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Foxtel In A Unique Position As Netflix Value Tumbles $76 Billion

As Foxtel continues to grow subscribers, due to their multimillion-dollar investment in sport and their Kayo app, archrival Netflix is starting to show signs of fatigue with their share value dropping 24 per cent in early trading on the Nasdaq at the weekend, wiping about A$76 billion from the group’s market value.

The Asia-Pacific region which includes Australia, lost its lead as the main driver of subscriber growth for Netflix in the fourth quarter of 2021 amid a broader slowdown in new-user additions, that caused it to miss forecasts and wiped nearly a fifth off its stock price.

When Netflix launched in Australia analysts predicted it would be “The death of Foxtel” the same analysts predicted that Amazon would hurt the likes of JB Hi Fi and Harvey Norman.

It never happened with Foxtel going from strength to strength and the likes of JB Hi Fi stock surging.

One analyst in the US told me that “Foxtel’s investment in sport is the foundation of the business. This category what is lacking with Netflix with the possibility emerging that they may have to invest in sport”.

They added “Google Amazon and Apple are all trying to work out how to get a position in the sports market. They have billions to throw at sports rights and this will be a problem around the world for media Companies who hold the rights to major sports events currently” they said.

“Australian media Companies and the likes of Foxtel are reasonably protected as both AFL and NFL are niche sports codes outside of Australia. The local subsidiaries of Amazon, Google and Apple are going to have to decide as to the value proposition and how much they invest if they invest at all in going after sports rights.”

“All of these US tech Companies are currently coming under regulatory pressure; they also have large installed databases of customers that they can market a sports package to if they decide to throw billions at sports codes””.

Recently Foxtel and Kayo moved to expand their investment in sport with the announcement that they will deliver live coverage of the 2022 golf season with unprecedented free coverage of the Australian PGA Championship from January 13.

In a major coup for fans, more than 100 hours of live Australasian Golf coverage will be broadcast across both platforms, with both the Australian PGA Championship and VIC Open to be live and free on Kayo Freebies.

They also locked down the rights to Formula One last year which has been witnessing a resurgence in demand around the world.

In the USA questions are being asked as to what is next for Netflix.

As of Saturday, Australian time Netflix shares were down 24% after the company quietly admitted that streaming competition was eating into its own growth in its fourth-quarter earnings release on Friday.

Despite Netflix beating analyst expectations on the top and bottom line and in user numbers for the quarter analysts are still concerned after the streaming business raised prices in some markets in its standard plan from US$13.99 to US$15.49 per month.

Analysts claim that the strengthening of the dollar will cost the firm $1bn alone, it said.

In Australia Netflix is charging up to $22 a month for a premium service with insiders tipping more price rises to com.

The number of Netflix subscribers grew to 222 million last year, overall, Netflix added 18.2 million members last year – roughly half the number who subscribed in 2020.

The bad news was that Netflix expected to add just 2.5 million members in the three months to March – far lower than analysts had expected.

“While retention and engagement remain healthy, acquisition growth has not yet re-accelerated to pre-Covid levels,” Netflix said, pointing to “Covid overhang and macro-economic hardship” in parts of the world like Latin America.

Management admitted that new competition from the likes of Disney, Apple, Amazon and HBO was starting to have an impact on the business.

“Consumers have always had many choices when it comes to their entertainment time – competition that has only intensified over the last 24 months as entertainment companies all around the world develop their own streaming offering,” the firm said.

Revenue increased by 16% for October, November and December, compared to the same period a year earlier, hitting $7.7bn. Quarterly profits increased 12% to $607m.

For the year, profits jumped from $2.7bn to $5.1bn, while revenue grew by 19% to $26.7bn.

Several analysts are now tipping Netflix as a buy.”



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