Yesterday, 21st Century Fox announced its fiscal Q1 2017 financial results. Afterward, the company held an earnings call featuring Executive Chairman Lachlan Murdoch, CEO James Murdoch and CFO John Nallen. It was an opportunity for 21CF to discuss a wide range of topics, including its cable business, its growth strategy, its discipline with investments and the strength of FOX News.
Here are some of the key comments from Lachlan and James on the call:
On 21CF’s cable business: “Overall in cable world, and of particular note, we added overall domestic paid TV subscribers this past quarter. We’re particularly excited by all the new DMVPD services that are emerging in the marketplace. Hulu is executing against its development plan and is on track to launch its new DMVPD service early next year as we have discussed previously. Our major brands are included in every DMVPD service that has emerged with affiliate fees that are absolutely on par with the per sub affiliate fees we get from traditional paid TV distributors.” – Lachlan
On the state of the overall business: “First, I want to reiterate that our strategy focused on big brands that matter for customers – an investment on-screen that clearly differentiates and earns attention, and a program of work to make our programming and products more available, not less – is paying dividends. Furthermore, the changes we’ve made to the organization are delivering a leaner and more capable company, and the team continues to move at a very fast pace.” – James
On 21CF’s growth strategy: “Importantly, the strategic focus we put on our brands across our leadership in entertainment, news and sports positions us well for the transition to IP delivery. We have a product focus that is as intense as it is unique and we’re seeing the benefits of all our efforts and investments in that area. Fundamentally, breakout content is what drives up the value of our brands. This is at the center of our growth strategy.” – Lachlan
“Fundamentally, breakout content is what drives up the value of our brands. This is at the center of our growth strategy.” – 21CF Executive Chairman Lachlan Murdoch
On the growth of STAR India’s mobile video platform, hotstar: “Between June and October, average watch time doubled on the platform, and minutes viewed is currently more than double all the mainstream competitors combined and more than 10 times the watch time of Netflix, which launched in India earlier this year.” – James
On one of the benefits of going more direct to the consumer: “One of the exciting things is ad innovation. So having that closer relationship with customers or working with partners like the DMVPDs and Hulu going forward, where we can innovate in terms of advertising, we can reduce loads, we have much more capability there, we think is a real positive for the business.” – James
On discipline with investments: “This is an industry and a business that thrives on scale. But at the same time, scale for scale’s sake is not something that we think should be pursued. We like the business mix that we have. We’ve really simplified the operating model over the last number of years and invested in these big-scale brands that really operate at the top of their games all over the world…And I would say, as I said the last quarter, we really try to be very, very disciplined about this. We have a very high hurdle in terms of how we think about investment and how we think about doing things. We clearly passed on a lot of opportunities [where] the price was just not going to deliver the value for shareholders that we think we want to deliver.” – James
“This is an industry and a business that thrives on scale. But at the same time, scale for scale’s sake is not something that we think should be pursued.” – 21CF CEO James Murdoch
On 21CF’s film business: “Under the leadership of Stacy Snider, the film studio has bolstered its team by attracting key senior executive talent, spend and marketing, international distribution, business affairs and licensing. And together they are well focused on charting the studio’s future course.” – Lachlan
On the inclusion of 21CF brands in DMVPDs: “We certainly anticipate…for our major brands to be part of all of these emerging DMVPDs, all the major ones, anyway… [We] certainly anticipate the inclusion of these brands, and that’s why we have been investing in these brands and it’s why we have really adopted the strategy that we have around these brands that matter for customers. And I think, seeing the early growth now in these new DMVPD entrants that we see in this quarter, we really think it is an exciting moment of growth over the next number of years, as this downstream competition really increases with lower barriers to entry for these players and at price points that do make a difference for customers.” – James
On the continued strength of FOX News: “I think there is absolutely growth there in affiliate fees. The channel is as strong as it has ever been and just completed another quarter of leadership and record viewing. Obviously we expect the ratings and stuff like that to sort of come off after the election – that usually happens and then comes back. But we feel that the product has an enormous amount of value to customers and that’s been reflected in our ability to continually grow those affiliate fees. And we do have some renewals in the near term on FOX News that are pretty old contracts, so merely leveling up to the market creates growth opportunity there. So there’s no real change in strategy there and from time to time, certainly, there are leadership changes and other things like that, on the affiliate side as well, but nothing that would change the basic trajectory and course that we’re on.” – James
