Rupert Murdoch's News Corp has reached a significant agreement to sell its Australian cable television and streaming service, Foxtel Group, to the global sports streaming platform DAZN for A$3.4 billion (approximately $2.1 billion). This transaction, announced on Monday, has been hailed as a pivotal moment for both companies, especially as Foxtel navigated through turbulent times marked by fierce competition from streaming giants like Netflix.
The deal not only marks the future direction of Foxtel but also resolves the uncertainty surrounding its operations, which had been jeopardized by declining subscriber numbers and rising costs associated with sports broadcasting rights. Foxtel, once the dominant force in Australia’s pay-television industry since its launch in 1995, has recently made attempts to revitalize its service through the introduction of streaming platforms like Kayo and Binge, but it has struggled to retain customers amid the changing media consumption patterns.
According to Bloomberg, the terms of the deal specify News Corp will retain approximately 6% ownership of DAZN, along with one seat on its board, ensuring continued influence over the media conglomerate's future. Telstra Group Ltd., which holds minority shares in Foxtel, will likewise sell its stake, which translates to close to 3% ownership of DAZN, resulting in A$128 million being cashed for the repayment of shareholder loans.
Robert Thomson, CEO of News Corp, characterized the agreement as "a victory for News Corp shareholders, DAZN, and sport fans in Australia and around the world." His enthusiasm reflects the potential of the new ownership arrangement, particularly how DAZN, known for its innovative technology and international reach, can help push Foxtel to new heights.
Shay Segev, DAZN's CEO, also expressed excitement about the deal, saying, "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." This sentiment highlights DAZN's commitment to leveraging Foxtel's established infrastructure and brand to penetrate the Australian market more effectively.
The sale is set to close by the second half of fiscal 2025, pending regulatory approvals and conditions customary to such high-value transactions. Analysts have observed the valuation on Foxtel as favorable, pegged at more than seven times its earnings before interest, tax, depreciation, and amortization (EBITDA) for the upcoming fiscal year, demonstrating potential growth prospects.
Historically, Foxtel has faced significant challenges, as its traditional pay-TV model became increasingly untenable. The company has attempted to retain customers by enhancing its own streaming services, yet the shift to more affordable options has heavily impacted its revenue streams. With exclusive rights to Premiere sports leagues like the Australian Football League and National Rugby League, Foxtel hopes to leverage these assets under DAZN's stewardship.
This acquisition marks not only DAZN’s aggressive expansion strategy but also signals News Corp's effort to streamline its business to focus on its core operations, including Dow Jones and book publishing assets. The emphasis on their growth segments reflects the shifting media landscapes, where digital platforms are dominating over traditional television.
Industry experts project the sale could reshape the Australian sports broadcasting market, pushing consumer expectations and potentially leading to new pricing models. Paul Budde, an independent telecom analyst, noted, "DAZN’s entry...could dramatically shift consumer expectations and reshape the pricing structure." This statement underlines the belief many harbor about the increasing competition and innovations expected from DAZN after it takes the reins of Foxtel.
Looking forward, the plan includes Foxtel maintaining its Australian leadership, with Foxtel CEO Patrick Delany continuing to lead the operations. Delany expressed optimism about the deal, stating, "We are excited to... provide access to their global reach and strengthen our infrastructure and technology to accelerate our transformation." This collaboration aims to not only engage current Australian viewers but also capture international audiences for popular sports.
Goldman Sachs served as the financial advisor for News Corp throughout the transaction, with additional legal support from Gibson, Dunn & Crutcher LLP and Allens. The completion of this deal marks the end of Foxtel’s long-standing connection with News Corp and signifies the next phase for the channel, as it firmly steps onto the global stage under DAZN's banner.
The significant financial impact of this deal alongside the important shifts it will cause within the Australian media market cannot be understated, setting the tone for future interactions between digital streaming entities and traditional cable networks.
