With its news and broadcast businesses continuing to stoke distribution and advertising revenue growth, Fox Corp. Chairman and CEO Lachlan Murdoch is happy to watch the streaming battle unfold from the sidelines.
Murdoch acknowledged the popularity of services, noting that 82% of U.S. households now have a subscription video-on-demand service and many are inclined to take three or four. However, he told investors at a March 10 conference that while Netflix Inc., Amazon.com Inc. and Disney+ sit atop the streaming ranks, there is a "gladiatorial kind of bloodshed" among multiple aspirants who are spending billions of dollars to secure that last position.
Fox, the executive noted, took itself out of the SVOD market when it sold all of its content libraries to Walt Disney Co. in a deal that closed in 2019.
"Now we're in the bleachers, watching this bloodshed that's going on," he said. "We're enjoying the show, and we're not spending billions and billions of dollars trying to chase the fourth position in SVOD."
As Fox approaches the three-year anniversary of it becoming a U.S.-centric, more news- and sports-focused company, Murdoch said the strategy is paying off.
FOX News Channel (US) generates some of the best margins in all of media.
"We are an essential part of the bundle," he said, noting almost 70% of the company's renewals with pay TV operators are coming up over the next two years ahead of the 2024 presidential election cycle. "It’s a tremendous opportunity for us to capture our audience share and ratings success and translate that to pricing."
FOX News Channel's license fee growth means the network now earns more from carriage fees than it does from advertising. Kagan, a media research group within S&P Global Market Intelligence, estimates the network will average $2.08 in monthly subscriber fees in 2022.
Still, Murdoch said advertising remains "very, very strong," as the channel is taking share from other news networks. "We now represent Middle America in a way that we have more Democrats and Independents watching Fox News than watch MSNBC (US) or CNN (US)," he said, without supplying specific numbers. "We have a broader array of advertisers than we've ever had before."
Moreover, the narrower business focus is helping Fox drive higher retransmission-consent fees from pay TV operators. Distributors pay retrans fees to broadcasters in exchange for permission to carry stations' local signals.
As a larger company, Fox had different corporate priorities, whether launching new cable networks, or trying to take care of FX (US), FXX (US), National Geographic Channel (US) and NatGeo Wild, all of which are now owned by Disney. As such, the leverage in renegotiations was spread around.
Now, Murdoch said Fox is able to say, "Look, the sports that we put on those stations deserve really the greatest retrans that they can achieve and that we can get in the industry." That will continue, he said, as Fox's strategy is to continue presenting live sports exclusively on FOX (US) and its stations.
Although Fox holds NFL streaming rights, it is not using them to drive subscribers to SVOD and ad-supported video-on-demand services.
"We think live sports on broadcast TV is still the greatest opportunity for us to monetize that engagement," he said.
Murdoch said the decision to punt on the NFL's "Thursday Night Football" package — which transfers to Amazon Prime Video a year early, beginning with the 2022-23 season — was the "right strategic move" in that the company was able to allocate more funds toward retaining its Sunday afternoon rights. He believes Fox will continue to drive retransmission rates based solely on its NFC package, highlighted by "America's Game of the Week," the most-watched show on linear TV.
As it heads into the upfront negotiating cycle, FOX Sports' strong fall lineup — featuring the NFL, college football and MLB's postseason and World Series — will be further bolstered by its coverage of the 2022 FIFA World Cup from Qatar in November and December and the Super Bowl on Feb. 12, 2023.
"We’re seeing strong demand in the upfront," Murdoch said. "It's a unique year for us."
Scatter pricing, he noted, has ranged from 20% to 25% above upfront inventory.
During the upfront, content providers look to sell linear and digital schedules to media agencies and their clients. In scatter, marketers secure buys closer to a program’s air date.