Fox Corporation CEO Lachlan Murdoch said the media company still believes traditional cable and satellite platforms offer the best consumer value and reach for its live news and premium sports programming, and that competitors are complicating their own businesses by spreading those two products across various streaming upstarts.
Speaking to attendees of MoffettNathanson's first technology, media and telecom conference on Wednesday, Murdoch said the value proposition of the brand's news and sports offerings have helped juice more retransmission revenue from cable and satellite providers while the company is in the preliminary phase of a renegotiation for its channels, which include the Fox News Channel, Fox Business Network and Fox Sports 1.
Murdoch said cable and satellite providers are willing to pay increased fees for Fox programming because the company has made a deliberate decision to keep much of its cable news and premium sports — including its National Football League and Major League Baseball games — off streaming services that aren't also part of the pay TV ecosystem.
"We are able to go to a distributor and say, look, we're not competing with you. We're not asking our audience to choose between your distribution, your pay TV platform, and our own subscription video on demand platform," Murdoch said. "We are adding value, exclusive value, to your platform — the only way to watch (the NFL's) America's Game of the Week on Sunday afternoon is through your platform in your market, and we think that's tremendously valuable to them."
The strategy is the precise opposite of what some of Fox's competitors have done over the last few years as media brands try to address consumer shifts away from cable and satellite toward cheaper streaming products. Paramount Global offers live access to NFL games during the regular season and post-season on its streaming service, Paramount+, while Comcast has simulcast its Sunday Night Football games from NBC on Peacock.
Those companies have little to show for their efforts: Both Comcast and Paramount have struggled to see a financial return on their investment in streaming, with each company posting operating losses in their direct-to-consumer businesses over several consecutive quarters. The Walt Disney Company, which has pushed more sports toward its ESPN+ streaming service, has suffered from similar financial woes.
The decision to relegate premium sports to Fox's broadcast operations has been financially rewarding, with the company posting $1.857 billion in affiliate fee revenue during its most-recent financial quarter. Advertising revenue increased to $1.875 billion during the same time period, a year-over-year increase of 43%, spurred in part by Fox's telecast rights to Super Bowl LVII this year.
The company's financials prove Fox's decision to forego streaming for the majority of its news and sports programming is working. On Wednesday, Murdoch said part of the reason why advertisers flock to Fox's news and sports programming is because it has greater reach on broadcast and cable compared to streaming.
"When we had Thursday Night Football a few years ago, and it was simulcast with the NFL Network and with Amazon, those games that were simulcast, 95 percent of the viewing was on broadcast TV, on Fox," Murdoch affirmed. "Then, when we moved on from Thursday Night Football...and it went to Amazon, Amazon's reach is down, on average 42 percent. And that includes local market broadcast (simulcasts)." (It wasn't clear where Murdoch got that data, and it could not be independently verified by Fierce Video.)
"If I was an NFL owner, that's a disaster for me," Murdoch continued. "Sports leagues, the owners really need to think carefully about the value of sports brands reaching as many Americans as possible."
Some of that has already started to happen. The E. W. Scripps Company, which owns dozens of local broadcast stations and a handful of digital broadcast networks, recently launched Scripps Sports, a division whose business goal is to bring back as much live sports programming to free, over-the-air television as possible. Since its launch, Scripps has already clinched national and local market telecast rights to Women's National Basketball Association (WNBA) games, as well as local broadcast rights to games played by the National Hockey League's Vegas Golden Knights franchise for its local TV stations in Las Vegas.
Like other entertainment moguls, Murdoch conceded that the future of live sports and news is obviously rooted in streaming, but said the value proposition for putting live news and sports on a traditional pay TV package is still, overwhelmingly, the better business decision.
"At the moment, if you want to watch all the sports you can possibly watch, you want to get every sport in America, you want to pay the lowest price for it, with the least amount of friction, without having to swap in and out of services...the best service you have is a traditional cable pay TV bundle or satellite pay TV bundle," Murdoch affirmed. "Having said that, technology has changed, behaviors change, and as it changes, we think we can give premium sports and the number one news business in the country, we will be on every scaled platform not relying on what technology that's delivered in. Whatever technology that is, whether it's a streaming service, cable TV service or satellite service or other service that we haven't invented yet, our brands will be integral to any business at scale, regardless of the technology."
And Fox is not ignoring the streaming landscape altogether: It has Tubi, a general entertainment service that is free to access and has more than paid for itself since the company plunked down $440 million for the operation three years ago. Tubi took the spotlight at Fox's recent Upfronts presentation, with the company touting more than 55,000 hours of content on the service, more than what is offered on Netflix.
Murdoch said Fox will continue to invest "modestly" in Tubi's entertainment offerings, to the tune of $200 million to $300 million every year, and that advertisers see Tubi as a value add in terms of price and reach when taken with its broadcast and cable assets (Murdoch said advertisers aren't required to buy Tubi inventory if they want access to broadcast and cable channels, and vice versa).
"We find that Tubi...we add anywhere from 75 percent to 90 percent reach compared to traditional linear ad buy when you add Tubi to that," Murdoch affirmed. "Tubi's audience is younger, very diverse and very engaged with the product. So it's a great asset for us to have, and it's a great asset for our clients to utilize, and they are."
Tubi's high engagement coupled with its attractive ad inventory for buyers helped boost streaming revenue by 30% during its most-recent financial quarter, with the company reporting $170 million in operating income. Fox has been so impressed with Tubi's performance in the three years since its acquisition that it recently launched a new digital division, called Tubi Media Group, which is oriented in large part around the service.
"The revenue growth profile of Tubi is off the charts. It's growing like a weed," Murdoch said. "It's growing like a weed first because our key metric, which is total viewing time, continues to grow and outpace revenue growth. What that means is, we've got more and more availabilities to offer our advertisers and our clients, and we have more room...to monetize those availabilities further."