FOX Q3 2024 Earnings Call Transcript

Thanks very much, John. So let me -- I'll start. I'm not quite sure what I understand what you mean by dilution at Tubi, but let me start with the other two. The growth at Tubi continues to be incredibly strong. I think TVT growth comes from both new subscribers or new viewers finding the platform. As you'd be aware, we've very efficiently been marketing the platform to bring more people to it and it's becoming a wider and wider known and loved brand in the marketplace. And the reason for that is, we have, we've talked about it on calls before with 250,000 movies and television series on the platform and now over 250 in fact, I think around 270 live fast channels on the platform. It really does offer a tremendous product for everyone who is utilizing it. But it's very interesting because of all those fast channels and all those 250,000 movies and TV series, 90% of the viewing comes on demand. And this is very important because when that viewing comes on demand and it's proactively on demand, as opposed to passively sort of sitting back and watching a fast channel, that's much more valuable to advertisers. And it certainly is something that we're going to make a big deal about at our upfront presentations next week.

So because of that, we are very confident we can hold our CPMs at Tubi. We're already very efficient with our CPMs. I think some of our competitors priced themselves when they entered the AVOD market over the past 12 and 18 months are very high and we're seeing the marketplace then having to drop CPMs as new entrants add supply to the market. So that's affecting the market overall. It certainly has an impact on the market for advertising for Tubi, but from a CPM point of view, it's not really going to be a big impact to us. I should just say though that next quarter we are going to be facing difficult comps in the fourth quarter. I think if you remember this time last year, Tubi was up 47% in revenue and that's going to be a very difficult comp for us next quarter. So there will be some headwinds for the whole marketplace, but from a comp point of view for Tubi as well in the next quarter, so that's just a slight word of caution.

Thanks, Roger. So with the NBA, obviously I can't sort of comment on other people's sort of negotiations and where that may or may end up. But in terms of how we think about it affecting the value of the FOX Network and our sports portfolio, we're very happy with our sports portfolio. We obviously look at rights packages as they come up, but we see them as a portfolio or a bouquet of sports rights that we have and we feel very strong with the current portfolio that we have, which is one of the reasons why we didn't pursue the NBA in this round of negotiations.

But I think it does go to the value of broadcast television because sports leagues still need reaches is still incredibly important for them, for them to drive their fan bases, for them to get the maximum amount of viewership to their games and matches. And so the value of the FOX Network and frankly our strategically kind of positioned station group to any sports league only increases over time is what we're seeing. And therefore, I don't think coming to the second part of your question, I don't think we are strategically disadvantaged with not having a subscription video on demand service because we found in the past we can partner with others, well, frankly, the leagues tend to partner with others. We can take the rights where we can broadcast to the most amount of Americans possible and they can allocate rights to SVODs as needed, but they're never going to be able to live entirely without a broadcast network and broadcast distribution.

M&A?

Yeah. So, Robert, just in terms of the M&A picture, our posture on sort of what you term non core assets like, we're strong believers in the sports betting market in this country. We read with interest your note that put a billion dollar value on it. And so, now our intention is to see that through and eventually exercise. And then the Studio Lot, we think is a long-term asset for us. We have development plans for that. And so we don't have any change in posture around early monetization of those assets. We think they're incredibly valuable for the long-term.

And I'd just remind you, it's not only the value of the option, but also the equity that we have in flutter, which is today worth over $900 million.

All right. Next question, please, operator?

Thanks very much, Ben. So first of all, as I said, I've got actually in the room behind me, I've got the beta version of the streaming app and I don't think we've announced the name yet. So I won't inadvertently do it on this call, I hope or not yet anyway. And -- but look, it's something that we've been able to engage with and it is really looking tremendously exciting as I said in my comments. It's very innovative, it's designed to be entirely focused on the cord nevers, cord cutters, people who are not in the cable bundle and who frankly can't -- won't be able to compare it to a tier of live channels. It's a very different digital first product, which when you eventually get it and get to enjoy it, you'll understand how ground-breaking certainly in this country it really is.

In terms of the speed, everyone is running at sort of full pace to get the product finished and delivered. Obviously, there's the -- the fun side of it, which is like the user interface and how you use it, which has been great to use, but there was a ton of work, obviously, in engineering behind that, in ingesting content from multiple partners and being able to combine that into one sort of seamless platform. So there's a tremendous amount of work that's being done to get them to get us over the line this autumn, but we're incredibly excited.

And so there's no, I wouldn't read in anything into final deal terms being signed. It's just a matter of everyone running on all cylinders to get this finished. So...

On Tubi...

Oh, on Tubi, sorry, the Tubi we don't see -- Tubi is a very different product. We don't see an opportunity at this stage, we haven't contemplated an opportunity at this stage to bundle the sports service with Tubi. I think it makes potentially more sense to bundle sports with other SVOD services, which you'll likely see as we go forward.

Next question, please.

Great. Thanks, Jessica. So on -- let me start with political. We are confident, we obviously were disappointed for multiple reasons that there wasn't a more competitive primary season, but we certainly know this is an election which both sides of politics or all sides of politics are very focused on, have raised a tremendous amount of money and that money will flow ultimately to local television and we are extremely confident of that.

One of the reasons we're confident in addition to the amount of money that we know has been raised, are just the position of our stations, specific stations within the group and how that aligns with the political map. If you look at the tight, so putting aside Presidential Election, everyone focuses on is easy on a call to talk about sort of national trends and people focus on Presidential, but you have to look below Presidential and look at sort of Senate races. So we have tight Senate races in key markets where we have big stations. And you have to remember, Jessica, these are big news stations, right? And political money tends to run alongside news, local news. And so there's tight races in Arizona, in Michigan and these are for Senate in Michigan, tight races, Senate race in Pennsylvania and in Wisconsin.

And also, of course, our DC station will benefit from tight race in Maryland. In addition, you've got a lot of issues on the ballot in different market. So Arizona, Florida, I think Maryland, again, all have a lot of issue money flowing into those, into those -- onto the ballot. So we think it's going to be an incredibly strong political season. We're just starting later than we had first expected than you traditionally have when you have a primary, more contested primers. So you'll start to see the benefit of that in the first half of our next fiscal, fiscal 2025 for us.

The next question on M&A and the balance sheet, I agree wholeheartedly. I think we have the best balance sheet in the industry, I think that's the math, that's just a fact. And so we continue to look for accretive opportunities that would align with our kind of strategic goals and initiatives and we'll continue to do that. We obviously don't want our balance sheet to go to waste, but we haven't found anything yet that we're, Anjali [Phonetic] going to do or follow. So -- but it is something we are keeping a close eye on.

And then on Tubi. What does -- how does Tubi look over the next three years? Well, Tubi continues to grow, obviously, as you get to the scale, the growth trajectory, which is harder to comp with the growth that we've had over the last couple of years, but Tubi continues to grow. Money will continue to flow from linear entertainment television, particularly cable entertainment networks, into streaming AVOD and SVOD with advertising supported SVOD services. That trend will not slow and Tubi will be one of the main beneficiaries of that money flow. So we're confident in the continued growth of Tubi and under the leadership of Anjali, it just goes from strength-to-strength.

Operator, we have time for one more question.

Thanks, Mike. Well, let me start. So, on the sports joint venture and how we certainly view it and how we discuss it with our distribution partners, I think the first thing and this is incredibly important to us, is that we are wholly and fundamentally supportive of the traditional cable television bundle. It will continue to be for a very long time, our number one revenue stream. And we are all in to support our distributors in every way we can in that bundle and supporting their, their subscribers and their business. So that is absolutely a fundamental fact for us.

Having said that, we've always said it's important for us to put our brands where viewers are right? And in the universe of sports fans that don't currently take a cable bundle, that is the universe that the sports joint venture will be entirely focused on. And it's frankly important to us that because we are so invested in the cable bundle, that the sports joint venture will be very targeted and very focused on the non-traditional pay TV viewer universe. And we think we can very cleverly and very -- in a very targeted way market to those subscribers, so that we minimize any cannibalization of traditional subscribers.

So we're very open with our distributors. We're very open with how important they are to us and also how -- because of that importance, how we can focus a sports joint venture in the areas that needs to be focused on.

Mike, it's Steve, just in terms of television profitability. So quarter-to-quarter, we were up close to $30 million. The way to think about it is the single biggest event was Super Bowl, which was a high tens of million dollars EBITDA contribution last year versus this year. But then you look at it this year to offset that, we grew affiliate fee in the segment by about $70 million. And so one for the other basically is a push. Tubi was a push quarter-on-quarter in terms of EBITDA deficit there.

And so then what's left is the biggest EBITDA sort of driver of contribution when you look at it from a quarter-on-quarter perspective is the change in entertainment programming costs, which was an ongoing push towards -- from scripted towards unscripted to get dollar cost per hour down without harming dealership, as well as the impact of the strikes. And so there's a lot of other puts and takes in there, but they're the sort of the big three things that drive it.

Okay. At this point, we are out of time. But if you have any further questions, please give me or Charlie Costanzo a call. Thanks so much for joining us today.