Foxtel confident of keeping HBO hits pipeline open
The boss of News Corp-controlled cable TV and streaming company Foxtel has signalled the owner of popular HBO shows such as White Lotus and House of the Dragon will sign another licensing deal with a local player, a move that would delay the US content giant’s plans to launch its own streaming service in Australia.
Foxtel CEO Patrick Delany has said his company, which holds the exclusive rights to HBO programs such as Euphoria and Succession, is in a “very good position” to renegotiate with HBO’s parent company, Warner Bros Discovery, as he fights for the crown jewel of international content against rival bidder Stan.
“The whole world’s changed, hasn’t it,” Delany said in an interview following the release of Foxtel’s second quarter results last Friday. “The architect of the throw everything into streaming – Bob Iger – is back into his job and has reassessed that strategy as though it wasn’t his.”
“We’re seeing a lot of the streamers doing exactly the same. We think that whatever decision is made, whether it’s to go over the top or continue to provide output, we’re in a very good position to work with Warner Bros.”
Foxtel outbid Nine Entertainment Co and its streaming service Stan in 2020 for the rights to a range of HBO programs and Warner Bros shows, in a deal believed to be worth up to $200 million a year at its peak. The company also fought Stan for a lucrative deal with US studio NBCUniversal, a move which prompted Nine chief executive Mike Sneesby to fly to talk to Hollywood studios about other ways to acquire content.
Delany’s most recent comments have occurred as Foxtel fights to retain that content, going head-to-head once again with Stan, owned by Nine Entertainment Co (the owner of this masthead). HBO is widely considered the jewel in the entertainment crown: it has transformed the television industry through popular hits such as The Sopranos, The Wire, Game of Thrones. Its programs attract millions of viewers all over the world.
When HBO bosses came to Australia late last year, Nine and Stan executives discussed a strategic partnership with Warner Bros Discovery, which would allow the latter to run its programs locally without having to launch a standalone service. Media sources, who requested anonymity to speak freely, have reiterated any deal with Stan could involve handing over a stake in the streaming service to Warner Bros Discovery in exchange for content exclusivity.
It is unclear how long a deal might run. Industry insiders expect it will be a short-term arrangement that lines up with a similar deal between Warner Bros Discovery and British pay TV network Sky, which expires at the end of 2024. Such a deal would give Warner Bros Discovery time to assess whether a direct-to-consumer model is still viable while receiving large sums for its highly sought-after content. Due to the quality of the content, it could become one of the most expensive entertainment deals in Australian history
Foxtel is not expected to give up the HBO content easily. Its entertainment service Binge, which launched in 2020, owes much of its success to the programs it has under the current agreement. HBO’s House of the Dragon helped Binge last quarter, helping it rack up to 1.38 million paying subscribers – a high point for the service. But for the first time since the launch of Binge, the company’s overall number of paying streaming subscribers has fallen.
Delany said he expects there is room for his services to grow, taking a swipe at rival streaming services in the market.
“There are some streaming services in this country that have been around for quite a while that are at maturity in terms of the number of subscribers, there are others that got to a number very quickly and are finding it hard to grow,” he said. “We’re a highly seasonal company because we’re sports-oriented…there are more sports subscribers and more revenue in the winter than there is in the summer.”
“We think our streaming services will just continue to grow – we were late into streaming with Kayo…but you can see the solid growth that’s happening there and the same with Binge. We feel that we are very much that steady momentum builder.”
Delany said last year he expected HBO’s parent company would launch its own streaming service in Australia. But going direct to consumer is no longer the priority for a lot of larger US entertainment companies that are worried their aggressive pursuit of subscribers has damaged profits. Disney+ last week reported its first subscriber loss – 2.4 million subscribers – and major cost cuts across the business as it focuses on profitability.
Wells Fargo analyst Steven Cahall said Disney+ would focus on average revenue per user and margins and could exit some markets where streaming isn’t profitable.
“Licensing will return where it makes sense, and Disney will cross-distribute some content between streaming and traditional,” Cahall said.
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