Foxtel is edging closer to the rosy
dawn of actually making after-tax profits, judging by the third quarter results
from News Corp, but don’t hold the presses expecting a big song and dance
about it.

You see
Foxtel’s $US2 million contribution to News’s operating
income in the third quarter was tiny and a small, small part of the $US261
million contributed from stakes in BSkyB, Sky
Brasilia, Direct TV and “other
affiliates”.

News still makes more money (as does PBL) though the shared
ownership (50% each) in Premier Media Group/Fox Sports which makes more
than $70 million a year from selling sports channels and other services
to Foxtel and its 1.6 million or so subscribers.

The
News Corp contribution indicates that Foxtel made an
operating profit before tax, etc, of around $10.5 to $11 million, or an annual
rate approaching $50 to $60 million.

Again
that sounds a good result, and it is in Australian terms, but at News Corp, that
list of affiliates (all in the pay or satellite TV business) contributed a
massive $US610 million to News’s operating income in the nine months to the end
of March. Even
when Foxtel hits the $100 million mark and goes past
it, it will still be a tiddler compared to BSkyB, Sky Brasilia, the Italian business and the huge
potential from Direct TV.

Foxtel still has to face the
rollover of hundreds of thousands of contracts taken out by subscribers in the
great push to digital broadcasting. The company is spending money to keep those
and cutting rates to try and attract new viewers who might be seduced into the
chain by the new start-up package of $36.95 a month, compared to the existing
$50.95 for the basic package.

If that
becomes too successful, those pre-tax earnings might be crimped for a while as
Foxtel tries to move subscribers up to more expensive
add-on packages.

Peter Fray

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