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Investment Overview for News Corp (NASDAQ:NWS)
News Corp's business comprises of cable networks, broadcasting, movie & TV show production and licensing, publishing and Sky Italia. The company is a diversified media giant and boasts of some of the key cable networks such as Fox Sports, Fox News, FX, National Geographic etc. Its movie studio Fox is one of the biggest movie studios in the world and its publishing division includes well know newspapers such as The Wall Street Journal. Fox Broadcasting Network is one of the 4 biggest broadcasting networks in the U.S.
The prime value contributor for News Corp is its cable networks business. This is a result of high number of subscribers due to high penetration in the U.S. as well as international presence, high subscriber fee for certain networks such as Fox Sports Network. Each of its major cable networks reach close to 80 to 100 million households in the U.S. and earn revenue by both subscription as well as advertising.
Furthermore, cable networks division has higher EBITDA margins of about 37.5% compared to its other businesses.
Increasing pay-TV competition
Increasing competition among pay-TV providers such as Comcast, Time Warner, DirecTV, AT&T and Verizon is favorable for media companies. In such a scenario, Viacom can gain negotiating power in discussions regarding the pricing of subscription fees for its programming content.
Increasing disputes with pay-TV service providers
Even though competition among pay-TV companies is increasing, they cannot continue bidding up subscription prices for channels. In order to protect consumers, pay-TV providers are increasingly taking a stand against media companies, leading to frequent channel blackouts.
With growth of online streaming companies such as Netflix that monetize primarily older content, licensing opportunities have expanded for media companies. This is helping them recoup some of the lost revenues from declining DVD sales.
Trefis Forecast Rationale for Fox's Share of Box Office Sales
The revenue generated from the ticket sales of a film showing at a theater are typically split between the production house and the theater. Most movies gross the maximum percentage of their total revenues in the first 3–4 weeks. The split might start off with a 90/10 split in favor of the production house, and continues to taper off as time progresses.
We have estimated that the share of the production house typically averages to 60% of the box office earnings.
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How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.
Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.
How does my dragging the trendline on the chart impact the stock price?
- We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
- We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.
See more on: DCF Methodology
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