Yesterday, 21st Century Fox announced its fiscal year and Q4 2016 financial results. Afterward, the company held an earnings call featuring Executive Chairman Lachlan Murdoch, CEO James Murdoch and CFO John Nallen. The call was an opportunity for 21CF to discuss a wide range of topics, including the strength of the upfronts, its investment in storytelling, the future of FOX News, Indian programming on STAR and hotstar, the strength of its RSNs and its disdain for the status quo.
Here are some of the key comments from Lachlan and James on the call:
Lachlan Murdoch
On 21CF’s increased investment across its programming portfolio: “The dividends these investments are yielding are clear, as our core brands are fundamental to emerging streaming services like Sony and Sling TV, as well as Hulu’s forthcoming DMVPD service, which we expect will launch early next year. These services understand and value the emergence of the core bundle that our brands underpin. These and other emerging platforms will aggregate the best channels at reduced cost, offering unsurpassed user experience and economics to the consumer, while substantially increasing the number of distributors competing for our content.”
On FOX News’ future: “As we’ve seen, this year will be one of the best years, or the best year for FOX News ever. There’s no desire or need to shift the position that it has in the market. It’s a very successful business, and we are just undergoing a transition to new leadership that should not flag at all a transition of the underlying positioning or the strategy of the channels.”
On the upfronts and scatter market: “[We] couldn’t be happier with the strength of the upfronts. We’ve now fundamentally completed them all. It’s been the strongest upfront we’ve had in years. CPM pricing is in…the very high single digits, if you blend both the network and the cable businesses. And volume increases are up in the mid-single-digits. So we couldn’t be happier with them. Also to scatter market, it remains very strong, sort of mid-single digits, which I think goes to the strength of the advertising market today.”
James Murdoch
On the overall state of the company: “[It’s] an exciting time. A vibrant downstream market is emerging, which will help drive affiliate income and advertising innovation in the future. The overall TV advertising picture is healthy. Our creative output is strong, notwithstanding some disappointments at the film company. And lastly, though most importantly, the talent inside the businesses is tremendous and focused on delivering growth. In an era of constant change, our disdain for the status quo is our greatest strength.”
On continuing to improve customer access and experience: “[We] want to make our programming and products more available, not less. And we want to grow our capabilities, in monetizing these brands and programs with our partners. And we want to enable a customer experience for our viewers, that is truly simple and great. Our work with Hulu is a key part of this, as is our licensing to other MVPDs over-the-top or otherwise. We want to be flexible in our approach though, to deliver the best experience to customers, and the most value to our partners and shareholders.”
On 21CF’s investment in storytelling: “[We] do believe in investing upstream. We really believe in content assets. We think that there’s an incredible amount of demand for great storytelling around the world. [Where] we have been able to find inorganic opportunities, in that regard, that are at attractive returns for shareholders and for the Company, we’ve done that.”
On the use of company capital: “Now this past year, we’ve seen a flurry of M&A activity in the sector. And I want to be clear: Please pay attention to what we’ve chosen and choose not to do. While we never rule out opportunities to invest inorganically, we’ve set a high bar with respect to how we intend to use capital, and that bar will remain high.”
On Hulu’s consideration of customers when making programming choices: “I think it’s important to note that we do think that in this rebundling that’s going on, there’s significant demand for great television, there’s significant demand for a great customer experience. And we want to be able to deliver it at the lowest price that we can. Fundamentally, that limits Hulu’s ability, right, to just go and pay anything for a lot of programming. We have to focus on what’s the programming that really, really matters, and what’s going to drive consumption, and what are people going to love? So I think it will be, as I’ve described it before, kind of a core package, a core bundle there, and we want to have a great entry point for customers to come in.”
On what Indian consumers are watching on STAR India and hotstar: “It’s Indian scripted programming in multiple languages. And that’s been the most gratifying thing to see, the more consistent viewership of that. And that’s really a big, big part of the volume now. And the fastest growing part of the volume, on a consistent basis, is local Indian scripted programming, at a very high volume. So there’s a lot of shows, full series stacks, all of that sort of stuff, of the many, many thousands of hours that we produce there every year.”
On the strength of RSNs and their streaming opportunities: “Look, these are channels and brands that absolutely are enormously successful from a viewing perspective in their markets. If I look at all of the MLB teams in the first half of the season so far, I think 10 MLB teams were rated No. 1 in prime time in their markets on nights that they play, and half of those teams are a FOX RSN. We combine that with streaming opportunities, when we combine that with what we’re able to do in a sort of TV Everywhere type of environment, we think that’s one of their core value propositions to our MVPD partners, both existing MVPDs and future MVPDs.”
