There was good and bad news for News Corp yesterday. First, the company made another major move into the online property sector, but then its long hold on the Australian rights to the popular English Premier League soccer was, surprisingly, gazumped by Optus.
In fact, News Corp’s latest move is another deal outside of print media — still its core activity and largest group of assets — and it has made clear that its newspapers will not be getting any new investment any time soon, bar that required to keep the company’s titles in business, such as the decision to drop the paywall for The Sun in the UK and the decision to rebuild its online newsroom.
News revealed its second major online property play in a year, with its online property subsidiary, REA Group, yesterday bidding for the remainder of iProperty Group (REA already owns 22.7% of iProperty). If the deal is done, News will outlay A$578 million for control. iProperty operates real estate websites in Malaysia, Hong Kong, Indonesia, Macau, Thailand, Singapore and the Philippines, which would be a good fit for REA, which dominates the online property market in Australia.
A year ago, News Corp and REA bought control of major US online property business Move for more than a $1 billion, and News has grown that business in America. News has also invested in an online property website business in India. In September, News Corp bought UK online video-ad company Unruly for up to more than A$230 million. And last month, Foxtel, 50%-owned by News, finally got its $75 million capital injection (in exchange for a 14.9% stake in the Ten Network). But so far no money for expansion in print media, especially in Australia.
In 2013, Rupert Murdoch pushed for the erection of a high paywall around The Sun (because the wall around The Times and Sunday Times was working well). He was strongly supported by then-News UK CEO Rebekah Brooks. Two years on and she’s back at News, and the paywall around The Sun has choked the life out of the paper online, reducing it to an afterthought. Now the dynamic duo supports the paywall’s destruction and Brooks wants The Sun and its new editor, Tony Gallagher, to rapidly rebuild The Sun’s reputation and presence online. The big driver for this change is said to be the continuing downturn in print advertising (which hit 20% in certain weeks over summer). Any new revenue source is welcome at The Sun as it looks at the huge gap it has to make up on the free websites of the Daily Mail Online, The Guardian, the BBC and the Mirror.
But for News and the Murdochs in Australia, the most telling blow wasn’t the online property play by REA Group, but the move by the Singtel-owned Optus to snatch the online and broadcast rights in Australia to the English Premier League from Fox Sports and Foxtel; in other words, from News Corp and Telstra. The EPL is the most watched soccer broadcasts in the world and have been part of the Fox Sports/Foxtel pay TV offer for years (because the Murdoch-controlled Sky in the UK has been the main British broadcaster since the EPL started in the early 1990s).
The new contract starts in August next year with the EPL’s 2016-17 season (and the 80% jump in broadcast fees for Sky and its rival, BT) despite claims in The Australian today that the EPL rights “were important but not critical”. It is a significant loss for Fox Sports (100%-owned by News Corp) and Foxtel (50%-owned by News). Optus will hold the rights for three years from next August. But it is a major blow to the reputation and omnipotence of the Murdoch media companies in Australia – an old rival that was seen off in 1992 has re-emerged and shocked everyone by using a typical Murdoch tactic in bidding high for a small but important piece of content, and thereby possibly opening the door to a more important deal: the NRL pay-TV rights.
This move would badly damage the business of Foxtel and Fox Sports and force major cuts and redundancies on both businesses as hundreds of thousands of subscribers would quit and go where they could find the NRL broadcasts. NRL games occupy more than 60% of Foxtel’s most watched content every year, with strong viewing in Sydney and Brisbane and in regional areas of NSW and Queensland. Hundreds of thousands of subscribers would be lost if Fox Sports lost the NRL.
Such a move would require huge investment by Optus and Singtel — winning the online streaming rights would be far cheaper because the infrastructure costs would be lower. But it does have a relationship with Fetch TV. Optus could also partner with US sports network ESPN for the pay-TV rights to the NRL and joint venture a cable operation via ESPN’s existing service in Australia.
Cost is the barrier, but the threat to the Murdochs and News Corp is very real and for ESPN’s owners, Disney, a chance to counterattack against the Murdochs who are going after ESPN in the US via the 21st Century Fox owned Fox Sports channels. News and Telstra can’t take a chance that Optus won’t move — Telstra will be especially nervous because of its big investment in the streaming rights. Board meetings of Foxtel and at Fox Sports will be best avoided for the next month or so. Recriminations, especially from Telstra, will be loud. News/Fox Sports and Foxtel overpaid for the AFL pay-TV rights in a fit of pique about the NRL’s surprise deal with Nine. Now News will have to hurry to prevent a more painful gazumping on the NRL.
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