What if Optus gets out of streaming?

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Welcome to a midweek update from Unmade. Today we explore the long term future of Optus Sport

In two months time you might want to read this article again. It will be behind the paywall by then, along with hundreds of other pieces of deeply researched analysis. To be properly informed, become a paying member of Unmade today.

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What will become of Optus Sport?

Will there be new ownership for Optus Sport? | Optus WWC hosts Amy Duggan, Niav Owens and Kelly Somers

Tim Burrowes writes:

What follows is not news. It’s a prediction.

There’s no insider tip of an imminent deal. But at the same time, when floating a question with people inside the industry in recent weeks, nobody dismisses this question: Will Optus soon look for some sort of exit from its sports streaming business?

With most sports subscription rights now locked up for the next few years, the focus is switching to the media operators.

The planets have started to realign. Yesterday it emerged that Foxtel will end its carriage deal with the Qatari-owned BeIN Sports channels in July, which means BeIN Sports’ content won’t be available on Foxtel’s sister streaming service Kayo either.

BEIn Sports had been available to Foxtel subscribers since Optus Sport surprised the market seven years ago by outbidding the Foxtel-owned Fox Sports, and Telstra, for live rights to the English Premier League. At the time, BEIn Sports offered Foxtel the consolation of Europe’s top tier Champions League, along with non-live content via club channels for the top EPL teams.

At the time the Optus move into sport was against the trend. The triple-play fad of telcos offering mobile, internet and media offerings had already peaked.

The noise around Foxtel’s triple play soon faded

The Optus launch was the brainchild of then Optus CEO Allen Lew and Corin Dimopoulos, both of whom have since moved on.

The proliferation of streaming channels now sees Australian soccer fans hunting their teams across the services.

Nine’s Stan took the Champions League from BeIN Sports in 2021. It also holds the rights to the second tier Europa League.

Paramount Plus has the rights to the FA Cup, which is the 732-team knockout tournament featuring all tiers of English football. Locally, Paramount Plus also holds the rights to Australia’s A-League, making it the only local offering with timezone-friendly football.

Factor in the fact that Optus Sport isn’t really Optus Sport. It’s Optus Football. (For avoidance of doubt, references to football in this piece mean soccer, by the way.) And that’s becoming tougher territory to hold.

And while Optus Sport was never really about all sport (that’s mainly Foxtel’s thing), the motivation behind the brand was also never primarily to build a profitable streaming business - it was to create a differentiated offering for Optus customers.

For the first seven years, Optus Sport was free to most of its mobile and broadband customers. Think of it as a marketing cost. It was a major point of differentiation from Telstra. It was only this time last year that Optus started charging its existing phone and internet customers $6.99 per month for Optus Sport, which was still a hefty discount on the full $24.99 price.

Arguably, the job of the Optus Sport team until now has simply been to not lose too much money.

Now is the logical moment for Optus management - and Singaporean owner Singtel -to be considering whether the cost of running Optus Sport is still the best way of spending its money on acquiring and retaining customers.

The FIFA Women’s World Cup kicks off in Australia in two months (Optus has on-sold the free to air rights to the Matildas games to Seven). And having renewed its EPL rights at the end of 2021, Optus still has the EPL for another five years. That will come around quickly, and will be even more expensive next time.

Against a backdrop of likely consolidation in the streaming world - there are more services than consumers will tolerate in the long term - it makes sense for Optus Sport to find a new home.

You could see the attractions of picking up the EPL rights for the other existing football players of Stan and Paramount. Or indeed to Foxtel as a route back into European football. (However, it would be interesting to see how competition authorities would view a transaction between Optus and the 50% Telstra-owned Foxtel).

There are barriers to a deal with any of the existing players. Those sitting on the other side of any transaction might argue that Optus Sport isn’t worth much more than a notional dollar, given that it doesn’t make a profit (or at least I haven’t found anybody who thinks it does make a profit). But Optus would see value in the brand, along with the sunk cost of its production facilities and painfully won (remember Floptus?) expertise in content delivery.

Optus learned a lot from its first World Cup streaming problems

There’s also likely to be a standard clause in the EPL contract which would give the league the ability to end the deal early if control of Optus Sport changes hands. It might be tempted to do that if rights valuations continue to escalate.

Arguably, some sort of joint venture, with Optus retaining some ownership might make more sense. But of course, that doesn’t necessarily lead to any more consolidation in the market.

Kelly Bayer Rosmarin, who inherited Optus Sport when she became Optus CEO in 2020, now appears to have survived the data hack scandal (thanks in part to the robust health of the brand beforehand, not least because of Optus Sport). Space is opening up for Optus to evolve its strategy.

There are signs of that already. Optus SubHub, which launched nearly two years ago, is a means of helping subscribers manage all their subscriptions in one place.

This morning the company announced a new deal with Netflix, which will see new SubHub users get 50% off for the first three months.

Ironically, the consolidation and navigation game is in itself becoming more competitive. Along with Optus SubHub, Foxtel has been integrating other streaming services into its IQ boxes (alongside the mysterious aggregation project “Project Magneto”. Fetch (now majority owned by Telstra) recently launched improved navigation.

So what does Optus have to say about all this? Yesterday it offered up a non-denial no comment: “We never comment on market speculation”.

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All quiet on the bourse

Seja Al Zaidi writes:

It was another low action day on the ASX as world markets continue to wait on a resolution to the US debt ceiling crisis, likely to come to a head this time next week.

The Unmade Index, our measurement of the performance of locally listed media and marketing stocks was flat, dipping by 0.06% to land at 640.5 points.

Seven West Media was the biggest winner of the day, climbing 2.7% on the market, while Southern Cross Austereo recovered slightly from Monday’s new low, with its share price lifting 1.3%.

ARN Media - formerly HT&E - climbed 0.97%.

The lightly traded Outdoor advertising minnow Motio saw a big fall in its headline stock price, with its share price dropping 17.14%.

Enero Group was down by 2.65%. Ooh Media followed with a fall of 1.19%.

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Time to leave you to your Wednesday.

We’ll be back with an audio-led edition tomorrow. I’ll be interviewing Guardian Australia editor Lenore Taylor and managing director Dan Stinton as the publication celebrates its tenth anniversary.

Toodlepip…

Tim Burrowes

Publisher - Unmade

tim@unmade.media