source can never be a justification for open slather.”

While News Corp is among those to have inked deals with AI companies, many publishers have raised concerns over the use of their copyrighted content to train generative models, which can be used as an alternative source of news information for consumers. The Guardian