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Fox. Corp. reported its fiscal second-quarter financials on Tuesday, which benefited from strength at Fox News and local TV stations due to the U.S. elections despite the coronavirus pandemic.
The company, led by CEO and executive chairman Lachlan Murdoch and chairman Rupert Murdoch, said its quarterly advertising revenue jumped 14 percent, “primarily due to record political advertising revenues at the Fox Television Stations, continued linear and digital growth at Fox News Media” and the impact of the consolidation of streaming service Tubi.
Fox also posted affiliate fees collected from cable, satellite and online distributors rising 6 percent to $1.51 billion, even as subscriber volume fell.
Overall revenue rose 8 percent to $4.09 billion. At the same time, Fox’s quarterly earnings fell to $224 million, compared with $300 million in the same period a year earlier, “primarily due to higher gains” recognized in a segment entitled “other, net” in the prior-year period, which includes equity losses of affiliates and other operations.
Like its peers, Fox, which became a stand-alone company focused on news, sports and entertainment after Murdoch sold big parts of 21st Century Fox to the Walt Disney Co. for more than $71 billion in 2019, took a big ad hit during the second quarter of calendar year 2020 due to the pandemic.
“Once again, the company delivered exceptional operating and financial results,” said Lachlan Murdoch in a statement that accompanied his latest financial results, before adding: “Fox Television Stations, Fox News Media and Tubi all experienced record highs in the December quarter, led by an unprecedented political advertising cycle at our local television stations, strong digital growth at Fox News Media and an influx of new advertisers at Tubi.”
“The spending was pretty staggering,” Murdoch told analysts on a morning call about political ad expenditures during the 2020 news cycle, though he forecast the prospect of a finely-balanced U.S. Congress promised still more record-breaking political ad spending levels in 2022 and 2024 during the next U.S. political news cycles.
More recently, Murdoch said Fox’s local Atlanta TV station gained from the news cycle around Georgia’s recent U.S. Senate run-off elections. He did point, however, to a recent 13 percent fall in overall ratings for Fox News Channel after the U.S. presidential election as the top-rated news channel adjusts to life after Donald Trump left the White House.
“We fully expect that the overall news audience will normalize, and our share of ratings will dominate,” Murdoch told analysts. To stress continuity, he announced that Fox News CEO Suzanne Scott had signed a contract extension, while he also welcomed former White House adviser Larry Kudlow taking over for Lou Dobbs after his show was canceled on the Fox Business Network.
“I’m also happy with the programming changes that Suzanne is implementing, including Larry Kudlow’s show on Fox Business Network that will premiere next week. We all welcome Larry to Fox,” Murdoch said as Fox News Channel fends off criticism, and lawsuits, around its on-air pundits like Dobbs allowing guests including Rudy Giuliani, another Trump White House advisor, to talk on air about discredited conspiracy theories around U.S. election fraud.
Murdoch also discussed speculation in media circles that Fox News Channel is pivoting further to the political right as its ratings come under pressure post-election and it faces new competition from Newsmax and One America News as they reach out to disaffected Trump supporters. “We believe where we’re targeted, to the center right, is exactly where we should be targeted. We don’t believe we have to go further right. We don’t believe America is further right. And we’re not going to pivot left. All of our significant competitors are to the far left,” he told analysts.
Murdoch added that holding the center right would see Fox News Channel return to a ratings dominance as it competes against CNN and MSNBC in the cable TV news arena.
The Fox Corp. boss also talked up Fox’s Thursday Night Football ratings as the company and the NFL engage in talks on a renewal of their TV rights deal. “The NFL knows this is a business that is important to us… We hope to bring those (talks) to a conclusion in the near to medium term,” Murdoch said on the call.
Murdoch also discussed Tubi, and stressed his favor for competing in the ad-supported streaming market (AVOD) over a crowded subscription streaming arena dominated by Netflix where viewers pay a premium to watch TV fare without advertising. “We see the SVOD competitive set as the potential to lose very many billions of dollars,” he argued, before adding that a free, ad-supported offering in Tubi better allowed Fox Corp. to avoid endless operating losses to establish a market foothold.
“We expect to win in AVOD, and be the leading player in this country, and secondly, we expect to be able to do it by reinvesting profits, and not by losing billions of dollars in programming costs in the time it takes to break even,” Murdoch said.
Macquarie Capital analyst Tim Nollen in his Fox earnings preview report had forecast “better- than-expected advertising strength” at Fox News “despite the end of the presidential election campaign in November, as newsflow continued unabated throughout November and December.”
He also noted “slightly lower costs in the quarter given [the] timing of [the] NFL season, with one less week than usual in the quarter, and programming costs from Fox’s entertainment shows [were] also relatively light,” but highlighted that “both will rise” starting with January.
Morgan Stanley analyst Benjamin Swinburne on Monday reiterated his “overweight” rating on Fox ahead of the earnings report, arguing its stock has been “left behind” in a recent media industry rally.
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