Fox Corporation — 2024 Q1
Transcript
Each turn shows the speaker, their inferred role, the section, and that turn's net sentiment (×1000).
Ladies and gentlemen, thank you for standing by. And welcome to the Fox Corporation's First Quarter Fiscal Year 2024 Earnings Conference Call. [Operator Instructions] I'll now turn the conference over to Chief Investor Relations Officer, Ms. Gabriele Brown. Please go ahead, Ms. Brown.
Thank you, operator. Good morning, and welcome to our fiscal 2024 first quarter earnings call. Joining me on the call today are Lachlan Murdoch, Executive Chair and Chief Executive Officer; John Nallen, Chief Operating Officer; and Steve Tomsic, our Chief Financial Officer. First, Lachlan and Steve will give some prepared remarks on the most recent quarter, and then we'll take questions from the investment community.
Thank you, Gabby, and thanks, everyone, for joining us this morning. I just want to start with a comment and a note of thanks. We are living through tumultuous times. And at the outset, I want to acknowledge the work our journalists are doing covering the horrific October 7 terrorist attack and the subsequent ongoing war in the Middle East.
Thanks, Lachlan, and good morning, everyone. FOX reported total first quarter company revenues of $3.21 billion, which is slightly above the prior year quarter. This was led by a 2% increase in affiliate fee revenues as the pricing gains from recent distribution renewals more than offset the impact from industry subscriber declines. From an advertising perspective, we, of course, faced the tough comparison to last year's record midterm political revenues at our local stations.
Thank you, Steve. And now we will be happy to take questions from the investment community.
[Operator Instructions] One moment for first question. And that will come from Robert Fishman from MoffettNathanson.
After deciding on passing on the WWE renewal, can you share anything specific on how you evaluated the ROI of the deal in the context of driving higher advertising and affiliate fee revenue? And then maybe just more broadly, can you discuss, whether you expect to see any impact on future sports right negotiation, if the Disney, Charter renewal impacts the industry rate of cord cutting or affiliate fee growth going forward?
Rob, there's a lot in there. So let me unpack it bit by bit and if I -- I hope I don't miss anything. So how we -- I think we've talked about this before, but how we analyze the WWE renewal, and we look at all of our sports portfolio in the same way and on all new rights, opportunities are for new rights in the same way. We -- on the base of analyst -- analysis, sorry. We on both an advertising point of view, we were not hitting the advertising numbers, due to the audience of the WWE to make return for our return on investment to be above the levels that we would accept. But also we didn't attribute enough significant retransmission revenue to WWE either, so it made sense for us to move on from them. They've been a great partner for many years.
The next question is from Ben Swinburne from Morgan Stanley.
My one question is on sort of unlocking value, although it does immediately have to spend 2 pieces that might be connected, I guess first -- it's a confession. I wanted to ask about sports and Tubi. So arguably, the popularity of sports, particularly football and even more particularly college football, has probably never been higher. I mean your college rights are probably more valuable today than ever. I'm just wondering if you guys have ideas on capitalizing and maximizing the return on those rights. Beyond the kind of stuff we always think about was advertising on the live rights and retrans fees.
No that's fine. I think the best way I can answer both questions sort of with one answer, I suppose, which is the value -- you're 1,000% right, college football has never been more popular. It's rating extremely well. And 1 of the things we haven't talked about is, frankly, advertisers have found it. Advertisers are pouring in to call triple with tremendous rates and with tremendous appetite for volume because they can see the value in this audience.
And that's from Jessica Reif Ehrlich from Bank of America Securities.
First of all, I want to say, I really appreciate your introductory comments regarding news reporting and of course, about your father, who was -- is definitely one of a kind. But my question, I guess, 2 part 2 as usual from all of us. First on advertising, can you give us your outlook for political advertising and what the current tone of sports advertising is. We know the general marketing still seems pretty tepid.
So let me start with advertising. So the -- we also hear and understand that the advertising market appears to be I use the word mixed, right, or sort of unsettled. However, we are not seeing that to the same extent due to our focus on sports and news. So let me start with sports, where we're seeing high demand around our NFL and we just discussed our cost football schedule particularly in the national sort of market, pharmaceuticals, auto, quick service restaurants and CPG categories have all been quite active and I think importantly our pricing has been added premium to our modest premium, but we are pricing above our [ upfront ] which certainly in a sports category, the market remains healthy. This will be somewhat tampered by post season baseball, including their conclusion of their world series last night.
The next question is from John Hodulik from UBS.
First, can we just get an update on the affiliate renewal process? I think you guys had said that it would be more weighted on the TV side, but I think a lot of the new agreements kick in, in January. So just any color on the trends we should see there.
Thanks, John. On affiliate renewal, let me start with the big picture and Steve can talk to any of the numbers going forward, or not depending on -- but look, the main thing on affiliate renewal is we -- really due to our focus strategy, our focus on our core brands. Also, I think our focus on being good partners with our distributors and wanting their businesses to succeed, because frankly, from a FOX perspective, the Cable bundle, Cable distribution or Pay TV distribution remains our largest and really the most important revenue stream.
Yes. So John, just to reinforce Lachlan's point, we had -- just over 1/3 of our distribution renewals, due this fiscal year, and we're virtually through all of that. So that's -- and as Lachlan mentioned, we've achieved our pricing objectives against those renewals, which goes to, a, the fact that we haven't gone back with any distributors and the fact that we've been able to achieve objectives. And assuming the distributors are also happy those renewals.
And that question will come from the line of Phil Cusick from JPMorgan.
A lot has been asked, but Lachlan, thinking about your comments on DR and recognizing that some of those upfront issues hopefully fade. But it makes me curious about your view on the future of the linear video ad landscape you have Tubi, which allows you to benefit from the shift to digital. But do you think we've reached a tipping point where linear video advertising is it secular, not just cyclical decline?
The short answer is ,we got to, you have to, I think, break it up by category, right? And so if we look at sports and news, there's no sign of a slowdown in sort of demand for the really incredible and unique reach that those platforms deliver our advertising clients.
At this point, we are out of time. But if you have any further questions, please give me or Dan Carey a call. Thank you once again for joining today.
Thank you, everyone. Thank you.
Ladies and gentlemen, that does conclude your conference call for today. Thank you for using AT&T Executive Teleconference. You may now disconnect.