Fox’s Retransmission Consent Revenue Should Continue to Expand
21st Century Fox Ranks Third Largest in 3Q15
21st Century Fox’s Television revenue
21st Century Fox’s (FOXA) broadcasting business continues to be positively impacted by growth in the retransmission consent fee. The company believes this trend will continue. According to James Rupert Murdoch, 21st Century Fox’s co-chief operating officer, “We think that the retrans income that we take, that we earn is going to continue to grow as you have new deals come up and new MVPD renewals.” Murdoch said this at J.P.Morgan’s Global Technology, Media and Telecom Conference on May 18, 2015.
As you can see from the above chart, 21st Century Fox’s revenue from its Television segment declined ~22% year-over-year to reach ~$1.2 billion in 3Q15.
However, if we take out the revenue the company generated from Super Bowl XLVIII in 3Q14, the change in the segment’s year-over-year revenue was flat. Super Bowl XLVIII contributed ~$350 million to Television revenue in 3Q14. FOX did not broadcast Super Bowl XLIX in 2015.
Even excluding Super Bowl XLVIII revenue, the segment’s advertising revenue fell ~7% year-over-year in 3Q15. However, a growth in the revenue from the retransmission consent fee helped compensate for this year-over-year decline in the segment’s advertising revenue during the quarter.
Impact of network ratings
The year-over-year decrease in the Television segment’s advertising revenues was due to a decline in the FOX networks’ entertainment ratings. The four largest US broadcasters compete for viewer ratings, which directly impacts their advertising revenues. The four largest US broadcast networks are CBS (CBS), NBC (CMCSA), ABC (DIS), and FOX.
If you want to take a diversified exposure to 21st Century Fox, you may invest in the iShares Core S&P 500 ETF (IVV). The ETF held ~0.3% in the company on April 30, 2015.
Please note that IVV also held a total of ~2.1% in media companies Walt Disney, Comcast, and Time Warner.
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