Fox eyes digital options to counter 'fraying' cable tv bundle
21st Century Fox Inc., Rupert Murdoch's entertainment company, is considering new Web-based initiatives to attract younger viewers and consumers who don't subscribe to traditional pay TV services.
Emerging digital platforms are "the most exciting and important opportunity for future growth," Chief Operating Officer Chase Carey said today on an earnings conference call.
The traditional cable TV bundle "is fraying at the edge" as millennials face economic pressure and watch more online, Carey said after Fox posted first-quarter sales and profit that beat analysts' estimates. Even as Fox plots ways to reach consumers on smartphones and tablets, pay TV will remain "the primary consumer package for years ago come," he said.
"In terms of digital, we are looking at everything," Carey said in a response to a question. 'We are making our own analysis of what we think consumers want, so it was not implying there is anything imminent.''
Last month, CBS Corp. announced a standalone subscription Web service, following a similar move by Time Warner Inc.'s HBO.
About 15 million U.S. TV households don't subscribe to pay television. Programmers like Fox have to figure out how to attract those viewers independently without tempting cable and satellite customers to drop their subscriptions. They also want to appeal to consumers who have signed up for online services like Netflix Inc., instead of traditional TV.
Content Choices
"The key challenge for us is to build these choices in ways that fairly compensate us for our content and brands, and do not undermine more established business models," Carey said.
Charlie Ergen, founder of Dish Network Corp., made similar comments today discussing a dispute over rising program costs with Time Warner Inc.'s Turner Broadcasting. He said he may permanently drop channels such as CNN and TBS.
"The industry is changing in a sense, because of the different methods of getting content today," Ergen said. "I don't anticipate that the cable companies, satellite companies, and phone companies are all going to carry the same 10 groups like it is."
Fox's first-quarter earnings, excluding items, rose to 39 cents a share, the New York-based company said in a statement. That surpassed the 36-cent average of 19 analyst estimates tracked by Bloomberg. Sales increased 12 percent to $7.89 billion in the period ended Sept. 30.
Earnings were boosted by a record first-quarter box office for the company. Fees from cable services countered a 5 percent drop in advertising revenue at the Fox broadcast network, where ratings have sagged.
Film Profit
Film-unit profit advanced 40 percent to $458 million. "Dawn of the Planet of the Apes," released in July, has taken in more than $700 million globally, while "The Fault in Our Stars," made for $12 million according to Box Office Mojo, generated more than $300 million in ticket sales.
This year, the company forecasts high single-digit percentage growth in earnings before interest, taxes, depreciation and amortization, Chief Financial Officer John Nallen said on the call.
That forecast balances lower-than-projected ratings at the Fox network and currency swings that hurt earnings outside the U.S., against better earnings from filmed entertainment and domestic cable results that are meeting plan, Nallen said.
Fox rose 1.6 percent to $33.85 in extended trading after results were announced. The Class A shares declined 3 percent to $33.33 at the close in New York and have fallen 5.2 percent this year.