Fox News Sees Continued Growth In Ratings And Subscription Fee

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Twenty-First Century Fox‘s (NASDAQ:FOX) Fox News Channel has reached 147th consecutive month at No. 1 spot in total viewers among cable news networks, in both total day and primetime. [1] For the first quarter of 2014, Fox News was the only cable news network to grow compared to the prior year quarter. Higher ratings translate into better advertising revenues for the cable networks.

Fox News spends roughly 45% of its programming on factual reporting, and 55% on commentary and opinion. On the other hand, MSNBC dedicates an average of 15% of its programming to factual reporting while other 85% is dominated by commentary and opinion. CNN is the only channel of the three to spend more time on factual reporting than opinion and commentary. [2] The mix appears to be working in Fox News’ favor as it continues to enjoy higher viewership than both MSNBC and CNN combined. It appears that Fox News will continue to dominate the news networks in the coming years. Let’s take a brief look at the drivers behind Fox News.

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How Did The First Quarter Pan Out?

As compared to the prior year quarter, Fox News was up 3% in total viewers and 5% among the viewers in 25-54 demographic in total day during Q1 2014. In primetime, the network was up 4% in total viewers. Fox and Friends First saw the biggest gains for the network compared to the year-ago quarter, up 18% in total viewers and 28% in the demographic. The Kelly File was up 15% in total viewers while Hannity was up 16% compared to the prior year period. Bill O’Reilly’s primetime program remains the top-rated show on cable news but was down 3% in the ratings. Shepard Smith Reporting was up 10% in total viewers. Fox News’ 5pmET and 6pmET programs were also up by 9% in total viewers and +7% in the demographic. [1]

Overall Viewership Is Declining

Fox News Subscription contributes more than 5% to 21st Century Fox’s value, according to our estimates. While the network has high penetration in the U.S. pay-TV households, it has declined from 94.4% in 2012 to 92.6% in 2013. The traditional pay-TV industry is facing headwinds primarily from the rise of alternative video platforms and online video options such as YouTube and Netflix (NASDAQ:NFLX).

The news networks, including CNN and MSNBC, saw decline in primetime viewership last year. The combined median prime-time viewership of the three major news networks – CNN, Fox News and MSNBC – dropped 11% to about 3 million, the smallest it has been since 2007. [3]  It will be interesting to see how traditional television viewership trends in 2014. A significant decline in viewership could have a meaningful impact on media networks.

Subscription Revenue Continues To Grow

News networks derive revenues primarily from licensing, subscription and advertisements. Licensing fees refers to the amount that cable channels charge to providers in exchange for the right to carry their programming. Around 58% of Fox News’ revenues are derived from licensing fees. [3] Fox News has more than 97 million subscribers in the U.S. and charges close to $0.82 monthly subscription fees, according to our estimates. This translates into annual subscription revenues of close to $1 billion. While the cable news primetime viewership has been lower in the past few years, the monthly subscription fee has been on the rise. In 2009, the estimated monthly subscription fee was $0.58 and the subscription revenues were around $675 million. We expect the subscription fee growth to continue in the coming years, translating into annual subscription revenues of $1.5 billion by the end of our forecast period.

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Notes:
  1. Q1 2014 Ratings: Fox News #1 For 49th Consecutive Quarter, MediaBistro, Apr 1, 2014 [] []
  2. Is MSNBC the place for opinion?, Pew Research, Jun 5, 2013 []
  3. Key Indicators in Media & News, Pew Research, Mar 26, 2014 [] []