Botched Ten Deal Set To Impact Struggling Foxtel

After a botched attempt to grab control of Ten both News Corporation and Lachlan Murdoch are now looking at what they can do with the struggling Foxtel that is fast losing both market share and senior executives.

Since chief executive Richard Freudenstein left Foxtel in March last year, two of the direct reports he appointed (chief commercial officer Moritz Von Hausenchild and technology boss Andrew Lorken have quit the struggling network that is 50% owned by News Corporation.

Then, three of those appointed by Freudenstein’s successor and incumbent Peter Tonagh – sales chief and Holt Street evacuee Shark Frame, pay TV lifer Deanne Weir and marketing head Mark Buckman quit the Telstra News Corp owned business.

There is also speculation that Peter Tonagh could be heading back to News Corp. According to News Corp sources the name of Fox Sports boss Patrick Delany has been mentioned as the person who both Telstra and News Corporation want as the head of Foxtel.

The AFR said that’s five direct reports to the CEO in eight months. Little wonder that Foxtel’s half-owned by Telstra is diluting and freeing its hands to compete. Year-on-year Foxtel subscription numbers are in decline, Foxtel is cannibalising its (unrealistic) revenue per subscriber with its (buggy) new products.

There is even speculation that their new content puck that is set to be released next week is going to be sold direct with mass retailers missing out, consumers will be told that they will get the device within 24 hours of placing their order.

For News Corp executives, the Channel Ten debacle is set to cause major problems.

The decision by shareholders to back US TV giant CBS over local investors Lachlan Murdoch and Bruce Gordon was a bruising result for Murdoch, executive co-chair of 21st Century Fox and News Corp, both financially and to his reputation as a top media executive.

Murdoch alone has sunk $137 million of his own money into Ten in 2010, served in such roles as executive chairman, acting CEO and putative financial saviour of the struggling network, and struck content and advertising sales deals with News Corp-managed pay TV outfit Foxtel.

The bottom line was decided by Channel Ten staff who had had enough of Murdoch.

“Tactically [the Murdoch’s] were clearly outplayed by CBS, and it seems they brought Ten to a crisis point too early,” Rodney Tiffen, a University of Sydney professor and author of a biography of Rupert Murdoch.

“I guess they just didn’t see CBS coming. It was a case of monopoly arrogance by Murdoch and Gordon.”

In comparison, “CBS saw the opportunity to acquire Ten and they weren’t cocky,” media analyst Steve Allen of Fusion Strategy said. “They were certain in their bid and were able to say ‘we’ve got a real interest in the outcome of this and can do better than Murdoch and Gordon. We trust management and how they will do things going forward, and we will back them’.”

There are few legal avenues remaining by which Ten Network Holdings could fall back into the hands of its former shareholders, News Corp and 21st Century Fox co-chair Lachlan Murdoch and WIN proprietor Bruce Gordon, in coming weeks.

But the pair’s strategic failure far more profoundly affects Murdoch’s suite of interests than Gordon’s – at least in gross, not relative, terms to their wealth and influence.

For the Wollongong-born Bermudan who turns 90 next year, losing his stake in Ten, the network whose feed WIN carries to the eastern regions, means both the expiry of (questionable) influence over his parent and the crystallisation of losses undeniably worth many hundreds of millions of dollars.

Murdoch’s miss looks cheap in dollars, but it is crushing in terms of media power.

According to the Australian Financial Review the rationale for buying Seven and Nine out of Sky News – to transpose its feed to Ten’s frequency – is gone, to some modest trepidation already at the Australian News Channel.

The rationale to continue Ten’s and Fox Sports’ effective dual bidding for sports – a canny workaround in some cases to the prohibitive anti-siphoning provisions – is also fully shot.

And for reality, comedy and drama, Ten’s prospective cash chute to the Murdoch’s’ US content studio is also done.

The AFR said that when it comes to ‘entertainment output’, Foxtel is the one to watch.

It has always secured non-Murdoch content as a driver and buffer of subscriptions, HBO’s to best effect in recent years.

But it bet on a now-failed streaming JV with Seven that set it back on its own modernisation, a lag that is wreaking havoc. And the outages of its live OTT offering Foxtel (Anytime) Now have been well-reported.