Fox News Helps Power 21st Century Fox Results With Campaign in Full Swing

Megyn Kelly Republican Debate - H 2016
Getty Images

Megyn Kelly Republican Debate - H 2016

Thanks to a politically charged season, the No. 1 cable news channel may have saved 21st Century Fox from what might have been an extremely disappointing quarter.

It wasn't said out loud, but the underlying message during the 21st Century Fox conference call to discuss quarterly financial results may have been: "Thank God for Fox News."

During the politically charged season, Fox is thriving big time thanks to 140 appearances by Donald Trump, multiple GOP debates, plenty of coverage of Hillary Clinton's email server and a renewed interest in her husband's infidelities. It helped the No. 1 news cable channel notch its 73rd consecutive quarter of profit growth and highest quarterly results ever, according to insiders.

21st Century Fox is loathe to break out too many details about the behemoth's financials. But, executives acknowledged while discussing quarterly earnings Monday that, while domestic advertising at its entire cable network segment rose just 3 percent, for Fox News and the domestic sports channels it was "double-digit" growth that could be something north of 10 percent.

Insiders at Fox News, run by CEO and chairman Roger Ailes, confirm ad sales during the most recent quarter were strong across the board, including pharmaceuticals, technology, automotive and, naturally, politics.

21st Century Fox also reported affiliate-fee growth of 10 percent. Though it didn't break it down by channel, analysts acknowledge that Fox News is one of the best-growing networks in regard to fees. While it gets about $1.25 per sub now, it could grow to $1.50 within three years, according to SNL Kagan.

It's a safe bet, then, to say that Fox News may have saved 21st Century Fox from what might have been an extremely disappointing quarter, rather than the mild disappointment that it actually was.

Overall, the parent company on Monday reported earnings of $748 million on revenue of $7.4 billion, both of which were down compared to the year earlier as home entertainment and the film studio in general were weak. The results come despite the success of The Martian, the Matt Damon starrer that has reached $605 million at the global box office thus far.

Fox News has been thriving even in the face of massive complaining by Trump, the GOP frontrunner who has an unusually passionate following. Many of his supporters have taken to the Internet to swear they won't tune into Fox News due to a perceived anti-Trump bias, especially on the part of host Megyn Kelly.

Trump began slamming Fox News and Kelly immediately following the Aug. 6 debate where she asked him about comments he has made about women, but The Kelly File still notched its third month at No. 1 among adults 25-54 that August. 

Trump isn't the only one who can boast of an unusually dedicated fan base, and studies bear this out. Pew Research, for example, found that a quarter of American adults say the only news they will watch is Fox News, which is a higher number than either CNN or MSNBC. Fox News also scores higher in "appointment viewing" than do its competitors. 

In January, all of the Top 5 cable news shows belonged to Fox, an accomplishment that is not atypical. The August GOP debate delivered 24 million viewers and is the highest-rated non-sports cable broadcast in history. The January debate on Fox News that was famously Trump-less scored 12.5 million viewers, making it the No. 2 telecast in the network's history, and Fox News has a third GOP debate scheduled for March 3.

"I'm a pretty hardcore lefty, but as a past and potential investor in 21st Century Fox, I give thanks for Fox News," says Steve Birenberg of Northlake Capital Management. 

Analysts figure Fox News brings in 10-20 percent of 21st Century Fox's entire revenue annually and as much as 30 percent of operating cash flow. In 2015, SNL Kagan figures Fox News was good for $2.32 billion in revenue, up 43 percent in five years. Cash flow, meanwhile, rose 40 percent to $1.5 billion. This growth comes despite subscriber reach falling from 98 million to 92.6 million in the same time frame.

"Fox News is really a powerhouse as far as cash flow generation, and I think along with the regional sports networks and Fox Sports are really something that investors focus on," says Derek Blaine, research director at SNL Kagan. "Although they have been hit with some subscriber losses, like everyone else, they are still running strong."

And Birenberg adds that Fox News "provides a steady, high margin, above growth vehicle while the company waits for Fox Sports 1 to ramp."