Rupert Murdoch's News Corp has officially announced the sale of its Australian cable TV and streaming unit, Foxtel, to the London-based sports streaming platform DAZN for A$3.4 billion (approximately $2.13 billion), including debt. This strategic move signifies News Corp's effort to divest from its struggling cable operations and refocus on its core businesses, as the media empire has faced growing pressure from the popularity of streaming services like Netflix.
The announcement, reported on Monday, marks DAZN's expansion efforts in Australia—an exciting opportunity, according to the company's co-founder and CEO, Shay Segev. "Australians watch more sport than any other country in the world, which makes this deal an incredibly exciting opportunity for DAZN to enter a key market, marking another step in our long-term strategy to become the global home of sport," Segev stated.
The deal will also see News Corp gaining a 6% equity stake and obtaining a seat on DAZN’s board, solidifying its influence within the newly formed partnership. Meanwhile, telecommunications giant Telstra has agreed to sell its 35% stake in Foxtel, receiving A$128 million in cash and retaining 3% ownership of DAZN.
This acquisition arrives at a time when many traditional media entities are facing dwindling subscriber numbers amid increasing competition from affordable streaming options. Foxtel, which struggled to maintain its subscriber base, was launched by News Corp back in 1995 but has since been challenged by platforms like Kayo, which offers live streaming of local sports.
DAZN's newly acquired entity will take on several broadcasting responsibilities, including coverage of the Australian Football League (AFL), the National Rugby League (NRL), and cricket, as well as significant international sports rights. Foxtel’s seven-year deal with AFL is valued at A$4.5 billion, and Cricket Australia is set to receive A$1.5 billion from its existing agreements until 2031.
The enterprise value placed on Foxtel stands at seven times its expected 2024 earnings before interest, tax, depreciation, and amortization (EBITDA). News Corp's chief executive, Robert Thomson, deemed the agreement beneficial for shareholders, DAZN, and Australian sports fans. Thomson emphasized this transition will allow for stronger investments in the company's primary sectors, including Dow Jones, digital real estate, and book publishing.
While the envisioned acquisition is thrilling for sports enthusiasts, it is not devoid of hurdles. The transaction is subject to regulatory approval by Australia’s Foreign Investment Review Board (FIRB), due to the international ownership of DAZN. This oversight will be closely monitored as DAZN’s majority shareholder, Len Blavatnik, has significant investments tied to the entity.
Despite its potential, DAZN faces challenges maintaining profitability, having posted losses of approximately $4.1 billion over the last three years leading up to December 2022. Uncertainties linger over whether DAZN will integrate Foxtel’s Kayo platform with its offerings or allow them to operate independently.
The acquisition has triggered discussions on how this will change Australia’s sports broadcasting environment. Many speculate the entry of DAZN could disrupt the current pricing structure, providing consumers with alternate options and potentially lowering costs for sports fanatics.
Also noteworthy is DAZN’s future relationship with other major stakeholders within the Australian sports arena. Long-term contracts with sports leagues are pivotal, especially since the NRL is planning to negotiate another broadcasting deal for 2027. This looming deadline raises questions about DAZN's commitment to Australian sports.
For now, shares of News Corp rose by around 3% following the announcement, reflecting investor optimism surrounding the transition from traditional cable services to the burgeoning streaming market. Similarly, Telstra witnessed its shares rise by 0.9% after disclosing its stake sale.
Overall, the ramifications of this deal extend beyond mere financial transactions, as they herald the potential for reshaping the media and sports broadcast sectors within Australia. It marks DAZN's determination to establish itself as the unrivaled premier destination for sports streaming, triggered by strategic acquisitions and dynamic market changes.
