Fox Corp.: Distribution Revenue Expanding Faster Than Advertising

While it continues to see strong advertising revenues, Fox Corp's distribution revenues are taking greater share of its overall business.

At the company, over the last few years, advertising-to-distribution revenue share was about 50-50. “That has shifted to about 45-55, advertising-to-distribution,’” said Lachlan Murdoch, executive chairman and chief executive officer of Fox Corp., speaking at the Morgan Stanley Technology, Media & Telecom Conference. Still, he adds: “Advertising has remained very strong.”

Even with cord-cutting, distribution revenues (cable carriage and broadcast retransmission fees) continue to grow at Fox, especially on the strength of its Fox News Channel. Murdoch says the company doesn’t position itself as competition against other cable TV networks -- but instead, compares itself to broadcast networks.



“We are an essential part of the bundle,” he says. “When we look at pricing of distribution, we are competing in ratings with the broadcast networks. We don’t compare ourselves to other cable channels. It is almost broadcast retransmission pricing.”

Murdoch also touts major advertising growth at Fox News Channel. Not only is overall viewership climbing again, but in particular, certain political-minded viewers that one might associate with its competitors CNN and MSNBC.

“We have more Democrats and Independents [politically minded viewers] watching Fox News than watching MSNBC or CNN... Advertisers have noticed that, and we have a broader array of advertisers than we ever had before," Murdoch says.

Heading into the upfront advertising selling season, Murdoch says, current TV scatter pricing for news content and sports TV programming on the Fox Television Network and Fox Sports channels is 20% to 25% higher than last year’s pricing.

Also for this year, Murdoch expects political advertising for this midterm election cycle to best the results the last time around in 2018, when Fox Corp. posted a total of $180 million on a company-wide basis.

Fox Corp., now three years old, continues to hone its national TV sports and news focus, coming primarily from its Fox Television Network and Fox News Channel, respectively.

But it has been selective. For example, it recently declined to participate in the bidding for a new UFC deal, a sports package it had in the past. Back then, he says, “it was very difficult to monetize from the advertising point of view.”

Advertising issues were also part of its decision not to pursue another contract for NFLs’ “Thursday Night Football.” Murdoch says: “Thursday Night Football didn’t move the needle that much.”

Fox’s solid financial position is also partly attributable to the company avoiding the high costs -- billions of dollars -- it takes to start up and run a premium subscription-based streaming service that other major TV-based companies have been pursuing.

In a market where consumers are signing up to buy just three or four streamers -- led by Netflix, Amazon, and Disney+ -- he says there is little to gain from being in the “fourth” position.

“We are happy to be sitting on the sidelines,” he says. “We knew this when we took ourselves out of the SVOD market when we sold Disney all of our content libraries. We’re in the bleachers watching this bloodshed that is going on.”

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