CBS to Buy Australian Network as Test Ground for Streaming

(Bloomberg) -- CBS Corp. snapped up ailing Australian television broadcaster Ten Network Holdings Ltd., securing an offshore testing ground for its on-demand streaming service.  

The most-watched U.S. network agreed to buy money-losing Ten, sidelining a potential bid from News Corp. Co-Chairman Lachlan Murdoch. Terms of the deal weren’t disclosed.

The deal shows how U.S. media companies are looking overseas for growth as the domestic advertising market struggles.  It also gives CBS a boost as it competes with other media giants, like Netflix Inc. and HBO, who are expanding online services worldwide.

Led by Chief Executive Officer Les Moonves, CBS has reduced its reliance on advertising in part by selling shows in international markets. The New York-based company, which airs “The Big Bang Theory” and “NCIS,” said this month it would take CBS All Access outside the U.S. next year, starting with Canada.

The network plans to introduce its service in Australia, more than two years after Netflix started streaming Down Under. Netflix, available in almost 200 countries, is prompting legacy television companies to offer their own programming to subscribers via the internet.

CBS will compete against on-demand platforms offered by Sydney-based Ten’s two main free-to-air rivals and publicly funded services. Australia may prove to be a useful laboratory for the U.S. company.

Viewer Interest

“It’s a nice little testing ground,” said Marc C-Scott, a lecturer in screen media at Victoria University in Melbourne. “There’s clear evidence we want to watch a lot of this content.”

In the U.S., CBS All Access includes a live feed of the TV network as well as the streaming service. Like Netflix, CBS is also making original shows for the service and plans to release a new “Star Trek” show on the platform in September.

In Australia, Ten had crumbled under the cost of buying programs from the U.S. as advertising revenue plunged. The broadcaster, which went into voluntary administration two months ago, was valued at just A$59 million ($47 million) before its stock was suspended from trading in June. The network had also been in the sights of Murdoch and local media mogul Bruce Gordon.

Murdoch and Gordon had been guarantors to Ten’s secured A$200 million facility with Commonwealth Bank of Australia, but backed off from providing further support as Ten sought a fresh loan of about A$250 million.

Details on the expected return to creditors and the timing of the second creditors meeting will be reported by the administrators “in coming days,” according to the Aug. 28 statement. Moelis Australia Advisory Pty advised Ten on the sale.

“This acquisition not only presents CBS with considerable broadcasting opportunities in Australia, but also allows for further multi-platform distribution and growth,” Armando Nunez, chief executive officer of CBS Studios International, said in a statement. CBS said the price it’s paying for Ten gave it confidence it could grow the business.

CBS is likely to cut costs at Ten by chopping newsroom staff and scaling back expensive Australian-produced shows, said Peter Wells, professor of financial accounting at University of Technology Sydney.

“They’ll be really mercenary in working out what they can earn from each of their products,” he said.