SYDNEY — News Corp.’s Aussie cabler Foxtel is believed to have fashioned a program supply arrangement with Hollywood majors Universal, Paramount, Fox and Sony that would substantially reduce its cripplingly high programming costs and possibly eat into the returns of the majors.
While it’s not clear if the new arrangements are exclusive or for how long they run, the deal can only be seen as a major blow to ailing satcaster Galaxy TV, which is headed for a financial meltdown in the next few weeks and is said to have sought delaying its December payments to the studios.
The exclusive Oz rights to the four studios’ product is Galaxy’s main asset, which it then sells to Foxtel (which had no premium movies of its own) at a cost of $3.5 billion to Foxtel over the deal’s 25-year life. That deal would expire if, as expected, Galaxy files for insolvency.
At present, Foxtel is believed to pay about $125 million per annum to Galaxy for the movies. Galaxy is said to glean a $21 million margin per annum, based on a $19 dollar per month per subscriber fee and on minimum subscription guarantees of 550,000.
That is thought to translate into Galaxy paying the majors about $85 million a year. But local sources indicate Foxtel has shaved some $25 million off the programming costs.
What’s not clear is if the new deal merely achieves Foxtel’s long-held ambition to delete the margin it pays to Galaxy, or if it cuts into the majors’ profits to the tune of $6 million each per annum.
Either way, the studios are understood to have been spurred into action by reports of secret meetings in London between Rupert Murdoch and Dick Brown, topper of Cable & Wireless, which controls Foxtel’s Oz cable rival Optus, who vowed to work together to form a single programming acquisitions entity.