• by Wayne Friedman , January 9, 2019

New Fox -- the remaining part of the company after it completes its deal with Walt Disney -- shows fiscal-year 2018 results with slightly higher overall revenue, up 2% to $10.15 billion, more or less in line with analyst estimates.

Although advertising revenue dropped 11% for the year to $4.6 billion, affiliate fees climbed 15% to $4.9 billion. The latter includes a 16% boost in subscriber fees for its cable networks -- to $3.5 billion -- and 12% more in broadcast TV retransmission fees to $1.4 billion.

Cable network advertising remains relatively strong -- up 4% to $1.12 billion. Broadcast TV ad revenue was down 15% to $3.5 billion, due to unfavorable comparisons to a year ago, when Fox aired the Super Bowl and other key sports events.

Fox’s $71.3 billion deal -- selling about half its business to Disney -- leaves the company with the Fox broadcast network, cable networks, such as Fox News Channel and Fox Sports 1, and TV stations, mostly focused around big sports programming and news content.

Michael Nathanson, senior media analyst at MoffettNathanson Research, says: “We see further longer-term upside in valuation given the under-monetization of sports-heavy Fox broadcast network, which is presently not optimized for profitability.”

Brian Wieser, senior research analyst at Pivotal Research Group, adds: “Among the key wildcards in valuing New Fox, there remains some uncertainty regarding the tax obligation that Fox will pay in association with the close of the Disney transaction, and whether Fox will end up owning some of the RSNs [regional sports networks].”

Wieser says sports programming rights fees for Fox for the next 12 months, beginning in June 2018, are $3.6 billion, with an average of $4 billion in each of the following two years and $4.2 billion on average during the two years after 2020.

With an total operating expense base for the company of around $7.5 billion, he says: “This data illustrates the relative importance of sports to the company.”

Current Wednesday morning stock price of 21st Century Fox was up 0.12% to $48.67.