Fox Corp. Forecast To Earn Stronger Profits From Carriage Fees, Sports TV Ads

The new Fox company, Fox Corp., which begins after Walt Disney completes its deal to buy about half its businesses, can expect improved profitability from sports advertising and affiliate fees, according to MoffettNathanson Research.

“The slimmed-down combination of Fox News with the Fox Broadcasting Network creates an unrivaled pair of must-have live sports and news content that will drive strong, industry-leading top line growth for years to come,” writes Michael Nathanson, senior research analyst at MoffettNathanson Research.

Improved financial results are due to higher affiliate revenues for its cable networks, as well as more retrans revenue for its local Fox TV stations.

Fox will be re-negotiating many carriage deals in the next few years. “The timing aligns well, given the massive investment in live sports at the Fox Television network,” says Nathanson.

“Reverse Retransmission” revenue -- fees from its TV affiliate stations -- will rise from $706 million this year to $1.31 billion by 2023, surpassing revenue from pay TV providers, growing from $925 million in 2019 to $1.28 billion in 2023.



Total retrans revenue is expected to rise 9% per year on average for the next five years from $1.6 million this year to $2.6 million in 2024.

Total advertising at the company is projected to climb 9% this year to $3.8 billion, with Fox network advertising rising 8% to $2.5 billion. All revenues for its TV stations are forecast to grow 10% in 2019 to $1.3 billion.

Fox network advertising has seen a sharp increase as a result of it grabbing more NFL programming -- the entire “Thursday Night Football” package.

The NFL gives Fox a massive 42% of gross rating points when looking at total viewers in Nielsen’s C3 measure -- to 157.8 million. Other sports are also major contributors: Major League Baseball contributes 7% (25.7 million) and NCAA football also contributes 7% to (24.5 million).

Fox had the highest share of any broadcast network of gross rating points -- 55% in 2018 -- coming from sports programming.

Fox non-sports original programming pulls in 45% of its GRPs -- 167.3 million.

Company-wide revenue will climb 11% in 2019 (to $5.7 billion) and 10% in 2020 (to $6.2 billion). Profit margins will grow 7% this year and next, steadily rising to 12% to 2023.

Much of the new Fox company’s cash flow -- earnings before interest, taxes, depreciation and amortization -- will come from its cable TV networks (86%), with the remainder (14%) coming from its broadcast network and TV stations.

Walt Disney said its $71.3 billion deal for Fox businesses is set to close March 20.

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