Fox CEO Murdoch Says Sports, News Will Stay on Traditional Cable for Now

Lachlan Murdoch, the CEO of Fox Corporation, stated that the media company continues to believe that traditional cable and satellite platforms provide the best consumer value and reach for its live news and premium sports programming, and that rivals are complicating their own businesses by distributing those two products across various streaming upstarts.

While the company is in the preliminary stages of a renegotiation for its channels, which include the Fox News Channel, Fox Business Network, and Fox Sports 1, Murdoch said the value proposition of the brand’s news and sports offerings have helped juice more retransmission revenue from cable and satellite providers on Wednesday.

Because Fox has made the conscious decision to keep much of its cable news and premium sports content off streaming services that aren’t also a part of the pay TV ecosystem, Murdoch claimed that cable and satellite providers are willing to pay increased fees for Fox programming. This includes its National Football League and Major League Baseball games.

“We are able to approach a distributor and explain that we are not in direct competition with them. We’re not asking our audience to choose between your distribution, your pay TV platform, and our own subscription video on demand platform,” Murdoch said. “The only way to watch (the NFL’s) America’s Game of the Week on Sunday afternoon in your market is through your platform, and we believe that is extremely valuable to them. We are thus adding value, exclusive value, to your platform.”

As media companies attempt to address consumer shifts away from expensive streaming products in favor of cable and satellite, Fox’s strategy is the exact opposite of what some of its rivals have done over the past few years. While Comcast simulcasts Sunday Night Football games from NBC on Peacock, Paramount Global offers live access to NFL games during the regular season and post-season on its streaming service, Paramount+.

Both Comcast and Paramount have struggled to see a financial return on their investment in streaming, and both businesses have posted operating losses in their direct-to-consumer businesses for several consecutive quarters. As a result, they have little to show for their efforts. Similar financial difficulties have been experienced by The Walt Disney Company, which has steered more sports toward its ESPN+ streaming service.

Fox reported $1.857 billion in affiliate fee revenue during its most recent financial quarter, demonstrating the financial success of the decision to move premium sports to the broadcast division of the company. Due in part to Fox’s telecast rights to Super Bowl LVII this year, advertising revenue increased to $1.875 billion during the same time period, an increase of 43% year over year.

Fox’s decision to forgo streaming for the majority of its news and sports programming has paid off, according to the company’s financials. The fact that Fox’s news and sports programming has a wider audience on broadcast and cable than it does on streaming, according to Murdoch, is one of the reasons why advertisers favor it.

“When we had Thursday Night Football a few years ago, and it was simulcast with the NFL Network and with Amazon, those games that were simulcast, 95 percent of the viewing was on broadcast TV, on Fox,” Murdoch affirmed. “After that, Thursday Night Football was no longer an issue…and it went to The reach of Amazon has decreased by 42 percent on average. Additionally, local market broadcasts (simulcasts) are included.” (Fierce Video was unable to independently verify Murdoch’s claim because it was unclear where he got the information.)

“If I was an NFL owner, that’s a disaster for me,” Murdoch continued. “Owners of sports leagues must seriously consider the importance of having their brands be seen by as many Americans as possible.”

Some of that has already begun to occur. The E. W. Scripps Company, which owns a number of digital broadcast networks and numerous local broadcast stations, recently debuted Scripps Sports, a division whose corporate objective is to bring back as much live sports programming to free, over-the-air television as is practical. Since its debut, Scripps has already secured the local broadcast rights for its local TV stations in Las Vegas for games played by the Women’s National Basketball Association (WNBA) and the Vegas Golden Knights franchise of the National Hockey League.

Murdoch acknowledged, along with other entertainment moguls, that live sports and news streaming is undoubtedly the way of the future, but maintained that adding live sports and news to a traditional pay TV package is still, by far, the better business choice.

“Currently, if you want to watch all the sports you possibly can, get every sport in America, and pay the least amount of money for it while experiencing the least amount of friction, you should avoid switching services frequently…the best service you have is a traditional cable pay TV bundle or satellite pay TV bundle,” Murdoch affirmed. “Having said that, technology and behavior have changed, and as a result, we believe we can continue to provide premium sports and the top news service in the nation by being present on all scaled platforms and independent of the technology used to deliver those services. Our brands will be essential to any business operating at scale, regardless of the technology, whether it be a streaming service, cable TV, satellite, or other service that we haven’t yet invented.”

Fox also has Tubi, a general entertainment streaming service that is free to use and has more than recouped the $440 million the company spent on it three years ago. This shows that Fox is not completely ignoring the streaming market. With more hours of content available on the service than Netflix does, Tubi stole the show at Fox’s most recent Upfronts presentation.

Murdoch said Fox will continue to invest “modestly” in When combined with its broadcast and cable assets, advertisers see Tubi as a value add in terms of price and reach (Murdoch noted that advertisers are not required to purchase Tubi inventory if they want access to broadcast and cable channels, and vice versa). This entertainment platform brings in $200 million to $300 million annually.

“We find that Tubi…we add anywhere from 75 percent to 90 percent reach compared to traditional linear ad buy when you add Tubi to that,” Murdoch affirmed. “The audience for Tubi is more youthful, diverse, and enthusiastic about the service. As a result, it’s a great asset for us to have and one that our clients can use, which they do.”

During its most recent financial quarter, Tubi’s streaming revenue increased by 30% thanks to its high engagement rate and its buyer-friendly ad inventory, and the company reported operating income of $170 million. Fox was so pleased with Tubi’s performance over the course of the three years following its acquisition that it recently established a new digital division called Tubi Media Group, which is heavily focused on the service.

“Tubi’s revenue growth profile is phenomenal. It’s growing like a weed,” Murdoch said. “First of all, it’s expanding like a weed because revenue growth is outpacing the growth of our primary metric, total viewing time. In other words, we have more room and more opportunities to offer our clients and advertisers…to monetize those availabilities further.”

Reference: www.fiercevideo.com