Fox Corporation didn’t see any impact to its business in the most recent quarter from macro challenges pressuring the ad market that some other major media companies and publishers have warned about.
On Wednesday morning’s earnings call, Fox CEO Lachlan Murdoch acknowledged the company is aware of chatter around advertising headwinds, saying “of course we will be prepared if the market turns downward,” but emphasized that Fox isn’t seeing it at this point.
“Let me be clear, we are currently not seeing any adverse advertising impact on our business,” Murdoch said, adding that it speaks to Fox’s unique positioning and strength of core platforms.
For its fourth quarter fiscal year 2022, Fox reported 7% growth in advertising revenues to reach $1.05 billion in the three-month period. It attributed the increase mainly to better pricing and higher ratings at Fox News, higher political ad revenues at Fox TV stations and continued growth at its free ad-supported streaming TV (FAST) service Tubi. Affiliate fee revenues were up 4% to $1.72 billion. Fox’s Television segment saw 4% growth in ad revenues, which hit $698 million, with 14% advertising revenue growth in Fox’s Cable Network Programming segment to reach $358 million. Total revenue was up 5% year over year to $3.03 billion. Net income of $308 million compared to $272 million in the same quarter a year ago.
The results come as other media companies such as Warner Bros. Discovery and Paramount Global warned of impacts of advertising challenges as they reported June quarter results. Streaming player Roku saw curtailed advertising spending in the scatter market in Q2, and cautioned that it expects challenges to continue near-term.
Murdoch also took the time to tout a successful upfront season, where the company booked volume commitments approximately 15% above last year’s upfront. Nearly 25% of current year commitments are across Fox’s digital properties. The company achieved price increases in the high-single to low double-digits compared to the 2021 upfront season. Murdoch said Fox was able to achieve broadcast level price increases at Fox News and drove incremental ad dollars into Tubi.
At the national level, Fox believes it “achieved the highest upfront price increases in cable news history at Fox News,” Murdoch said. That is, to some degree, to be expected, he added, as the 24-hour cable news network ended the year as cable’s most-watched network in primetime and total days and continued to generate audiences on par with the big four broadcast networks.
For the full fiscal year 2022 Fox reported 9% ad revenue growth, even with the comparison of record political ad revenue in the prior fiscal year. Murdoch said over two-thirds of fiscal 2022 ad revenue was generated by live content, with sports and news delivering 40% and 30% respectively.
Locally, base market advertising sales have been stable, he said, with the company seeing a return to growth in the auto category for the first time in a couple of years – reflecting “a really strong indicator of things to come.”
“This stability in the base market provides a good foundation for the upcoming political cycle where the outlook is remarkably strong,” Murdoch said. This mid-term cycle “looks certain to surpass the 2020 presidential cycle at our local stations.”
Murdoch did cite softness in two local advertising categories of wagering or sports betting – which has shifted somewhat to national as betting becomes legalized in more states – as well as government spending. The latter had been bolstered in the last few years related to Covid and healthcare. However, weakness in those two verticals has been more than made up by strength in other categories, according to the chief executive.
He also noted some softness in programmatic advertising, primarily in Tubi and the Fox News Media digital platforms. Still, programmatic represents 10% of Fox’s advertising business and Murdoch said it’s not having a meaningful impact at all.
Growth at Tubi and Fox Nation
Executives on Wednesday also highlighted growth for the company’s direct-to-consumer streaming news service Fox Nation, as well as Tubi.
According to Murdoch, the Fox Nation platform increased its subscriber base by around 80% over the past fiscal year. This was driven by sustained and high conversion rates of people trialing the service to paid subscribers, as well as retention rates “well above industry averages.” Fox hasn’t disclosed subscriber figures for Fox Nation, which launched in 2018.
The content strategy for Fox Entertainment is focused on an ad-supported multi-platform TV approach, where the company wants to leverage its broadcast network to build and support business beyond linear airing.
Murdoch pointed to “Next Level Chef” as an example, which was Fox’s number one new broadcast entertainment in the past season and Fox’s first production inside a partnership with celebrity chef Gordon Ramsay. Whereas the company used to license Ramsay’s products from third parties, now it’s the one that licenses hits like “Next Level Chef” to third parties, he said.
Another way the company is monetizing IP is launching FAST channels on Tubi, including a recently debuted Gordon Ramsey channel.
As for Tubi, Murdoch said that one year into a focused investment cycle at the FAST, the platform generated nearly 40% growth of total viewing time and revenue growth of 45% across the fiscal year. During the June quarter, 34% growth in Tubi’s total viewing time helped drive revenue growth in the low double-digits.
Both Tubi metrics came in better than planned, “reinforcing our decision to invest in this strategic asset.”
In the period, Fox launched 25 linear channels on Tubi, grew its video on-demand library to over 45,000 titles and premiered 13 Tubi originals.
“We will continue to invest judiciously in Tubi with our sights set on achieving $1 billion dollars in revenue run rate in the next couple of years,” Murdoch said.
Fox just reached a new affiliate deal with Verizon that provided for the inclusion of Tubi (as well as Fox Weather), and executives said they were happy with the partnership and achieved industry leading prices.