The shock loss of Foxtel's English Premier League rights to telco Optus has been described by one of Australia's top media analysts as a blow to the pay television provider.
Optus' successful bid, confirmed on Monday, is "a clear negative for Foxtel and Fox Sports", Macquarie's Andrew Levy said. Optus paid an estimated $US45 million ($63 million) annually for three years of exclusive rights to show EPL in Australia, beginning with the 2016-17 season starting in August, The Australian Financial Review reported.
It is the second setback this year for the Foxtel business, jointly owned by News Corp and Telstra, at a time when subscription television providers are vulnerable to competition from "over the top" or OTT providers and cord-cutting by households. Earlier in 2015, Nine Entertainment Co agreed to a five-year $925 million deal with the National Rugby League which denied Fox Sports exclusivity to Saturday and Monday night matches.
Mr Levy's analysis is the first to underscore the importance of the EPL, the world's most popular football competition, to Foxtel's business.
"While EPL is not as popular as the major winter codes [Australian Rules and Rugby League], it is not covered by anti-siphoning protections, meaning Foxtel/Fox Sports have historically been able to secure exclusive broadcast rights in the country," Mr Levy said in a report to clients. "All up, somewhere in the region of 70 per cent of Foxtel broadcast subscribers take up the sports tier, highlighting its importance."
Even more incredible is that Optus has not yet revealed how it will broadcast games to Australian customers. "This is iconic – it's a major plank in our content strategy but it doesn't live alone," Singtel-Optus chief executive Allen Lew told the Financial Review.
"Sport is the main content that Australians like."
Optus' partnership with Fetch TV is being renegotiated but Mr Lew said his viewers will be able to watch EPL on all the "traditional platforms" and other devices.
'Concerning' trend
"Overall, the trend is concerning," Mr Levy said. "We think Foxtel's business model is more vulnerable to the changing competitive landscape than its international peers, given its small subscriber base [less than 30 per cent household penetration] and restrictions over it acquiring key broadcast rights due to the existence of anti-siphoning protections."
Unique anti-siphoning rules ensure free-to-air providers keep key sporting rights ahead of pay TV competitors in Australia.
Foxtel had 2.8 million subscribers in Australia as of June 30, paying an average $93 a month. While its subscriber base grew 9 per cent over the previous year, this is believed to include "internet protocol products", chiefly Presto.
Optus' interest in exclusive content comes amid heightened competition in telecommunications from cheaper rivals led by TPG. Optus is seeking to build market share just as the national broadband network is rolling out, although many households will still be restricted to inferior download speeds when the 2016-17 EPL season begins.
Macquarie's analysts noted in flagship research published in September that Optus' parent SingTel was "doing a lot on this front" with regards to the provision of content. Shares of SingTel were unmoved by the EPL deal.
