James Murdoch Talks Hulu Growth, Streaming Upside, Fox's 'Minority Report' "Disappointment"

Lachlan Murdoch James Murdoch - H 2014
AP Images

Lachlan Murdoch James Murdoch - H 2014

The Fox CEO and co-executive chair Lachlan Murdoch mention discuss how Hulu sub adds are up more than 60 percent, the "matured" cable bundle, the need for better audience measurement, the Fox Business network and the film business.

21st Century Fox CEO James Murdoch and executive chairman Lachlan Murdoch on Wednesday touted the conglomerate's focus on questioning and breaking traditional business rules and self-disruption and their desire to grow Hulu and the company's broader streaming video business.

CEO James Murdoch also assessed the early fall TV season trends for the Fox broadcast network, touting strong ratings for a slew of shows and what he called the "disappointment" of adaptation Minority Report. The network recently cut its order for the show. Overall, U.S. broadcast fall season trends for the network look "encouraging," he said, touting such new shows as Rosewood and Grandfathered and the second season of Empire.

Speaking on the company's earnings conference call, his brother and Fox co-executive chairman Lachlan Murdoch said this was a "time of transformative change" in the media industry, saying that this requires "clear thinking and calculated risk-taking," which the company has focused on.

James Murdoch, who was on the call from London, said it was important for Fox to be disruptive and not “cling to business rules” amid “wave after wave of technological change.” He said the company was “best served" by efforts to " innovate and disrupt ourselves."

Lachlan Murdoch said that the cable bundle has “matured,” but Fox on the call said that its latest quarterly figures included aggregate increases of over 1 percent in the company's U.S. pay TV subscribers. Lachlan Murdoch predicted a smaller effect from bundle concerns and changes for the company, saying that Fox, Fox News, Fox Sports and other core brands are all "in great demand."

He also urged more improvements to TV and online audience measurement, saying things "will need to evolve further" to ensure a "modern ratings currency." He cited Fox hit drama Empire as an example, saying it had 12 million viewers in the live-plus-same day figures, "a great number," but 25 million over 30 days in multi-platform viewing. "The show is really a phenomenon," James Murdoch said about Empire.

Scream Queens grew its audience by 130 percent across its digital consumption, the CEO also said, adding that other shows are also seeing much digital viewing. Fox's advertising revenue for TV shows outside of linear TV is up strongly this year, even though monetization can be improved, he said. 

He said that growing Fox's streaming video business was a focus for his team. "It’s pretty early days finding all the different ways we can move it forward and innovate," he said, citing possible upside to ad loads and pricing, subscription pricing and the like. He also mentioned expected new streaming services that are not yet launched, saying they would help improve Fox's financials.

Asked about the Hulu joint venture, he touted improved sub gains this year, saying net subscriber additions are up more than 60 percent from last year through September, and higher viewing and engagement, saying "the growth is good." He hinted that Hulu's subscription pricing could evolve and that it could create new price points. "We believe very strongly in Hulu and Hulu’s prospects," he said. And he predicted that pricing models around attention would develop, and Fox wants to be there for that.

The Murdoch brothers also emphasized the need in taking a holistic view at the industry. James said the company was looking at total viewing for any given night across various platforms, saying Fox total viewing was up 10 percent year-over-year so far this season, excluding sports. "The full life-time value of these assets is something we are very focused on," the CEO said.

The Fox Business Network also was mentioned on the call, with James Murdoch saying it was gaining momentum, with an upcoming debate featuring the Republican presidential hopefuls providing an opportunity to "showcase and differentiate" the network.

After a weak film quarter, James Murdoch on Wednesday also touted the studio's upcoming releases, including Deadpool, as well as next summer's X-Men: Apocalypse and Independence Day: Resurgence. He said those, others and the strength of The Martian are all providing "some comfort" despite the weak past quarter. He also touted growth in digital film spending.

CFO John Nallen said that the company would stop providing earnings targets and replace them with quantitative and qualitative guidance where possible.

Fox earlier reported lower quarterly earnings as the conglomerate's film unit recorded weaker results amid a strong year-ago period and the disappointing box office for The Fantastic Four. Cable networks unit and TV unit results profitability grew.

The company, led by executive chairmen Rupert Murdoch and Lachlan Murdoch and CEO James Murdoch, also was affected by currency fluctuations and the exclusion of Shine from its result after the formation of Endemol Shine.