Foxtel’s residential audience fell by almost 200,000 subscribers last year, documents filed with the US Securities and Exchange Commission show.
In response to questions from the SEC in February, News Corp’s global chief financial officer, Susan Panuccio, said residential subscribers tumbled by 196,000 in 2019, from about 2.2 million at the end of 2018 to a little over 2 million by 31 December, the documents show.
Paid subscriptions to the streaming service Foxtel Now also dropped, from 354,000 to 343,000 over the same period.
The number of paid subscriptions to the new sports streaming product Kayo exploded from 42,000 to 350,000, but dropped dramatically when the pandemic hit earlier this year and there was no live sport on television.
This week the Australian government added $10m to its previous grant of $30m to the Murdoch-controlled platform to broadcast women’s and under-represented sport, saying: “Fox Sports is well placed to continue its role as a leading sports broadcaster.”
“With eight dedicated sports channels, plus the Kayo Sports streaming service and foxsports.com.au, Fox Sports has a strong commitment to promoting sports and events that may not otherwise receive any media coverage,” a spokesman for the minister for communications, Paul Fletcher, told Guardian Australia.
In May, News Corp said its $1bn loss was primarily driven by the company’s decision to slash the valuation of Foxtel, which has been struggling to compete against streaming services like Netflix in Australia.
SEC staff focused their inquiries on Foxtel, asking Panuccio to explain its valuation method for the pay TV service and for more information about its decision to cut the value of some of its entertainment programming after it goes to air.
The SEC said that in future News Corp should include the numbers it uses in investor presentations, “such as broadcast subscribers, unique users, or broadcast churn”, in the paperwork it files with the regulator.
In her response, sent in early March, Panuccio provided historical information dealing with how News had valued its stake in Foxtel in 2017 and in 2018, when it increased its holdings in Foxtel to 65%, giving it a controlling interest.
The remainder of Foxtel belongs to Telstra.
SEC staff responded to Panuccio’s letter the same month, closing the regulator’s review of the 2019 accounts.
Revenue from News Corp’s subscription video service segment, which is made up of Foxtel and Sky News, fell US$77m in the first three months of 2020 “mainly due to lower subscription revenues resulting from fewer broadcast subscribers” and the weaker Australian dollar, the company said in accounts filed in May.
The value of the segment fell by a quarter, from $4.4bn to $3.3bn, and News said it faced tougher times ahead due to the Covid-19 crisis.
“The cancellation or postponement of sports events for which the company has broadcast rights has resulted in fewer subscribers to its sports services, including Kayo, and is expected to adversely impact customer churn, which, in turn, have adversely affected and are expected to continue to adversely affect subscription revenue from broadcast and Kayo subscribers and, together with adverse economic conditions, have negatively impacted and are expected to continue to adversely impact advertising revenue,” it said.
A spokesman for Foxtel said News Corp’s Q4 result would be announced on 7 August and would contain up-to-date numbers for Foxtel and Kayo.
“In relation to the grant, that money is for a specific purpose – to support rights payments and production for under-represented sport based on agreed performance metrics,” he said.
“The goal is to build exposure and audiences for women’s and under-represented sport, without which those sports would be unlikely to find themselves on television and in a less sustainable position in terms of attracting sponsors and paying athletes.”
The payment to Foxtel comes as the free-to-air industry lobbies the government to release it from its quota obligations to screen first-release drama and children’s television due to the impact of streaming services.
Free TV argues the arrival of on-demand services has seen a dramatic fall in audiences for local drama – from an average of 1 million in 2008 to under 400,000 in 2018.
