Pay television and streaming business Foxtel, after three years of investment, is nearing the point where half of its revenue comes from its digital business.
The pay TV group’s strategy has been to transform to a high growth, diversified media company with a majority of assets in digital.
Revenue increased 1% (2% when adjusted for currency fluctuations) to $US506 million in the June quarter.
This was mainly driven by streaming services Kayo and BINGE.Those two added almost 200,000 paying subscribers in the quarter.
Kayo grew 42% compared to the prior year and the recently rolled-out ad offering at BINGE grew fourfold.
Streaming subscriptions represented 32% of total circulation and subscription revenues, compared to the same three months last year.
And digital advertising now represents more than 40% of Foxtel’s total advertising.
Total closing paid subscribers across the Foxtel Group were nearly 4.7 million, up 1%.
Kayo Sports reached 1.606 million subscribers (1.550 million paid), up 14%. BINGE hit 1.552 million subscribers (1.529 million paid), up 1%.
Foxtel residential and commercial broadcast subscribers were 1.452 million.
“The results are great but it's not an overnight success,” Mark Frain, CEO of Foxtel Media, told AdNews.
“For us this is the culmination of a three year strategy, which puts us on this milestone moment going into FY 25 where the majority of our revenue will be coming from digital for the first time.”
In the 2019 financial year, about 7% of Foxtel’s revenue was coming from digital.
“To be heading into a new financial year, charging towards 50% in a three year period has been incredible. It's been a lot of investment, a long journey, but it feels like a big moment,” Frain said.
Over the last three years Kayo has grown over $100 million of ad revenue.
“Binge, much newer and fresher to the scene, and only been around for 18 months in an advertising sense, is up 100% year on year,” he said.
“So we've got two brands, two brilliant assets, that we really started to leverage the scale of their subscriber base into advertising impressions and ultimately advertising revenue.”
Frain said sport remains the standout for the Foxtel media business.
“Live sport in general remains one of those last bastions of appointment to view content,” he said.
“And so on the Fox Sports linear side, which is the majority of our linear TV revenue, has remained really consistent in that last financial year.
“Kayo is nudging close to $150 million worth of ad revenue. We're probably in that level of momentum that we start to see setting our sights on a sports advertising business that's targeting $300 million. It's a really strong war chest of content that advertisers are fully engaged in.”
Hubbl, Foxtel’s aggregation service, is still in its early days, not yet providing significant revenue.
However, more than 30% of Hubbl customers are new to Foxtel and about 75% buy an additional Foxtel product.
“The feedback from those customers is outstanding,” Frain said.
“Their consumption of content goes up significantly. Those that are watching Kayo through Hubble are pretty much watching 100% more Kayo.
“Ultimately, from an advertising perspective, when the Hubble scale gets to critical mass, it'll start to play a much bigger role in our campaigns but it's early days yet for it to become a significant, scalable product in advertising.”
News Corp is considering an offer for Foxtel. The unsolicited bid was revealed by News Corp CEO Robert Thomson when briefing analysts on June quarter and full year results.
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