On Monday, 10 March 2025, Fox Corp (NASDAQ: FOXA) participated in the 33rd Annual Deutsche Bank Media, Internet & Telecom Conference. The company highlighted its robust performance, driven by strong advertising revenue and the growth of its AVOD service, Tubi. However, Fox expressed concerns about market undervaluation of Tubi’s potential. The strategic focus on capital allocation and upcoming launches were also discussed.
Key Takeaways
- Fox reported strong advertising revenue across news, sports, and local businesses.
- Tubi is on track to generate over $1 billion in revenue this fiscal year.
- The company plans to launch a D2C streaming service targeting cord-cutters.
- Fox is prioritizing organic investments and shareholder returns.
- The company is satisfied with its current sports rights but is open to new opportunities.
Financial Results
- Advertising Revenue:
- Significant growth in news, sports, and local business sectors.
- Fox News pricing increased by 50% from upfront; doctor advertising up 28% year-on-year.
- Affiliate Renewals:
- 25% of the base renewed, with fiscal year 2025 renewals complete.
- Tubi:
- Revenue on track to exceed $1 billion this fiscal year.
- Quarterly revenue growth: Q1 up 19%, Q2 up 31%, Q3 pacing at or above Q2 levels.
- Targeting margins of 20-25% at maturity.
- Capital Allocation:
- $6 billion delivered via buybacks over six years; over $1 billion in dividends.
- Subscriber Trends:
- Subscriber erosion improved: Q4 down 8.5%, Q1 down 7.8%, Q2 down 7%.
- Fox News Viewing:
- Q3 viewing increased by 50% from the previous year.
Operational Updates
- Affiliate Renewals:
- Achieved pricing and packaging objectives for 2025 renewals.
- Fox News Digital:
- Foxnews.com had over 110 million unique visitors in January.
- Leading news brand on YouTube, with 2.5 times the audience of the next competitor.
- Tubi:
- 97 million monthly active users, with 65% being cord-cutters.
- Less than six minutes of ads per hour; 97% consumption is video on demand.
- D2C Streaming Service:
- Launch expected before the football season, targeting millions of subscribers in 3-5 years.
- Sports Rights:
- Added MotoGP, IndyCar, and Liv to its portfolio.
Future Outlook
- Advertising:
- Anticipating a healthy upfront market with high single-digit increases in entertainment and sports.
- Tubi:
- Investment peaked in fiscal year 2024, moderating in subsequent years.
- D2C Streaming Service:
- Will not offer exclusive content; bundled with linear service for existing customers.
- Capital Allocation:
- Focus on organic investment, aligned M&A, and capital returns.
- Plan to address a $600 million debt maturity.
Q&A Highlights
- Skinny Bundles:
- Fox views skinny bundles positively, focusing on live sports and news.
- Fox News:
- Attracting new advertisers, especially in pharma, auto, and travel sectors.
- Tubi’s Moat:
- Tubi’s strengths lie in content, user experience, and scale.
- NFL Rights:
- Fox holds a termination right with the NFL post-2029 season.
- Local Sports:
- No interest in re-entering the regional sports network business.
In conclusion, Fox’s presentation at the conference showcased a strong strategic direction, with significant growth prospects for Tubi and a forthcoming D2C service. For further details, readers are encouraged to refer to the full transcript.
Full transcript - 33rd Annual Deutsche Bank Media, Internet & Telecom Conference:
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: Okay. Good morning, everyone. We’re going to get started here or restarted, I should say. So I’m Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst. I’m thrilled to introduce John Nallen, who’s the President and Chief Operating Officer of Fox.
John, welcome and thanks for joining us.
John Nallen, President and Chief Operating Officer, Fox: Thanks, Brian. Thanks for having us. Really appreciate it.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: Very welcome. So Fox has been the second best performing stock in all of media over the past year, up 90%. Maybe to start off, you could talk about some of the highlights and accomplishments over the past twelve months and touch on what’s ahead for Fox.
John Nallen, President and Chief Operating Officer, Fox: So I don’t want to spend a lot of time going backwards, but it’s probably a good launch pad for the rest of the discussion. But if you look over the last year and even up to where we are now, starting with advertising, it’s been really strong for Fox across news, sports and our local business. On the affiliate side, we renewed about 25% of our base during that last twelve months. You didn’t hear a lot of noise and it was quiet during that whole renewal. On screen, it was a really good twelve months for us.
If you think from a news, both national and local perspective, we had the election cycle and a lot of both national local, national, international news keeping our national Fox News and our local stations busy. Sports was particularly active over the last year. We had a great World Series. College football was good. It wasn’t great for us.
It was a good season. But the NFL culminated with the Super Bowl we had just a couple of weeks ago with an $800,000,000 gross pay for us. So it was strong. 2B continued. I’m sure we’ll spend some time on that, going from strength to strength over the last year, breaking the $1,000,000,000 run rate top line for us.
And then from a corporate standpoint, we’ve been talking about this for as many conferences as you and I have sat through Brian, but we finally announced our D2C initiative a few weeks ago during the earnings release. We continued, I think, to be good capital allocators over the history of Fox and certainly over the last year with returns to shareholders. And the stock to your point, I think there’s finally a recognition of the strategy, the focus strategy of Fox, the focus on live news, on live sport and some of the hidden assets that we call two d wagering, a lot, Tax Shield. So yes, all in all, it’s been a good twelve months, but our focus is really looking forward now and what’s going on there.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: Okay. Great. It’s a great overview. Maybe we’ll start with affiliate. I think one of the surprises we’ve seen over the past couple of quarters has been just the improvement in the rate of pay TV subscriber declines.
What do you think is possible from a subscriber volume improvement perspective, just given the changes we’re seeing in pay TV packaging, Charter’s bundle of streaming services now included with pay TV, which I think could expand to other MVPDs?
John Nallen, President and Chief Operating Officer, Fox: Yes. When we look, as I said, we did 25% of the base was renewed in the last year. We’re done for fiscal twenty twenty five. All of the renewals are finished. So we don’t have anything ahead of us in the current year.
And as I look at it from a subscriber erosion standpoint, if you look at our Q4, our Q1 and our Q2 fiscal, we were down 8.5, down 7.8%, down 7%. So the trend is really moving in the right direction and that’s before the announcement or introduction of the skinny bundles or as Lachlan calls them the jack bundles that are in the market. So the trend was moving is moving in the right direction and I particularly more so than my colleagues are more are very encouraged about the introduction of the skinny bundles. Take DIRECTV, Comcast and Fubo have put three products into the market. They’re priced in the $50 to $70 range.
Importantly, we all of our all the FOX product is in every one of those skinny bundles. And again, the focus of these skinny bundles is live sports and news. That’s what we do and that’s the encouraging part. I do think the skinny bundles are a real positive. There’s finally innovation between the distributors and the content owners talking about this.
And I think that the rest of the distribution market will be offering skinny bundles. So it’s not just these three. It’s expanding. It will expand. It’s just contractual when each of these contracts renew that others, the big names that you all know will offer skinny bundles in the market.
So I think it’s finally a real positive toward erosion, ameliorating the erosion that we’ve had on the sub base. And those numbers I gave you were even before that. So it’s
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: a real positive for us. Yes. Okay. So encouraging. Staying on affiliate, you mentioned you’ve completed all the affiliate renewals for this year.
What did you achieve in those renewals? And maybe if you could talk about what the renewal cadence looks like going forward when that sort of restarts again?
John Nallen, President and Chief Operating Officer, Fox: So the two debates always in an affiliate renewal around pricing and packaging. That’s where all the noise is. And if you look at what happened in ’twenty five and as I said, we’re completely done now. We achieved all the objectives we were after in both of those areas, including the introduction of the skinny bundles. If you look at 26%, we have just a touch under 25% of our base renewing at that point in time.
But importantly, they are of the same vintage as ’24 and ’25. So we’re not breaking new ground from a pricing or packaging standpoint. We have market prices, market packaging for our product in the market. And as we talk to distributors who are renewing in ’twenty six, it’s of the same ilk
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: as we had in prior years.
John Nallen, President and Chief Operating Officer, Fox: When you look beyond that to 2027 and 2028, we get back to a cadence of about a third or a touch more than a third of our base renewing in those periods. Skinny bundles will be even more important in those years, because I think by then everybody will be offering the skinny bundles. And as we look forward and we stay in our lane with the focused portfolio that we have, I think these renewals will be quite successful for us as well.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: Maybe if we could talk about Fox News for a few minutes. What are you seeing in national news advertising? Fox News ratings have only strengthened since the election and you’ve talked about new national advertisers coming to Fox News. What are you seeing there?
John Nallen, President and Chief Operating Officer, Fox: So it’s hard to talk about advertising at Fox News without talking about share and strength of viewing, because it’s just gone from strength to strength. You look at Q3 to date, we’re up 50% in viewing from where we were a year ago. If you look at January as an example, we were second to NBC in prime time weekday. February, we’re second to CBS. So in many ways, Fox News is the fifth broadcast network now when you look at competition on a prime time basis.
Weekend is quite different because of sports calendar that happens during that. But its share in news varies between two thirds and 70% now. So from a competitive standpoint, we’re really looking to the broadcast market more than we’re looking to the cable market just because of those kind of statistics that we have. But a lot of advertisers have come to the Fox News media platform, particularly since the election, the inauguration, just by way of example across pharma, auto and travel, we have nine of the top 10 advertisers in America on Fox News across retail and financial, eight of the top 10 are on Fox News. So it’s a complete sea change from where we were certainly twenty four months ago to where the viewing is in Fox News and I just think it continues.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: How about on the rating side, how sustainable do you think the Fox News ratings are?
John Nallen, President and Chief Operating Officer, Fox: You’d have to tell me about this administration and how sustainable it is. I mean, the President has two press conferences a day. And the amount of news that’s coming out of this is just shocking, the amount of viewing. An example I’ll give you is last week the equivalent of the State of the Union address, Fox News had 10,000,000 viewers for it, which was if you look at ABC and CBS combined, we beat that combination. So from a sustainability standpoint, I certainly think the next three and three quarter years will be a really sustainable amount of news and viewing on the Fox News platform.
I think most people in
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: the room are hoping a little less on a daily basis given these markets.
John Nallen, President and Chief Operating Officer, Fox: Well, we have particularly given this morning the movement in the markets.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: How is demand from the new advertisers that you mentioned impacting CPMs at the network? Seems like it probably should be pretty positive.
John Nallen, President and Chief Operating Officer, Fox: Yes, it is. If you look, we brought about 125 new advertisers to Fox News since the election. And the demand along the from a viewing standpoint is what I outlined. From a pricing standpoint, it really is pretty significant. Upfront is not huge for news in any for any news category, but use it as a just a barometer for the moment, because there is some news that’s booked there.
Our pricing is up 50% from upfront, 53% to be exact where we are in the market. From a Doctor standpoint, which is an important part of Fox News’ advertising, year on year, we’re up 28%. So, I said it’s hard to talk about advertising at Fox News without talking about the share and the viewing and all of that has really come back to pricing. Yeah. Okay.
That’s helpful.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: I think that the past year, as you mentioned, has proven that Fox News is strong from a linear perspective. But can you talk about what Fox News is doing on the digital side? And how does your recently announced acquisition of Red Sea fit into your strategy? What are your plans around the business?
John Nallen, President and Chief Operating Officer, Fox: It’s interesting because when we talk about Fox News, virtually all the time people are focused on the linear network. And the digital part of Fox News is a really important element to what we call Fox News Media, the wider group of inside of Fox News. And one of the secrets of Fox News is a massive digital site that almost feels like one point zero. It’s foxnews.com. In January, we had over 110 uniques come to foxnews.com.
And it does feel like one point zero, but it’s where people post leading into the election, what we saw was that people either supplemented their news consumption with digital or solely sourced their news consumption with digital, beit.com, social, whatever. So what we see in foxnews.com, really healthy engagement. On YouTube, in January, Fox News had something like four ten million views. It was 2.5 times the next news brand inside of YouTube. It’s the number one news brand on YouTube, which is again people don’t appreciate the digital side of Fox News.
January also was a really historic high for Fox News across social media. So whether it was Instagram, TikTok, X, Facebook, it was the best that Fox News has ever done from a consumption standpoint. So, they said in the opening, the best kept secret about Fox News is the digital side where there is really significant consumption happening.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: Maybe we could talk for a second about advertising more broadly. So you touched on Fox News advertising trends. How would you describe current ad trends across the networks, the stations as well as Tubi?
John Nallen, President and Chief Operating Officer, Fox: So I probably won’t spend a lot of time talking about the verticals because Steve and Lachlan did a thorough job if you go back to the earnings release going through each of the verticals. But around this time of year, this conference, we start looking toward the upfront. Even though physically we have our upfront held on the May 12, we really start planning toward it at this point in time. And the upfront is about two things, pricing and supply. And if you look from a pricing standpoint, all indications for us at least are for a healthy upfront.
You mentioned what Fox News is achieving from a pricing standpoint. Across entertainment and sports, we are up high single digits above upfront and our cancellations are at historic lows. So that bodes well from a pricing standpoint looking toward the upfront. From a supply standpoint, there’s only two big events that are going to add linear inventory into the upfront and one of those hours, the World Cup and then the Winter Olympics that NBC has across. Absent that from a linear perspective, there’s not a ton of new inventory coming in.
That’s not the case in digital. In digital, we’re going to see inventory increases from this natural growth of the SVOD and AVOD participants, including of course Tubi. And you’ve now got product on digital that you didn’t have a year ago, like the NBA on P Doc and Amazon. And you’ve got ESPN flagship that’s coming into the market as well, which will be more digital inventory that’s going to be sold. So I don’t see pressure.
I think the market will absorb the supply and 2B in particular could be a real player in it. But it is more supply that you’re going to see in the digital side. And there could be some headwinds generally as you look at it. Clearly, what we’re talking about last week and over the weekend with tariffs in the area of auto and retail is question mark, does that impact what’s going on? Pharma was a question for some time people had raised around regulation.
I don’t see it as big that to be a particularly big issue. And importantly, it’s a big pharma consumer pharma year. There is over 70 new consumer drugs coming to market in the upcoming year versus 50 that were in market currently. So there’s from a demand standpoint, I’m sorry for all of you that watched commercials for pharma, but there will be more of them coming out in the upcoming year. So anyway, the punch line of all of that is the upfront for us looks to be a healthy upfront.
I don’t know across other peers how they’re looking at it, but certainly we’re looking at it quite positively. Okay.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: Maybe we could talk a little more about Tubi, which you touched on. So Tubi is on track to generate more than $1,000,000,000 in revenue this fiscal year. I think that’s been our model anyway. What’s the path forward for Tubi over the next few years? What do you need to do to continue to grow the business while at the same time turning it profitable because you have talked about turning profitable in a couple
John Nallen, President and Chief Operating Officer, Fox: of years. Yes, very important. So now we’ve said publicly that 2B has now broken the $1,000,000,000 run rate for us. So it’s a milestone, but only one of many milestones that we’ll have. If you look at the growth of 2B alone in Q1, we were up 19% in revenue.
In Q2, we were up 31% in revenue. Now that had some political in side of it. Ex political Q3 so far, we’re pacing at or above where we were in Q2. So the trends for 2B from a top line perspective are all very encouraging. The investment that we’ve made into 2B from any measurement against an AVOD or SVOD product are modest.
We peaked our investment in it fiscal twenty twenty four and we’ve been moderating our investment into 2B in 2025 and it will moderate yet again in 2026. Percent. This business will achieve margins at maturity at somewhere in the 20%, twenty five % range. And it will be a real growth engine for Fox. I mean, this will be a big grower.
The rest of our verticals, we feel very strong about how they’ll grow in line with the market. But 2B’s growth is a bit outsize. 2B is also my frustration. I don’t mean that from a business standpoint to the people that are running to. My frustration inside the value of Fox that don’t think we’re getting the appropriate or the full value for the kind of growth that 2B has ahead of it or has achieved inside the stock.
Some market participants just capitalize our television segment. By doing that, Tubi has got a negative value inside the stock. So without pulling out Tubi and separately analyzing it, comparing it
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: on some
John Nallen, President and Chief Operating Officer, Fox: of the parts basis to gears or other SVOD platforms, I think is a, again, is a frustration for me at least inside the stock. Okay.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: So new segmentation next quarter, it sounds like. How maybe like related to that, how sustainable is 2B as a business, just given the number of other free ad supported streaming services in the market? What is the moat around the business? How is it differentiated? I think that’s people would love to hear more about that from your perspective.
John Nallen, President and Chief Operating Officer, Fox: Yes. I think 2B has got probably the three things that are the moat for 2B or the what sets it apart are content, its user experience and its scale. And if you take each one of those from a content perspective, you’ve heard these stats before, but there’s over 275,000,
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: sorry,
John Nallen, President and Chief Operating Officer, Fox: episodes and films inside of the platform. There’s a great user experience in the fact that the personalization engine, Tubi started as a tech company, didn’t start as a television company. So the personalization engine for Tubi is really strong for consumers. The experience also for viewers is better than I think some of the competitors, because there’s less than six minutes of ads or in an hour for anyone consuming and substantially less. And it’s just a good platform that way.
From a scale standpoint, there’s 97,000,000 monthly active users on this platform. And 65% of them are cordless. So from an attraction of advertisers to try to access a market to be accessed as a market that’s been very difficult for them to get to. And clearly, I can’t get to from a linear perspective because they’re cordless, right? So I think those three factors, content, user experience, scale are the three factors that we focus on in growing 2b into the mode that I described earlier from a profit standpoint.
Okay, great.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: I wanted to ask you also about just Tubi’s ad sales model. How much of Tubi’s ad inventory is sold programmatically versus through sales force? And how integrated are Tubi sales with the TV side of the business?
John Nallen, President and Chief Operating Officer, Fox: So whether it’s just thinking about this, whether it’s SVOD or AVOD, what’s vital to advertisers in those platforms is data, where they can get much more data in those environments than you can in a linear than you ever could in a linear environment. So therefore programmatic is important to it. And we saw this in the election cycle where the 2B did attract a lot more advertising than we expected, because they were able to target for campaigns or issues into certain markets and certain communities advertising. Importantly, Toobie is a VOD service. And by that, I mean, it’s not a fast service.
97% of the consumption on Tubi is video on demand, not jumping into a fast set of fast channels. So over just over half of the revenue that we generate on 2B is programmatic. The balance is direct sales, which is right out of our sales group that and 2B is an important part, therefore, of the upfront to us. Different than what I described on Fox News where very little sales happen in the upfront, 2B has a substantial amount of direct sales happening in the upfront. And therefore, if you watched our upfront last year or you see our upfront this year, 2B is center stage, where our direct selling.
So it’s about balance between programmatic and direct selling, a touch more on the programmatic side.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: Okay. That’s helpful. Maybe we could talk about your new direct to consumer service, so finally getting to that.
John Nallen, President and Chief Operating Officer, Fox: Finally, we get a chance to talk about
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: that after all these years. All right. So you recently announced that you’ll be launching the SPOC streaming service. It would be great to hear your thoughts on what segments of the market you’ll target, which content you think will primarily drive new subscriptions and really any other details that you can give around the service?
John Nallen, President and Chief Operating Officer, Fox: So the one place that we won’t be offering the D2C service or competing with more importantly is the traditional bundle, the traditional distributors. From a pricing standpoint, we’re going to respect the wholesale arrangements we have with the current distributors. So you won’t see us competing from a pricing standpoint with the traditional distributors. From a content standpoint, there will be nothing exclusive on it. So whatever the traditional distributors are offering their consumers, we’ll be offering the cordless community, which is where we’re pointed to on this B2C service.
And all the marketing and promo that we as we look toward it will be addressed toward the cordless community. And the worst thing we could do is take a consumer from the traditional side of any of our big partners and move them out and bring them into D2C. So our target market and therefore our aspirations for the size of the platform to us from a subscriber standpoint are pretty modest. That mid single digit millions over the next three to five years and that’s about what we’re targeting. Okay, great.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: Could you give us a little more on just how you plan to go to market and sell it from a marketing distribution standpoint?
John Nallen, President and Chief Operating Officer, Fox: Yes. I can’t believe this product will stand on its own. By that I mean, this will have to be bundled with other products by a consumer, self bundled. Alternatively, we may partner with other streamers who are in the market to offer a bundle to consumers at some price point that’s a little different than if you offered it unto itself. But again, our focus is everything outside of traditional.
Pete Distad has come to join us. Those of you that may not know, he ran the venue project for us that we shut down about a month ago. He has a history at Hulu and Apple and he will launch that B2C service for us. You should expect it to be in the market before football season this year. So therefore, the promo, the digital promotions that will happen in marketing will happen in the summer in advance of the autumn launch of it.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: Just maybe a follow-up there. When you talk about partnering or bundling with others, other streaming services or more distributors, whether it’s a wireless distributor or a broadband distributor?
John Nallen, President and Chief Operating Officer, Fox: So a couple of couple there. First, and I should have made this clear. If you’re a linear customer of one of our partners, you will get this product for nothing. This will be part of your linear service. So if you’re in your linear service, you’re in a skinny bundle and you have Fox News and Fox Sports, you will authenticate into the service as part of your subscription over there to access Fox News and Fox Sports.
And that helps that traditional ecosystem retain and avoid churn. From a bundling standpoint, no, I expect that other streamers we would bundle with. So that not integrate with, which our service won’t exist inside of another service, but it will sit alongside other services. So that if you’re an NFL fan and you’re in the cordless world and you’re trying to put together an NFL package, you’ll need a couple of other services to join in to get it done and we will likely partner with that. Okay.
That makes sense.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: How should we be thinking about losses early on to launch the service? What incremental costs will there be to support it?
John Nallen, President and Chief Operating Officer, Fox: Well, if I go back and comment on the SVOD losses that other peers have incurred, it’s because they’ve added exclusive and original content to their platforms. We’re not doing that. So we currently have the rights and we don’t need to pay any more for the rights that we have for all of the product that will be on our D2C. So that’s news or sports or local, those rights exist. They were paid for inside of contracts that have been negotiated.
So I don’t particularly the content is not an issue. From a tech standpoint, we had kept warm the tech stack for D2C ever since Fox started nearly six years ago to the date. But we’ve augmented that with the venue platform, where each of the partners had access to the platform. So from a tech standpoint, again, there’s not going to be big incremental costs. So most of the costs will go toward marketing and promo to launch the product.
Our intent is there will be a margin and it will be a profitable platform after we launch, but there will be some launch costs associated with it, but nothing along the lines of what you saw the biggest spot streams. Okay. That makes sense.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: Maybe moving on to just sports and content a little bit. On the sports side, boxes assembled, portfolio of really premium sports rights. I mean, you’ve got the best NFL package, you’ve got Big Ten, Major League Baseball, then you’ve got rights to NASCAR, World Cup and then more recently you’ve added Liv and IndyCar, MotoGP. Is
John Nallen, President and Chief Operating Officer, Fox: this
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: current sports rights portfolio complete? Is there anything you want to add if the opportunity came up? And if so, how would you go about evaluating that opportunity?
John Nallen, President and Chief Operating Officer, Fox: It’s not really that much available to be honest. You mentioned three that just came on board in the last month or so with MotoGP, IndyCar and Liv. Liv, the first event we had was on Super Bowl weekend and last week was the first event we had for IndyCar. So there’s not from the big sports standpoint, obviously, they’re all contracted. I think what will come to market in some form will be some baseball product, particularly after baseball and ESPN announced that after the season their relationship would change.
So, baseball has been a great product for us and we’ll probably look at that and look at it in the context of how it makes sense to us overall. But absent that from a product standpoint, there’s not a lot out there that we’d be attracted to at this point. Okay.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: I’d say the worst kept secret in sports is that the NFL has this clause to opt out of the current media rights contracts after the 2018 season. 2019 season. 2019 season, sorry. Two questions here. So I guess one, how do you make sure you retain those rights?
And two, how do you generate the incremental revenue to make the economics work at a higher price tag?
John Nallen, President and Chief Operating Officer, Fox: I don’t see how it’s been and you’re right about it, but how it’s been worst kept secret, because in March of ’twenty one, when we announced the new deal with the NFL, we specifically put in our press release that the NFL had a termination right after the ’twenty nine season. So ’thirty, ’thirty one, ’thirty two and ’thirty three were optional by the NFL. We’re firm through the ’29 season. And then after the thirty Super Bowl, they have the right to terminate the contract. But we’re firm through ’29.
So we’ve got a great robust product there. I have no idea whether the NFL will invoke that termination right or change the character, change the games, whatever. At this moment, I have no idea. But what I do know is that in any negotiation we’ve had with the NFL, the discussion around it happens well before the termination date. So in prior pre contracts we’ve had with the NFL, the discussion is two years ahead of time or eighteen months ahead of time.
So I fully expect that any discussion around those option years will happen well in advance of the ’thirty Super Bowl, which is under contract. Look, the NFL is vitally important to us. We provide them with great production quality, the ability to do national and regional games. We give them the reach for broadcast that they can’t get elsewhere. So, we’ll evaluate whatever it is, if there is something in those option years, focus principally on our two top line revenue.
The 50% of our revenue today is advertising, 50% is affiliate. And those are the drivers behind supporting virtually all of our businesses. With advertising being particularly important to our sports contracts and particularly to the NFL. So in evaluating it, that will be an important element for us. I mean, you have to look today, counting it up over the weekend, the NFL has eight partners, different platforms, between the broadcasters, the streamers and Sunday ticket.
And that’s a lot of partners to be involved with. Yes.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: Okay. Sounds like we have at least three years before there’s even a conversation anyway. I
John Nallen, President and Chief Operating Officer, Fox: think that’s right. Okay.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: That’s really helpful. Do you see any opportunities for Fox in the disruption that’s taking place in local sports right now? Obviously, you were in the local sports business before, got out of it at probably the best time you could have, but now it seems like there may be some new opportunities.
John Nallen, President and Chief Operating Officer, Fox: I’m smiling because if it’s a question of are we interested in getting in the RSN business again, the answer is no. It wasn’t really that. Okay. Or even on a stealth basis, it’s not that way. But we have across our local stations, we have some contracts with NHL teams, WNBA teams.
We’ll look at ones that come up, but it’s if I look at big strategies for the company, that’s not one. Okay. So getting involved in local sports in a big way, basically taking on RSN contracts into the local stations. Shouldn’t expect to see us doing that. Okay.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: I didn’t know if there was anything new models that you were looking at potentially on the streaming side.
John Nallen, President and Chief Operating Officer, Fox: We started, like I said, with these NHL and WNBA contracts, but they’re modest. Yes. And I think that’s what you should expect to see from us. Okay.
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: We only have a little bit of time left. Maybe just to talk about capital allocation for a second. I mean, you’ve been a very prudent allocator of capital as you mentioned in the beginning, really ever since the divestment of assets to Disney or including that decision. What are your capital allocation priorities from here? You’ve got quite a bit of cash on the balance sheet.
Looks like net debt will be below one times by the end of this quarter.
John Nallen, President and Chief Operating Officer, Fox: So we talk about a lot of the assets of the company up until now. Another key asset of the company is our balance sheet. We are really focused on maintaining a pristine balance sheet and having firepower available to do something. And we did Red Sea and we talked about I forgot to comment on Red Sea, but it’s a modest acquisition that we made using our capital to get into an aligned industry. So you should see us basically as I mentioned to you in the past, refocuses of our capital allocation or organic investment, take 2B as an example of that, take B2C as an example of that, Fox Nation was an example of that.
Aligned M and A, we haven’t found anything really big there. If you look 2B was an example of that, Red Sea recently is an example of that. And then absent a good use of capital for those two in a moment or in a cycle, we look to capital returns. And we’ve delivered $6,000,000,000 by way of the buyback since Fox since the inception of Fox six years ago, little over $1,000,000,000 in dividends. And that’s really where the allocation of capital is.
We have a maturity coming up, a $600,000,000 debt maturity. We’ll use cash to make that maturity. And importantly, the way I look at our balance sheet, I look at gross debt and cash. The cash is intended to be deployed for growth of the enterprise and for shareholder returns and the gross debt is what I look at to see how levered we are. So some people look at net debt and Steve Tomcic, our CFO and I are really focused on the gross debt position and deploying cash for shareholder value.
Okay. It’s a
Brian Crafts, Deutsche Bank’s Media and Telecom Services Analyst, Deutsche Bank: great way to end it. John, thanks so much. Thank you, everyone. Thank you.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.