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Welcome to 2025, and according to industry experts it's shaping up to be a big one for financial markets and dealmakers due to a number of macro tailwinds. We saw this crystalised just before Christmas when it was announced that Foxtel would be acquired by a relatively new kid on the block in British sports-streaming platform DAZN. To kick off ABSI for 2025, we will analyse the deal and what it means for the future of streaming in Australia.

The Australian media landscape is set for a significant shake-up in 2025 with the announcement that Foxtel, Australia’s leading subscription television service, will be sold to British streaming giant DAZN. For the unfamiliar, DAZN, pronounced “da zone”, is the "Netflix of sports" with a subscription-based streaming service that specialises in live and on-demand sports content. Founded in 2015 and headquartered in the UK, DAZN operates in over 200 countries and territories, offering coverage of major leagues such as the UEFA Champions League, NFL, and boxing events. Backed by billionaire Len Blavatnik’s Access Industries, DAZN has built a reputation for innovation and aggressive expansion in the competitive streaming market.

Source: AFR

In its acquisition of Foxtel, DAZN has agreed to pay an estimated enterprise value of A$3.4 billion for an extensive subscriber base and portfolio of sports broadcasting rights, which are distributed through the traditional ~1.4m set-top boxes and through the two dedicated streaming services Kayo Sports and Binge reaching ~3.2m subscribers. The deal came about after an extensive period in which Foxtel’s parent company, News Corp, sought to divest the asset due to the changing media landscape that has seen homes continue to cut the cord in favour of start-up streaming services. 

While the motivation for DAZN to acquire Foxtel accelerates its global expansion plans into Australia, at face value it appears that Foxtel owners News Corp and Telstra have gotten the better end of the deal in being able to offload the ailing Foxtel business, albeit for DAZN scrip with the cash component being repayment of shareholder loans. 

To me, it’s like selling Blockbuster in 2009.

DAZN is paying ~7x FY24 EBITDA for a legacy cable business that is experiencing 11.7% churn, according to FY24 results, and a streaming platform which is growing subscribers by 5% and revenue by only 1%. Moreover, DAZN is focused on sport so Binge, with its ~1.6m subs, is not core to its offering and will likely be spun off. However, it's hard to see the value in Binge given that it doesn’t own any original content and is likely to lose highly rated HBO content when Warner Bros. Discovery launches HBO Max in Australia in April.  

Kayo Sports is the jewel in the crown for DAZN but it too is undergoing a number of challenges. Namely, competition from other entertainment streaming platforms looking to diversify into live content, such as sports. Local competitor Stan Sport, owned by Nine, continues to chug along with access to tennis, rugby, football and motorsport. But it's the 100-pound gorillas in Netflix, Amazon, and Disney which are coming for Kayo’s and DAZN’s lunch.

Source: eMarketer

In 2024, Netflix successfully experimented with streaming live sport including paying US$150m for two NFL games on Christmas Day. Locally, Disney, owner of ESPN, has indicated that it is likely to introduce live sports to its Disney+ platform in Australia. Currently, Foxtel has the rights to ESPN’s US sports content, broadcasting the NFL, NBA, MLB, and NHL amongst other college sports and UFC. However, the current deal is set to expire in July 2025, which could spell a massive loss for Kayo and more competition for future sports rights in Australia. 

Arguably Foxtel’s most valuable asset is the broadcast rights it holds for popular Australian sports, which are vital for any sports streaming company that wants to carve out a large audience in Australia. Although shared with free-to-air broadcast partners, Foxtel has media rights to cricket and AFL until 2031, and to the NRL until 2027. Therefore, if DAZN didn’t acquire Foxtel, it would need to wait until 2028, at the earliest, to have a chance at acquiring these rights organically and they would need to be paying cash, not scrip for the rights. 

At the end of the day, the sale of Foxtel marks a pivotal moment for Australia’s media industry. While DAZN appears to be overpaying for an unstable subscriber base and a shrinking content base, it does so with minimal cash upfront and gains an immediate footprint in the sports-mad Australian market. The deal is definitely a win for Foxtel’s owners News Corp and Telstra, however, the biggest winner is likely to be Australian sporting leagues as the market for media rights heats up. Rugby Union might be the first to test this theory as their current deal with Nine/Stan Sport expires in 2025.

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