What Could Be In Future For Fox?

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FOX: Fox Corp logo
FOX
Fox Corp

21st Century Fox (NYSE:FOX) recently announced its fiscal Q4 earnings, reporting a  7% increase in revenue due to higher affiliate and advertising fees. We expect advertising revenues to grow by 5% in fiscal 2017, due to favorable market conditions such as U.S. presidential elections and Superbowl. Over the long term, we think one of the best bets for Fox is monetizing its content via OTT channels. Overall we continue to maintain our bullish stance on the company.

Advertising Business Has A Silver Lining In Near Future

Advertising and Subscription business, which includes advertising revenues from Fox’s U.S. and international networks, accounts for more than 50% of the company’s valuation according to our estimates. We believe Fox’s advertising revenues could grow by mid-single digits over the next two years. Here is why we believe so:

  • Ratings for most of its networks are at their peak within the last two years. Fox News became the most watched channel during the past quarter. We expect this trend to continue due to the U.S. presidential elections.
  • Fox Sports had some good ratings recently due to the coverage of Copa America games. We expect this trend to continue particularly due to Super Bowl 51 coming up next year. In 2016, Superbowl brought in $1 billion in ad revenue for CBS. The prices for average 30 second ad slot were as high as $5 million.
  • National Geographic is also having a complete revamp after its acquisition. Transformation of Nat Geo’s “Explorer” and seven new projects are part of this revamp plan. The company has already seen growth in mid-teens for the advertising revenue.

                                        

Fox’s Focus On Licensing Content To Streaming Service Providers Will Give Its Bottomline A Boost

Fox’s online content strategy has already started showing some momentum and we expect it to be a game changer in future. Here is why:

  • Fox has 30% stake in video streaming service provider Hulu. Time Warner recently acquired 10% stake in Hulu, giving it access to NBC and Disney’s strong content library. Now making of deals to acquire content for Hulu should be easier.
  • Hulu has grown from 9 million subscribers in April, 2015 to 12 million subscribers in May this year. The growth was slower compared to last year, but we expect the subscriber additions to pick up because of content expansion.

Hotstar has shown positive results for Fox in India, with more than 50 million active users already. The company plans to expand this service to other south-east Asian countries. The consumption of Indian scripted shows has increased consistently. The app has already become a medium for online viewing of sports such as cricket in India.

Source:

[1] 21st Century Fox (FOX) Q4 2015 Results – Earnings Call Transcript, Seeking Alpha, August 06,2016

Relevant Articles
  1. Fox Stock Rallied 6% Last Week – What Should You Know?
  2. Fox Beats Q4 Estimates On The Back Of Gains In Cable Networks, Studio Performance
  3. U.S. Department of Justice Approves Disney-Fox Deal
  4. What Would A Potential Comcast-Fox Combination Look Like?
  5. How Much Could Comcast Benefit From Acquiring Fox’s Studio Business? 
  6. Why We Revised Our Price Estimate For Fox To $43

[2] FOX NEWS | RATINGS
February 2016 Ratings: Fox News Is Most-Watched Cable Channel for 6 Weeks, Breaking 13-Year Record, Adweek, March 01,2016

[3] National Geographic Channel Unveils Revamped ‘Explorer,’ ‘Earth Live’ Special and Other Shows, Variety, March 15,2016

Have more questions about 21st Century Fox? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for 21st Century Fox 

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