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April 9, 2020
Embattled Australian cable TV provider Foxtel has laid off 200 staff as it reels under the impact of the coronavirus.
The company, which has stayed afloat in the past year thanks to shareholder loans, has also stood down another 140 staff until the end of June.
Primarily an old-school cable TV operation delivering content to a home set-top box, Foxtel has been fighting a losing battle against streaming services like Netflix and local player Stan.
But COVID-19 has hit the company where it hurts most: sports.
Foxtel carries all the major sports, in particular the four football codes and cricket, and these drive its subscription business and its lucrative streaming services to pubs and clubs.
The big investment in sports has also propelled one of Foxtel's few new sources of growth: the online sports service Kayo, launched 18 months ago.
According to the most recent figures, at the end of June 2019, Foxtel had 3.14 million subs – a 12% increase over the previous year thanks largely to Kayo and its streaming business Foxtel Now.
Yet revenue for the final quarter was down in real terms by 12%.
Foxtel's critics say it has moved too slowly to counter the streaming services, that it charges monopoly prices, and that its set-top boxes are clunky.
It has ceded the market to Netflix, which despite launching just four years ago dominates the segment with 11.5 million subscribers.
In the last quarter of 2019, Foxtel subscriber churn reached 16%.
Now, with its most popular content streams gone, it is offering discounts and additional free entertainment channels to customers who have been threatening to cancel.
But the company has been surviving only because of loans from its two shareholders of more than A$1 billion ($622 billion) in the past year.
Telstra, the 35% owner, formed the partnership with News Corp 25 years ago to carry content over its new HFC network.
In the last few years it has wisely launched its own digital TV business, bundling NBN subscriptions with a service that includes access to Foxtel, Netflix and other streaming services.
Following the shocks of the past month, the once-snug relationship between commercial sports and broadcasters is now unclear, as is Foxtel's future.
Foxtel CEO Patrick Delaney made the point in a staff memo last week.
"It is clear all codes are struggling with significant financial challenges and we should anticipate that the future shape of sport in Australia will be very different," he said.
— Robert Clark, contributing editor, special to Light Reading
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