Sector: Cable/Media Dave Novosel June 17, 2021
[email protected] Avoiding The Streaming Wars Three of the major broadcast networks (Disney/ABC, Comcast/NBC, and ViacomCBS/CBS) have turned their focus to streaming. But Fox Corporation (FOXA) has not followed this path, other than a minor effort with Fox Nation and Tubi. Tubi is advertising supported and Fox is not making huge investments in programming and marketing. Instead Fox is concentrating on news and sports. People can argue with the perspectives and editorial comments of Fox News. What they can’t argue about is the success of Fox News. After of few months following the presidential election when the audience migrated away from news, the channel is once again the highest rated news network. Meanwhile, Fox just renewed its Sunday NFC football package, the most watched NFL package for the past 15 years. Management will continue to look at sports rights that become available. The bulk of the success at Fox is driven by the Cable Network Programming segment. Although this unit accounts for less than 45% of total revenue, it generates more than 80% of total EBITDA. The segment does so by generating EBITDA margins that have averaged more than 47% over the past three years. Moreover, we think margins will approach 50% this year. Margins have generally risen because of the improved revenue. But they have also benefited from lower studio show production costs at Fox Sports, including the absence of Super Bowl week studio shows this year. Lower programing rights amortization and productions costs have lifted margins too.