Murdochs: Use Sports To Outfox Competitors

Sole possession of the rights to Thursday Night Football is part of 21^st Century Fox’s strategy, as related to securities analysts by key company executives on Wednesday. Fox will add the TNF franchise to its strong stable of sports offerings en route to dominating the live sports category. 

Said Executive Chairman Lachlan Murdoch: “Live sport has never been more important than it is today. This is why we are energized and excited about our recent deal with the NFL to make Fox Sports the official home of Thursday Night Football for the next five years.” He added: “NFL programming is hands down the most powerful in all of media.”

All told, Fox will hold rights to 34% more sports programming than its closest competitor, he said, which affords great opportunities for monetization, including in the digital sphere.

CEO James Murdoch said that the TNF deal was part of plan to consolidate as much of the NFL audience as possible. He explained: “The scarcity value of large audiences coming together at a national event continues to rise, and we want Fox to be the home of that kind of compelling product.”

Another stable income source can’t come soon enough in the up-and-down financial world of broadcast. According to Senior EVP-CFO John P. Nallen, the television division had a difficult quarter. Revenue was down by 6%, and EBITDA was precipitously down by 85%.

Retransmission consent income continued to grow, but it was more than offset by the lack of political spending and unfavorable comparisons from the 2017 Baseball World Series to that of 2016, the latter of which was the highest-rated in decades.

On the football front, a weak performance from the NFL took a bite, but Nallen said it was more than offset by the company’s addition of college football action.

Regarding December’s major tax legislation, Nallen said that due to Fox’s off-calendar fiscal year — it just completed its second quarter while most companies are only just now beginning their first — the impact will be blended over two Fox financial cycles.

Fees are key to the company’s income profile, and it benefits from working both sides of the street, collecting reverse compensation fees at its television network, standard fees at its cable networks and retransmission consent fees at its owned-and-operated stations.

Lachlan Murdoch noted, overall company revenue growth is “…underpinned by continued acceleration of domestic affiliate revenue. We drove a 12% year-over-year increase, sequentially surpassing the 11% gain of the prior quarter.”

On the consent side, he said “There’s still a growth trajectory in terms of getting to what we think is a fair price, given the strength of the network and the strength of the stations.”

Fox and Disney are hammering out the details of the deal struck last December, and closing is not expected anytime soon, not until next year, in fact.

Disney will pay $52.4 billion for Fox’s film and television studios, along with certain cable programming assets. Several notable programming assets will remain with Fox, including the broadcast network, the O&Os and cable networks Fox News Channel, Fox Business Network, FS1, FS2, and the Big Ten Network.

Until the close, it’s business as usual at Fox, which means working hard to develop all of its properties just as it would any other year.

Disney will be getting some, but not all, of Fox’s programming assets, and those remaining in the Fox stable will constitute what they are calling “New Fox.”

Asked about the fact that despite Fox’s emphasis on sports, Disney will be receiving its regional sports networks, Lachlan Murdoch explained Fox has been tying up national rights deals, while the bailiwick of RSNs is local rights. In short, it’s actually a different business.

That’s not to say RSNs aren’t attractive — of course they are, and that’s why Disney wants them.