Telstra Dealt A Fatal NRL Blow, Should They Exit Foxtel?

Telstra has been side swiped by no other than the NRL an organisation they tip millions into sponsoring with some now questioning as to why the big telco is hanging in as a shareholder at Foxtel.

When Nine Entertainment and Foxtel were negotiating new 2020 contracts a small bit of fine print, has seen Telstra customers denied access to the NRL for free from 2023 onwards.

According to Nine Media it was Australian Rugby League Commission chairman Peter V’landys that Telstra did not see coming.

ChannelNews understands that Telstra executives who are struggling to grow their mobile sales in Australia, are seething and one source has told us that they believe that both Nine Entertainment and Foxtel “conspired” to get rid of Telstra so that more advertising dollars could be channelled to Nine, Foxtel and the NRL.

Telstra who has a 35 per cent stake in Foxtel said, “We are … disappointed to learn the NRL, through their agreement with Foxtel, has decided not to make those digital rights on mobile available beyond 2022,”.

Some observers claim that Telstra has become “More of a hinderance” than a strategic partner for Foxtel and that the carrier could walk away from the relationship as they look to raise capital by selling Telstra property.

Under the existing Foxtel arrangement, Telstra mobile customers receive an NRL Live Pass app for free, allowing them to stream all games on their smartphones.

Archrival Optus, which uses its English Premier League soccer rights in a similar fashion.

Nine Media claim that the exclusion of Telstra has added to tensions between Telstra and News Corp over sports rights shared in their joint venture with Foxtel who are seeing a major resurgence in demand for their content across both Kayo, Foxtel and their new Binge service.

In the smartphone handset market JB Hi Fi has grown market share at the expense of Telstra and the loss of a key offer will hurt them claim analysts.

Morningstar analyst Brian Han claims that neither of the NRL’s two broadcast partners – Foxtel and Nine – were thrilled about the existing arrangement in particular Foxtel who can still sell NRL access on their Kayo sports app.

Some analysts claim that should exit Foxtel a move that would be welcomed by News Corp.

Back in February Telstra extended Foxtel a $170 million loan so that the pay TV operator could pay the telco the fees for using its cables.

Months later News Corp announced a $1.4 billion write down of Foxtel due to intangible assets and an impairment on goodwill, which resulted in a $300 million write down by Telstra of its stake to $450 million.

The horror situation comes as carriers in the USA and the UK are expanding their sports coverage via mobile devices with smartphone brands such as Samsung, TCL and Apple pushing the streaming to a larger TV screen or monitor capability of their devices.

BT in the UK has spent vast sums on sports rights while AT&T in the US splurged US$80 billion on Time Warner the owner of HBO.

Nine Media a key NRL partner said that Telstra’s one foot in, one foot out approach continues to confound analysts.

“They’ve got bits and pieces, but I’m not sure it comes together in a cohesive strategy. They are able to do a bit of bundling which might help with customer retention or acquisition, but I wouldn’t say there is any major strategy,” MST Marquee partner and media and telco equity analyst Fraser McLeish says.

“A number of years ago when there weren’t the alternative providers or sources of content that you’ve got today – Netflix, Stan – that ability to bundle Foxtel with broadband was a differentiator. These days, it’s much less so because there are so many alternative sources of video providers out there. It’s a bit of a legacy rather than anything that gives them a particularly big advantage going forward.”

“This means the telco needs to have its fingers in many pies beyond communications infrastructure/delivery so that it increases the stickiness of its core phone and other network customers and hopefully even get a share of the customers’ media and entertainment spending, down the track,” Mr Han says.

“I’m not sure Telstra has a developed media strategy.”

Mr McLeish says the “jury is out”.

“Exclusive content will attract and retain customers but it costs a lot of money, so the question mark would be on do the economics of buying or paying for exclusive content stack up? I’d say that’s questionable,” he says.