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CBS to Buy Australian Network as Test Ground for Streaming

Published on .

Credit: Bloomberg News
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CBS Corp. has snapped up ailing Australian TV broadcaster Ten Network Holdings, securing an offshore testing ground for its on-demand streaming service.

The most-watched U.S. network agreed to buy Sydney-based Ten, which has lost money for five straight years, and provide immediate funds to save it from collapse, the Australian company's receivers and administrators said Monday in a statement. The planned transaction also sidelines a potential bid from News Corp. Co-Chairman Lachlan Murdoch. Terms of the deal weren't disclosed.

The New York-based media giant, which airs "The Big Bang Theory" and "NCIS," plans to introduce CBS All Access in Australia, more than two years after Netflix started streaming Down Under. Competition from upstarts including Netflix, available in almost 200 countries, is compelling legacy TV companies like CBS to offer their own programming to subscribers on-demand via the internet.

CBS will come up against on-demand platforms offered by Ten's two main free-to-air rivals as well as publicly funded services. While the U.S.-based network is entering a crowded market, Australia could prove to be a useful laboratory as CBS seeks to expand its streaming product outside its home country.

"It's a nice little testing ground," says 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 on-demand shows. Like Netflix, CBS is also making some original shows for the service and plans to release a new "Star Trek" show on the platform in September. CBS said this month it would take CBS All Access offshore next year, starting with Canada.

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," the Aug. 28 statement said. 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, CEO of CBS Studios International, said in a statement. CBS says 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, says 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 says.

-- Bloomberg News