CEO Lachlan Murdoch Says He Can’t Discuss Possible Fox/News Corp. Consolidation as Topic Dominates Earnings Call

With Wall Street scuttlebutt in high gear regarding a rumored reunification between Fox Corp. and News Corp., Lachlan Murdoch, CEO of the former, tried unsuccessfully to avoid the topic on the Nov. 1 fiscal call.

“I really can’t really comment on it because we don’t really know if there is a deal or will be a deal,” the co-heir apparent to the Rupert Murdoch-founded media company said when asked a possible transaction. “It’s impossible to comment on anything that doesn’t exist today. We have to be patient and wait to see what the outcome of the special committees’ discussions and processes [are].”

Rupert Murdoch split up News Corp. in 2013, spinning off the company’s legacy print and digital news operations, including The Wall Street Journal, under the flagship name, and organizing the entertainment assets under the 21st Century Fox banner. The latter changed to Fox Corp. in 2019 after Murdoch sold 21st Century Fox to Disney for $71 billion.

With media consolidation and scale an ever-present issue among analysts, the prospect of a reunification between Fox and News Corp. had both companies’ stock up in early morning trading.

“Scale, you have to be focused on it, right?” the younger Murdoch said. “Scale is important and what we’ve seen among our media peers over the last few years is our peers getting bigger through mergers and acquisitions. Scale lends flexibility in many ways. So, we continue to grow our business and look at M&A and be very disciplined how we look at it. Particularly over the next couple years when opportunities in the marketplace will emerge.”

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But to make any corporate re-merger between Fox and News Corp. a reality would take a majority of non-Murdoch family member shareholders’ approval. The Murdoch family reportedly owns a 40% controlling interest in Fox and News Corp. shares, respectively.

“As has been made public, News Corp. and Fox have established separate special committees to explore a potential accommodation,” Murdoch said. “For a transaction to proceed, it would need the approval of both committees and supportive vote by the majority of the minority affiliated shareholders of each company. The special committees have not made any determination at this time, and there can be no certainty the company will engage any transaction.”

Fox Nation Ups SVOD Subs 80% in FY 2022, Tubi Eyes 45% Ad Revenue Growth

Spurred in part by the brand’s strength across cable television, the Fox Nation subscription streaming video service saw an 80% increase in paid subscribers for the fiscal year ended June 30, based in part on strong conversion rates from free trial subscribers.

Parent Fox Corporation has not disclosed Nation subscriber numbers since launching the politically themed SVOD in 2018. A recent Kagan research report on cable news SVOD subscribers found that less than 5% of the 2,500 survey respondents subscribed to the platform.

Speaking on the Fox Corporation Aug. 10 fiscal call, CEO Lachlan Murdoch suggested the Fox Nation viewership gains reflected Fox News’ ongoing domination of the cable news market.

“Fox News was the only cable news network to post viewership gains in the fiscal year in the key 25-54-year-old demographic,” Murdoch said, adding that the network saw 30%+ viewership hikes among Latino and Asian demographics.

Separately, Murdoch said that Tubi, the Fox-owned ad-supported VOD and free ad-supported streaming television platform, realized a 45% growth in revenue over the past 12 months of the fiscal year, driven by a nearly 40% jump in monthly average users.

“Both metrics came in better than planned, reinforcing our decision to invest in this strategic asset,” Murdoch said. Fox acquired Tubi in 2020 for $440 million.

The executive said that Tubi users increased 34% in the fourth quarter, underscored by the addition of 25 linear channels on the platform, expanded the VOD library to more than 45,000 titles, and premiered 13 Tubi original programs.

“We will continue to invest judiciously in Tubi with our sights set on achieving $1 billion in revenue run rates in the next couple of years,” Murdoch said.

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For the fiscal year, Fox reported total revenue of $13.97 billion, an 8% increase from the $12.91 billion reported in the prior year. Advertising revenue increased 9%, primarily due to higher pricing at Fox Sports and Fox News Media, continued growth at Tubi and the return of a full schedule of live events at Fox Sports.

These advertising gains were partially offset by lower political advertising revenue. Other revenue increased 15%, primarily due to higher sports sublicensing revenue and Fox Nation subscription revenue, in addition to the impact of the consolidation of entertainment production companies at the television business segment, which include MarVista Entertainment, TMZ and Studio Ramsay Global.

Tubi Says ‘The Freak Brothers’ Most-Watched Program on Platform

Tubi, the AVOD/free ad-supported streaming television platform owned and operated by Fox Entertainment, said the premiere episode of original animated series “The Freak Brothers” was the most-watched program on the platform since its Nov. 14 debut.

Based on the cult underground comic series, and featuring the voices of Woody Harrelson, John Goodman, Tiffany Haddish and Pete Davidson, among others, “Brothers” delivered 80% more viewers than the next closest series on Tubi.

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“[The show] is a result of the synthesis between great content, stellar cast, superb marketing, new viewer engagement and organic viewership driven by our content personalization engine,” Adam Lewinson, chief content officer, said in a statement.

Since acquiring Tubi in 2020 for $440 million, Fox has doubled down on AVOD/FAST distribution as a less-expensive alternative to subscription streaming spearheaded by Netflix. Fox contends Tubi can soon generate upwards of $1 billion in annual advertising revenue as over-the-top video slowly supplants legacy pay-TV.

Indeed, Fox this month reported that first-quarter fiscal-year 2022 (ended Sept. 30) ad revenue increased 17% to $1.13 billion, from $969 million in the previous-year period.

CEO Lachlan Murdoch attributed the increase in part to the company’s focus on free ad-supported streaming TV and the return of a full schedule of live sports and more scripted programming compared with the postponements and cancellations in the prior year quarter as a result of the pandemic.

“We remain focused on bolstering our core brands and leveraging the unique assets that distinguish us to further propel growth and drive value for our shareholders,” Murdoch said on the fiscal call.

Fox Q1 Ad Revenue Spikes 17% to $1.1 Billion Thanks to Tubi, Live Sports

Fox Corp.’s cold shoulder to subscription video-on-demand continues to pay dividends on the bottom line. The media company Nov. 3 reported that first-quarter fiscal-year 2022 (ended Sept. 30) ad revenue increased 17% to $1.13 billion, from $969 million in the previous-year period. Total revenue increased 12% to $3.05 billion, from $2.72 billion a year earlier.

Lachlan Murdoch

CEO Lachlan Murdoch attributed the increase in part to the company’s focus on AVOD and free ad-supported streaming TV and the return of a full schedule of live events at Fox Sports and more scripted programming at Fox Entertainment compared with the postponements and cancellations in the prior year quarter as a result of the pandemic.

Fox acquired Tubi in April 2020 for $440 million, quickly bolstering the AVOD platform with catalog, primetime network shows, i.e. “The Masked Singer,” and original programming.

“We have made a strong start to the 2022 fiscal year with broad-based operating momentum led by the return of a full slate of live events at Fox Sports and exceptional progress at Tubi,” Murdoch said in a statement.

Murdoch said that as TV viewers migrate back to live news, sports and increase their streaming, the trends underscore the strategy and priorities that have defined Fox since its asset (20th Century Fox Studios) sale to Disney.

“We remain focused on bolstering our core brands and leveraging the unique assets that distinguish us to further propel growth and drive value for our shareholders,” he said.

Fox Weather AVOD Service Partners With Company Offering Live Meteorological Updates From Sports Stadiums

Fox Weather, the pending ad-supported weather streaming service launching Oct. 25, has signed a partnership with WeatherSTEM, a company offering weather data and high-resolution video from collegiate and professional sports stadiums.

Utilizing WeatherSTEM’s network of sensors, the Fox streaming platform will have the ability to access live information from a footprint of nearly 600 data points nationwide, including collegiate and NFL stadiums. Key stadium locations include the Tampa Bay Buccaneers’ Raymond James Stadium, the Pittsburgh Steelers’ Heinz Field, the University of Iowa’s Kinnick Stadium, Louisiana State University’s Tiger Stadium, and Texas A&M’s Kyle Field, among others. Fox Television is major broadcaster of NFL football.

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The high-definition camera network will also enable instantaneous access to real-time weather conditions, spanning lightning, wind speed and temperature, for a hyper-local approach to weather coverage.

“In an effort to create the most robust network of cameras across the country, [we have] partnered with the WeatherSTEM to provide a live look into local weather conditions across the country, allowing access to real-time weather conditions and video,” Sharri Berg, president of Fox Weather, said in a statement.

Fox Weather marks Fox’s third standalone streaming platform following the 2018 debut of the Fox Nation subscription streaming video service, and the 2020 launch of Fox News International. Fox Corp. has become a big believer in AVOD and free ad-supported streaming television (FAST) following its 2019 acquisition of Tubi.

Indeed, Fox Corp. CEO Lachlan Murdoch has told investors he believes Tubi can generate $1 billion in ad-revenue in the next few years.

“I cannot emphasize enough the importance of total view time as the critical metric for ad supported streaming,” Murdoch said on a recent fiscal call. “It is the best measure of burgeoning engagement on Tubi and correlates directly to the monetization of the platform.”

In September, Tubi and Fox Sports announced the launch of “Sports on Tubi” in the United States, affording viewers access to 10 live-streaming channels for different sports, including professional football, baseball, soccer, collegiate sports from the ACC and Pac-12 Conferences, as well as nearly 700 hours of VOD content.

Fox: Tubi AVOD Offsets Lack of Super Bowl Broadcast

Free ad-supported streaming television platform Tubi keeps paying dividends for Fox Corp. — a year after being acquired for $440 million. The AVOD service contributed to Fox generating $915 million in advertising revenue for the third quarter (ended March 31). That compared to ad-revenue of $1.26 billion in the previous-year period when Fox hosted Super Bowl LIV. Current-quarter ad revenue topped the previous non-Super Bowl period in 2019 by 11% at $812 million.

Fox doesn’t break out Tubi revenue separately, but the company expects the FAST platform to generate $1 million in incremental ad revenue in the fiscal year.

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Through nine months of the fiscal year, ad revenue is tracking at $3.4 billion, compared with $3.7 billion a year earlier.

Tubi’s viewership increased more than 30% and now reaches 40 million monthly active users. Tubi generated more than 275 million hours of total viewing in March, a monthly record for the platform. It also set a quarterly record for total view time with nearly 800 million hours streamed — up more than 50% year-over-year. Tubi streamed more than 2.5 billion hours of content.

“Contrary to the strategy of the major SVOD services, Tubi’s goal is to turbocharge certain genres of content that already make Tubi successful, and thereby allow us to super-serve certain segments of Tubi’s audience. Again, all to continue to drive engagement and therefore monetization to new heights,” CEO Lachlan Murdoch said on the fiscal call.

Murdoch said another important differentiator of Tubi’s content is live local news. Tubi recently closed deals to bring an additional 20 local new stations to the platform later this year. These added stations extend Tubi’s news reach to 24 of the top 25 markets.

“Underpinning the news on Tubi offering our live local news feeds from 18 owned and operated Fox Television Stations,” Murdoch said. “In total, news on Tubi will carry nearly 100 local station feeds in 2021 covering 58 DMAs and offering the most robust local news offering of any free streaming service.”

Fox CEO: ‘We Can Win in the AVOD World’

With the exception of Fox Nation, the $5.99 monthly streaming video adjunct to Fox News, corporate parent Fox Corp. has little interest in the SVOD market. This strategy was underscored by the media company’s $71.3 billion studio assets sale to Disney in 2019.

Instead, Fox Corp.’s direct-to-consumer initiative is driven by Tubi, the San Francisco-based ad-supported VOD platform acquired 12 months ago for $440 million. The platform has skyrocketed in recognition since the acquisition in large part because Fox Entertainment is offering up its original pay-TV programming on Tubi — a first for the catalog-centric AVOD market.

“We can win in the AVOD world,” Lachlan Murdoch, CEO of Fox Corp., told investors March 4 on the virtual Morgan Stanley Technology, Media and Telecommunications Conference. “We think it will be a significant growth driver for our business. We don’t want to compete in the subscription on-demand world.”

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Murdoch said that as Fox’s pay-TV business is centered around live news and sports — two areas the traditional cable bundle still has consumer leverage — the company’s digital assets, led by Tubi, will generate $1.2 billion in ad sales in 2021.

Indeed, prior to the acquisition, Tubi sold advertising around specific programming. Now, sales are incorporated within Fox Entertainment, which can cross-pollinate marketing efforts across the  company’s brands. Murdoch said Tubi was a small part of Fox’s media buyer upfronts last year, while the platform will play a major role in media selling this year.

“If you own a movie studio, a big TV studio, or you own entertainment channels, get[ting] into a D2C future as quickly as you can is incredibly important,” he said.

Murdoch said Tubi is already profitable while it invests profits back into the business to help build up its profile in an AVOD market that has renamed itself FAST (Free Ad-Supported Streaming Television), and includes The Roku Channel, Pluto TV, IMDb TV, Peacock, Crackle Plus and soon HBO Max, among others. He cited Wall Street projections that the SVOD business can generate 20%-30% margins — a percentage he feels the AVOD market can replicate in time.

“We’re not there yet, [but] we can win [with AVOD] in a much more clever and careful way,” Murdoch said.


Fox Corp. Buys Tubi TV for $440 Million in Cash

Fox Corp., the Rupert Murdoch-controlled media company following the sale of 21st Century Fox to Disney, March 17 said it has acquired ad-supported video-on-demand service Tubi TV for $440 million in cash. Fox used its previous 5% ownership stake in Roku to fund the transaction.

Tubi founder/CEO Farhad Massoudi will continue to head the service. The transaction, which is subject to regulatory approvals, is expected to close before June 30.

The purchase price is about $100 million more than what ViacomCBS paid for Pluto TV last year. The deal underscores media companies’ desire to enter the over-the-top video space with an alternative product to SVOD platforms such as Netflix, Amazon Prime Video and Hulu.

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Tubi brings Fox an expanded consumer offering with a sizable, younger-skewing and directly connected user base that spends over 160 million hours per month watching content on the service.

San Francisco-based Tubi, which is currently available on more than 25 digital platforms in the United States, features over 20,000 titles and 56,000 hours of film and episodic television programming from over 250 content partners, including many of the major studios. The combination of Tubi’s reach, the resonance of its content and the quality of its technology platform have doubled the service’s usage and monetization over the last 12 months.

“Tubi will immediately expand our direct-to-consumer audience and capabilities and will provide our advertising partners with more opportunities to reach audiences at scale,” CEO Lachlan Murdoch said in a statement.

Fox plans to continue to run Tubi as an independent service anchored by its consumer offering of licensed entertainment content. Fox said it would “evaluate” opportunities to expand the AVOD offering not through original content, but rather in a cost-effective manner by leveraging “its expertise” in national and local news and sports programming.

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Fox Corp. owns and operates Fox News and SVOD platform Fox Nation, among other properties.

“Tubi provides a substantial base from which we will drive long-term growth in the direct-to-consumer arena,” Murdoch said.

On the sale of Fox’s ownership stake in Roku, Murdoch said the company continues to admire the ongoing accomplishments of founder/CEO Anthony Wood and his team.

“We are pleased to expand our partnership with them as a result of the Tubi acquisition,” he said.


Lachlan Murdoch to Become Chairman/CEO of New ‘Fox’

Twenty-First Century Fox May 16 revealed the senior management team at the revamped “Fox” once it consummates the asset sale of 20th Century Fox Film Corp. to The Walt Disney Co. (or Comcast).

Current executive chairman Lachlan Murdoch will serve as chairman and CEO of the new company, while his father, Rupert Murdoch, will serve as co-chairman. John Nallen, CFO at 21st Century Fox, will take a broader role as new COO.

No mention of current Fox CEO James Murdoch, who apparently won’t have a role in the new company.

The younger son was seen as more progressive politically than his father and brother. Indeed, James was reportedly embarrassed by ongoing sexual harassment issues at Fox News, and late last year wrote an email criticizing President Trump’s response to the deadly skirmish in Charlottesville, Va., between protesters and white nationalists and alt-right groups that left one woman dead and 19 people injured.

The downsized Fox will feature Fox News Channel, Fox Business Network, Fox Broadcasting Co., Fox Sports, Fox Television Stations Group, and sports cable networks FS1, FS2, Fox Deportes and Big Ten Network.

It will house the top cable news channel in the country, and a stations group in nine of the 10 largest metro areas in the U.S. Its broadcasting and cable sports brands will have long-term sports rights to the NFL, MLB, World Cup soccer and NASCAR.

“We have worked through the winter ‘standing up’ a reimagined independent Fox,” the younger Murdoch said in a statement.

Rupert Murdoch said the revamped company would become the only media company solely focused on the domestic market.

“Focused on what Americans love best – sports, news and entertainment,” he said.

Fox’s Lachlan Murdoch Declines Comment on Comcast Bid, Touts Studio Home Entertainment Releases

Lachlan Murdoch, executive chairman of 21stCentury Fox, refused to comment on “market speculation” surrounding a possible $60 billion cash offer from Comcast for 20thCentury Fox Film Corp., and related assets.

The Walt Disney Co. currently has an accepted $52.4 billion stock offer for Fox – a transaction that must be approved by shareholders and regulators.

That didn’t stop Rich Greenfield, analyst with BTIG Research, from asking whether any offer other than Disney’s would be considered.

“We are committed to our agreement with Disney … and working on the conditions to bring it to closure,” Murdoch said, adding Fox’s board was aware of its fiduciary duty to entertain all offers.

Notably, Disney has to pay Fox $2.5 billion should the deal not be approved, while Fox is on the hook to Disney for $1.52 billion should it back away from the deal.

Meanwhile, speaking on the brief (28-minute) third-quarter (ended March 31) fiscal call, Murdoch gave a shout out to recent home entertainment releases of The Greatest Showman, The Shape of Water and Three Billboards Outside Ebbing, Missouri and Maze Runner: Death Cure.

“The home entertainment release of these films, along with the theatrical release of Deadpool 2, should propel a strong fourth fiscal quarter,” Murdoch said.

The Fox film unit generated pre-tax operating income of $286 million, which was down 23% decrease from $373 million in operating income in the prior-year quarter. Revenue was flat at $2.24 billion.

The operating income decline reflected lower contributions from the television production business due to higher deficits related to more new drama series delivered during the quarter and the absence of revenue from the prior-year subscription-video-on-demand licensing of “The People v. O.J. Simpson: American Crime Story”.

Fox, like other Hulu corporate parents Disney, Comcast and Time Warner, accrued increased losses from the SVOD service and Hulu Live online TV service. Fox lost $148 million on Hulu in the quarter, up from a loss of $62 million during the previous-year period. Through nine months, Fox has lost $318 million on Hulu compared to a loss of $161 million last year.

Separately, Murdoch acknowledged presence of a “potential further offer [i.e. Comcast],” for “our businesses” – reiterating a “no-comment” company policy on the issue.

He said he expected U.K. regulatory approval shortly for Fox’s bid for shares of satellite TV operator Sky it does not already own. Comcast also has an outstanding bid for Sky that substantially exceeds Fox’s offer.

“Comcast has just begun its regulatory process, and we think it’s very reasonable that Comcast undergo a very robust regulatory review – which could take months,” said Murdoch. “Given Comcast’s bid for Sky, we are considering our options.”

Murdoch said planning for the New Fox (absent 20thCentury Fox) was well underway, including the just-announced $910 million acquisition of seven TV stations from Sinclair Broadcast Group.

Fox chairman Rupert Murdoch and his sons, are keeping Fox News, including new SVOD service Fox Nation, Fox Broadcasting and Fox Sports.