Fox promotes cable bundle as better value for live sports and is not ready to give it up just yet.
Speaking to investors on Tuesday during fiscal year Q4 earnings, Fox CEO Lachlan Murdoch said cable and satellite services still offer a better value proposition compared to streaming upstarts.
“At the moment, that premium content drives the most value from being behind a paywall, within the traditional cable and satellite pay-TV universe,” Murdoch said. “And we think that pay TV ecosystem, continues to be of tremendous value for our businesses and really drives the value of Fox Sports and that content, and will for a long time to come.”
Of the four major broadcast networks, Fox is the only one that does not operate a subscription-based general entertainment streaming system. Instead, it operates the free streamer Tubi, which is supported by ads, and the subscription-based Fox Nation, which offers next-day episodes of Fox News prime-time shows coupled with niche shows of interest to its cable news audience.
Fox doesn’t offer live sports through either of its two streaming services; instead, viewers need to subscribe to a streaming cable alternative like YouTube TV, Fubo or DirecTV Stream if they want to watch football, baseball, stock car racing and other sports offered by Fox and its sports-centric cable networks.
That may sound counter-intuitive, since streaming is all the rage. But Fox has the numbers to back up its strategy: On Tuesday, the company revealed it earned $1.771 billion in affiliate fees charged to cable, satellite and streaming companies for the rights to retransmit its broadcast and cable television networks. The fees represented nearly 60% of Fox’s overall revenue, which clocked in at $3.03 billion during its fourth fiscal quarter ending June 30. (Fox’s fourth quarter coincides with the second calendar quarter of the year.)
Despite signs pointing to an ever-eroding pay television market, Fox’s affiliate fees were 2.6% higher on a year-over basis, and helped the company earn $369 million in profit during its Q4. Those fees helped offset lower advertising revenue, which brought in $1.01 billion during the quarter, reflecting a year-over decline of around 4.5%.
Fox is not oblivious to consumer shifts: Murdoch acknowledged the company can only squeeze value out of cable and satellite customers (and those who subscribe to streaming cable-like replacements) for so long. But unlike Disney, Comcast and Paramount, which offer some or all of their premium sports content through standalone streaming services, Murdoch said now isn’t the right time to abandon the cable model for a platform that is still in its earliest stages — and the company may not abandon it entirely at all.
“As consumer demands change, consumer tastes change, we will endeavor to put our content and our brands in front of consumers in whichever manner, makes the most sense for them, provided that it remains behind a pay wall, and we get full value for those rights and those brands,” Murdoch affirmed. “But…we don’t envision a moment when [we] leave a pay-TV universe and quickly transition to a direct-to-consumer universe; we think [we will] enter a phase where both are important.”
That said, Fox still sees value in streaming. It spent $440 million buying Tubi three years ago, and has built it into a powerhouse, ad-supported streaming business. In March, Tubi broke free from the “other” section on Nielsen’s The Gauge report. This measures domestic streaming audiences across a wide number of services. The report showed Tubi had 1% percent of total streaming TV time in February.
Fox does not report specific ad revenue attributed to Tubi. Instead it lumps the service in with its broadcast network and local television stations on its quarterly earnings statements. But on Tuesday, Fox Chief Financial Officer Steve Tomsic said Tubi’s generated 47% more revenue during its Q4. Compared to the prior year (though he did not offer a specific dollar amount), and that Tubi’s revenue helped partially offset “by lower off-cycle political revenues and a slower rebound in the base market” at Fox-owned local TV stations and the broadcast network.
News Source: StreamTV Insider