Fox met Wall Street earnings expectations in its fiscal second-quarter earnings report, though the TV advertising market continues to struggle, with ad revenues down 20 percent compared to the same quarter last year.
Fox notes that Q2 last year included the FIFA World Cup and some midterm political ad revenue, and added that higher supply in the direct response advertising market combined with “lower ratings and higher preemptions associated with breaking news coverage” at Fox News, led to the decline.
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Overall revenues were $4.2 billion, down from $4.6 billion a year ago. Net income was $115 million, compared to $321 million a year ago. Affiliate revenues were up 4 percent to $1.8 billion, driven by the Fox broadcast network, while ad revenues were down 20 percent to $2 billion.
Fox noted that its expenses decreased in the quarter, thanks in part to lower production costs associated with the Hollywood strikes and the absence of the World Cup: “Expenses decreased in the quarter, primarily due to lower entertainment and sports programming rights amortization and production costs, led by fewer hours of original scripted programming and the absence of the Men’s World Cup, partially offset by the renewed NFL contract.”
In the television segment, which includes the Fox broadcast network and Tubi, revenues were $2.5 billion, down from $2.9 billion a year ago, though Tubi was a growth driver.
“Tubi has consolidated its position in the streaming landscape and is the most watched free TV and movie streaming service in the United States, according to Nielsen, surpassing Peacock, Max, Paramount+ and Pluto TV in view time for seven consecutive months,” CEO Lachlan Murdoch said on the company’s earnings call.
In the cable segment, revenues were $1.7 billion, up 2 percent from a year ago, driven by affiliate fee growth.
On the call, Murdoch also addressed the new sports streaming service announced Tuesday in partnership with Disney and Warner Bros. Discovery, telling analysts that it is focused on targeting the roughly 60 million “cord-nevers” in the U.S. and that there are no plans right now to add other partners like NBCUniversal or Paramount.
“We are very confident that this is a large market and a large opportunity that we can address without without undermining the traditional traditional bundle,” Murdoch said.
He also addressed the risks to Fox News, which will now be the only Fox channel available exclusively in the larger pay-TV bundles.
“In terms of the risks in particular for Fox News, I think the risks are very low,” Murdoch said. “And that’s because of the focus of the sports product being on you know, the cord nevers, Fox News continues to be the top-rating cable network, and our distributors, our partners, really value that channel and that brand as it really drives tremendous viewership and audience engagement for them, and we think we’ll continue to do so within the traditional cable and pay television bundle.”
And he noted that among Fox’s business lines, the local stations had the “most mixed” quarter.
“But you have a bad comparison, particularly in the current pacing of football comps,” he added. “This time last year is probably about $50 million in Super Bowl revenue just in the station group, so the comparisons are quite tough as we go forward. But we remain confident that we’ll see a record political cycle. This is slightly ameliorated, I think, in their current quarter with the — for lack of a better word, competitive — primary competition, but we’re already seeing business in the first half of next year start to flow in from a from a political perspective.”
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