November 7, 2018
Twenty-First Century Fox Nov. 7 disclosed a first-quarter (ended Sept. 30) equity loss of $114 million regarding its 30% ownership stake in Hulu. The loss represented an 84% increase from an equity loss of $62 million during the previous-year period.
Hulu, which is co-owned by Disney, Comcast and WarnerMedia, continues to generate significant losses on paper to its corporate owners, who license hundreds of millions of dollars in content to the 20+ million subscriber over-the-top video service.
While Hulu is nominally losing several billion dollars per year, its “losses” essentially amount to the excess it pays to its four sponsors over the revenues it generates, according to Wedbush Securities media analyst Michael Pachter.
“If the four [corporate] sponsors find a way to grow Hulu’s subscriber base, it should be able to achieve breakeven, and it should manage to gain market share from Netflix,” Pachter wrote in a recent note.
The analyst expects content from Disney, Fox, Universal, and Warner to be largely unavailable to Netflix going forward, leaving the SVOD pioneer trying to buy content from Sony, Paramount, Lionsgate, MGM, and smaller studios.
“Ultimately, we expect Hulu to become a formidable competitor to Netflix, particularly should Disney and Warner Bros. layer their own streaming offerings as premium additions to a basic Hulu subscription,” Pachter wrote.
Meanwhile, 20thCentury Fox Film (which includes 20thCentury Fox Home Entertainment) reported operating income of $277 million, an 8% increase from the $256 million reported in the prior-year quarter. The increase reflected higher contributions from the television production studio led by higher SVOD licensing of animated product.
Quarterly revenue decreased 7% to $1.82 billion, primarily reflecting lower theatrical revenue from a lower volume and mix of films released in the current quarter partially offset by higher SVOD revenue at the television production studio.
“We continue to deliver against our growth plan even as we make important strides toward completing our Disney transaction and launching Fox in the first half of 2019,” executive chairmen Rupert Murdoch and his son Lachlan said in a statement.
Separately, Fox posted a $147 million equity gain from its 39% stake in British satellite TV operator Sky – up 34% from an equity gain of $110 million last year. Fox recently sold much of its Sky stake to Comcast.
Finally, the European Commission approved Disney’s acquisition of 20thCentury Fox provided it sells its stake in A&E channels (History, H2, Blaze, Lifetime, Crime + Investigation) distributed overseas.
“The commission’s decision is conditional upon full compliance with the commitments,” the EC said in a statement.