Foxtel reports $23m Q3 loss following sale of Presto

Foxtel's $23 million quarterly loss was again blamed on its decision to close streaming service Presto, with EBITDA also down by 9 percent to $131 million.
Written by Corinne Reichert, Contributor

Pay TV company Foxtel's quarterly loss has worsened thanks to the closure of Australian subscription video-on-demand (SVOD) provider Presto, this time for a loss of $23 million (AU$31.2 million), News Corp has announced.

The $23 million loss is significantly worse than the $2 million equity announced for the same period last year. It also amounted to a nine-month loss of $276 million for the financial year so far, down from the $25 million in equity announced last year.

According to News Corp, which owns 50 percent of Foxtel alongside Australian telecommunications provider Telstra, Foxtel's loss was "primarily driven by costs related to Foxtel's shutdown of Presto and the loss resulting from the change in the fair value of Foxtel's investment in Ten Network Holdings".

"Foxtel's net income was nil, compared to $32 million in the prior year period, primarily due to $21 million in losses related to Foxtel's management's decision to cease Presto operations in January 2017 and a $14 million loss resulting from the change in the fair value of Foxtel's investment in Ten Network Holdings," News Corp said.

"Foxtel's net income in the three months ended March 31, 2017, included a $21 million loss resulting from Foxtel management's decision to cease Presto operations in January 2017. Equity losses of affiliates were negatively affected by $10 million, which represents the company's share of that loss."

Revenue for Foxtel increased by 2 percent year on year to $591 million -- although in local currency, revenue fell by 3 percent thanks to the low value of the Australian dollar.

Foxtel's earnings before interest, tax, depreciation, and amortisation (EBITDA) decreased by 9 percent to $131 million, and decreased by 13 percent in local currency, with News Corp saying this was "primarily due to lower revenues and planned increases in programming costs, specifically investments in sports".

During the first nine months of FY17, News Corp also recognised a $227 million non-cash write-down of the value of its Foxtel investment. The nine-month loss resulting from the Presto shut-down amounted to $42 million.

News Corp added that total Foxtel subscribers numbered 2.8 million as of March 31, with the company also losing 1 percent of its cable and satellite subscribers during the period.

Foxtel had similarly reported a first quarter loss of $21 million back in November thanks to Foxtel's decision to cease Presto operations.

"Foxtel's net income of $16 million decreased from $42 million in the prior year period," News Corp said at the time.

"Presto had approximately 130,000 paying subscribers as of September 30, 2016, who will be invited to transition to the new Foxtel Play packages."

Presto, previously a joint venture between Seven West Media and Foxtel, was fully acquired by the latter in October last year, with Presto customers moved across to the Foxtel Play streaming service in December.

"It has been great working with the team at Seven on Presto, and we look forward to future collaborations," Foxtel CEO Peter Tonagh said at the time.

"We are delighted to be able to offer Presto subscribers access to the new look Foxtel Play, which we know will be highly attractive to them."

Foxtel announced several new Foxtel Play packages, with existing Foxtel Play customers to be transitioned over to the new pricing in December.

Presto then ceased operations at the end of January.

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