Fox Corporation beat Wall Street expectations for its second quarter of 2024 on Wednesday, despite its quarterly results being dragged down by a 20% drop in total advertising revenue to $2 billion.
Here are the top-line results:
Net income: $115 million, compared to $321 million in the prior year quarter
Revenue: $4.23 billion vs $4.18 billion expected by analysts surveyed by Zacks Investment Research.
Adjusted Earnings Per Share: 34 cents vs 9 cents per share expected by analysts surveyed by Zacks Investment Research
The company attributed the 8% year over year drop in advertising revenue primarily to the absence of the FIFA Men’s World Cup at Fox Sports, lower political advertising revenues at the Fox Television Stations due to the absence of the 2022 midterm elections, and “the impact of elevated supply in the direct response marketplace, lower ratings and higher preemptions associated with breaking news coverage at Fox News Media.”
Meanwhile, total affiliate fee revenue grew 4% year over year to $1.78 billion, driven by 10% growth in the television segment, and other revenue grew 14% year over year to $445 million, driven by higher sports sublicensing revenues.
The TV division fell 13% year over year to $2.54 billion in revenue, including $1.65 billion in ad revenue and $70 million in affiliate fee revenue. The lower advertising revenue was partially offset by continued growth at Tubi and increase in affiliate fee revenue was led by higher rates at the company’s owned and operated stations and third-party fox affiliates. The segment’s other revenues were $132 million, compared to c$196 million in the prior year quarter, primarily due to lower content revenues at the entertainment production companies as a result of the Hollywood strikes.
The cable network programming division reported a 2% increase in revenue to $1.66 billion. Affiliate fee revenues increased $5 million as contractual price increases were partially offset by the impact of net subscriber declines. Advertising revenues were $348 million as compared to the $451 million reported in the prior year quarter. The company chalked this drop up to the impact of elevated supply in the direct response marketplace, lower ratings and higher preemptions associated with breaking news coverage at Fox News Media. Other revenues increased $124 million or 80%, primarily due to higher sports sub-licensing revenues at the national sports networks.
Net income attributable to Fox Corp stockholders was $109 million, or 23 cents per share. On an adjusted basis, net income was $165 million, or 34 cents per share.
Fox CEO Lachlan Murdoch was optimistic in the company’s statement, touting the performance of Tubi and Fox Sports, and saying Fox News “has maintained its leadership in cable news.”
Fox shares climbed 3.5% in pre-market trading following the release of the latest quarterly results.
The results come as Fox is teaming up with Warner Bros. Discovery and Disney on a new sports streaming joint venture that will put ESPN, TNT and Fox Sports on a standalone app.
The service will be launched in the fall, with each media giant owning one-third of the company, having equal board representation and licensing their sports content to the joint venture on a non-exclusive basis. The venture will have its own independent management team.
The offering will provide subscribers with access to content from linear sports networks including ESPN, ESPN+, ESPN2, ESPNU, SECN, ACCN, ESPNEWS, FOX, FS1, FS2, BTN, TNT, TBS, truTV, as well as the ABC network. Content will include the NFL, NBA, WNBA, MLB, NHL, NASCAR, College Sports, UFC, PGA TOUR Golf, Grand Slam Tennis, the FIFA World Cup, cycling and much more. Subscribers would also have the option to bundle the product, with Disney+, Hulu and Max.
Pricing details and a name for the service will be disclosed at a later date, though an individual familiar with the matter told TheWrap that the price point would be cheaper than YouTube TV, which charges $72.99 per month for its basic plan.
Despite the one-third ownership stake for each company, the individual emphasized that the networks will not share revenue from the venture equally, with the companies expected to earn a similar carriage fee rate as they do through other distribution channels where their networks are available.
The formation of the pay service is subject to “the negotiation of definitive agreements amongst the parties,” the companies noted in their press release.
“The inclusion of our networks in the platform is consistent with our strategy, being proudly consumer first and distribution agnostic across the distribution ecosystem. Our traditional pay TV market will remain our dominant customer base for some time to come,” Murdoch told analysts during the media giant’s earnings call on Wednesday.
“As such, we remain committed to our existing distribution partners where our strong portfolio of leadership sports, news and entertainment brands thrive in their bundled offerings. This unique new platform opens up a new market for us, one that we have not accessed before and that we’re excited to participate in.”
Elsewhere, a New York judge ruled earlier this month that the media conglomerate must face a $2.7 billion defamation lawsuit from Smartmatic. The electronic voting technology firm has accused Fox of intentionally misleading viewers about the company in the aftermath of the 2020 election.
The lawsuit is separate from the case brought against Fox after the 2020 election by Dominion Voting Systems, another voting machine company that settled with the company in April for $787.5 million as the case was set to go to trial.
In addition to the quarterly results, Fox declared a dividend of 26 cents per Class A and Class B share, which is payable on March 26. The company has repurchased approximately $4.1 billion of its Class A common stock and
approximately $1 billion of its Class B common stock, with a remaining share purchase authorization of up to $1.9 billion as of Dec. 31.
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