Fox Corp. Aims for "Surgical Strikes" in M&A, CFO Says

Fox Headquarters New York City - Getty - H 2019
Drew Angerer/Getty Images

“You shouldn’t think of us doing something like a station group acquisition,” Fox CFO Steven Tomsic said Tuesday at the UBS Global TMT (Technology, Media & Telecommunications) Conference in New York.

Fox Corp. has had a busy year.

After 21st Century Fox closed the sale of its entertainment assets in March, creating the news and sports-focused Fox Corp., the company has been active in the M&A market, buying Credible Labs and Bento Box, investing $100 million in the streaming startup Caffeine and acquiring local TV stations in Wisconsin and Seattle.

The company is not planning to slow down, either, though Fox CFO Steven Tomsic said Tuesday at the UBS Global TMT (Technology, Media & Telecommunications) Conference in New York that the company is looking at “surgical strikes” when it comes to potential acquisitions, rather than any sort of massive deal. “You shouldn’t think of us doing something like a station group acquisition,” he said.

“For us there is nothing on the table and nothing that we think we need to have,” the exec added. “If we think there is a small opportunity or a medium sized opportunity we will take it on a case by case basis.”

One thing that will definitely be a factor in 2020 is political ad revenue, driven by a contentious Democratic primary, and significant expected ad spending from President Donald Trump.

“All the signs point to it being a bumper year, but you never know, Tomsic said, adding that “in 2016, Trump didn’t spend a lot, then '18 was the biggest year we ever had.”

The CFO also said that with Fox selling its entertainment assets to Disney, “we have to rethink what the entertainment side of the business looks like.” Part of that means using the company’s sports programming to try and drive viewership to the entertainment bets it does make.

“We think it is incumbent on us to use the schedule not only to drive the retrans and ad revenue, but to try and use that audience to create asset value in other parts of the schedule,” said Tomsic. “We have precious little airtime available for the entertainment side of the business, and it is surrounded by sports.”

As for the direct-to-consumer services being touted by competitors like Discovery, WarnerMedia, Disney and NBCUniversal, the exec said that “it would be crazy” for Fox to follow with the same strategy.

Instead, the company is building more niche services, such as the Fox Nation service for Fox News “superfans.”

Tomsic said the conversion rate for Fox Nation is “great,” at around 80 percent, but that the company is debating ways to grow its reach.

“Do we expand it and make it bigger and broader and make it appeal to a wider part of middle America? That is an active debate for us,” he said.