Q3 2024 Earnings Summary
- Strong political advertising revenue expected due to tight Senate races in key markets where FOX has major news stations, leading to an "incredibly strong political season" starting in the first half of fiscal 2025.
- Tubi continues robust growth, with increased viewership driven by both new and existing users, offering over 250,000 movies and TV series and around 270 live FAST channels, with 90% of viewing on-demand, making it highly valuable to advertisers.
- Increased television profitability despite lacking Super Bowl or extra playoff games, driven by a $70 million growth in affiliate fees and cost savings from shifting from scripted to unscripted programming, underscoring FOX's operational efficiency.
- Tubi is expected to face headwinds and difficult revenue comparisons in the next quarter, particularly due to a prior 47% revenue growth that will be hard to replicate, potentially impacting the company's overall growth.
- The launch of the new sports streaming joint venture may cause friction with existing distribution partners, raising concerns about cannibalization of traditional pay-TV subscribers, which is FOXA's main revenue stream.
- FOX's decision not to pursue NBA rights could limit their sports content portfolio, and the absence of an SVOD service might place them at a competitive disadvantage in securing future sports rights.
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Streaming JV and Tubi Integration
Q: What's the update on the streaming JV and Tubi's role?
A: Lachlan Murdoch stated that the beta version of the streaming app is in testing and is "looking tremendously exciting," highlighting its innovative, digital-first focus on cord-nevers and cord-cutters. He clarified they don't currently see an opportunity to bundle the sports service with Tubi, as Tubi is a different product. -
M&A and Noncore Asset Monetization
Q: Any thoughts on monetizing noncore assets like FanDuel option and Studio Lot?
A: Lachlan Murdoch affirmed their strong belief in the sports betting market and intend to "see through and eventually exercise" the FanDuel option. Steven Tomsic added they view the Studio Lot as a long-term asset with development plans and have no plans for early monetization. -
Tubi's Growth and CPMs
Q: What's driving Tubi's strong growth and CPM outlook?
A: Lachlan Murdoch attributed Tubi's growth to new viewers discovering the platform and its extensive content offering, including over 250,000 movies and television series and around 270 live Fast Channels. He highlighted that 90% of viewing is on-demand, which is more valuable to advertisers, and expressed confidence in maintaining CPMs despite market pressures. He cautioned about difficult comps next quarter due to a 47% revenue increase in the same quarter last year. -
Sports JV and Distributor Concerns
Q: How do you address distributor concerns about the sports-only JV?
A: Lachlan Murdoch emphasized their commitment to supporting the traditional cable bundle, acknowledging it as their "#1 revenue stream." He explained that the sports JV will target non-traditional pay TV viewers to minimize cannibalization, and they are open with distributors about their strategic focus. -
Political Advertising Outlook
Q: Will political advertising return to linear TV as before?
A: Lachlan Murdoch is confident that political ad spend will flow "ultimately to local television," highlighting tight Senate races in key markets where FOX has big stations, such as Arizona, Michigan, Pennsylvania, and Wisconsin. He anticipates an "incredibly strong political season," noting that the delay is due to a less competitive primary season. -
Television Profitability Without Big Events
Q: How did TV profits grow without Super Bowl and extra playoffs?
A: Steven Tomsic explained they offset the high tens of millions EBITDA contribution from last year's Super Bowl with $70 million growth in affiliate fees. Additionally, reduced entertainment programming costs, driven by a shift from scripted to unscripted content and the impact of strikes, contributed to profitability.
Research analysts covering Fox.