Industry Insider: A Look Into Fox Corporation’s 2023’s Third Quarter Earnings Call
On May 9th, Fox Corporation (NASDAQ: FOXA, FOX) held its Earnings Call for the business and financial results of the Third Quarter of Fiscal Year 2023. The meeting was led by CEO and Executive Chairman Lachlan Murdoch, COO John Nallen, and CFO Steve Tomsic.
The most impressive financial result was growth in revenues: an 18% increase in quarterly revenues, from $3.46 billion to $4.08 billion, heavily impacted the 46% increase in advertising revenues thanks to the broadcast of the Super Bowl LVII which generated approximately $650 million for the television advertising segment (which grew 61%) and cumulating 115 million viewers across platforms. In the fourth quarter, the company plans on broadcasting other major sports events following the success of the Super Bowl, namely NASCAR, Major League Baseball, and the finals of the UEFA Nations League. Murdoch highlighted how the combination of sports and entertainment places Fox as the leading broadcast network among the audience ages between 18 to 49.
Another revenue stream comes from Tubi, which grew 31% and total view time by 38%. The 2020 $440 million investment thus confirms itself as a win, as it now reports 64 million monthly active users from the 25 million reported in February 2020. This growth is a testament to the importance of AVOD (Advertising-based Video On Demand) in the streaming space, often too focused on SVOD (Subscription-based Video On Demand) platforms like Netflix or Disney+. Murdoch strategically positioned Fox in a still relatively free space of an otherwise extremely crowded market. Tubi was also included in Nielsen’s The Gauge, the monthly snapshot of TV viewership (both broadcast and streaming), adjudicating its first 1% of shares. It was only the second free ad-supported streaming service to do so, following Pluto TV.
Fox News is also performing extremely well, maintaining its position as the most watched cable news network, and now also becoming the most watched cable network in total day and primetime. After also praising Fox Business Network for its leading position among the business cable networks, Murdoch went on to address the defamation lawsuit with Dominion Voting Systems.
In 2021, Dominion sought $1.6 billion in damages after many hosts on Fox News claimed that the company’s voting machines were rigged against Donald Trump’s votes. Fox’s response was that they were reporting opinions and not implying facts, a right protected under the First Amendment to the Constitution. In March 2023, Judge Eric Davis ordered a trial to determine whether the statements made by Fox News were made with malice, and two weeks later it was announced that the parties had reached an agreement: Fox paid almost $800 million to Dominion. On the matter, Murdoch stated that:
“The settlement in no way alters FOX's commitment to the highest journalistic standards across our company or our passion for unabashedly reporting the news of the day. We're proud of our FOX News team, the exceptional quality of their journalism and their stewardship of the FOX News brand.”
In addition to Dominion, Smartmatic, also an electronic voting system company, was accused of rigging the 2020 elections against Trump’s reelection by Fox News’ on-air hosts. The company subsequently filed a lawsuit in the New York State Court. The case is pending, and Fox’s defense based on the First Amendment remains solid, as the case is described by Murdoch as “fundamentally different”.
Although Fox's revenue growth is impressive, its quarterly profits are negative, reporting a $50 million loss or a $0.10 negative per share. The difference with last year’s period (which reported almost $300 million in profits) is primarily due to legal settlement costs concerning the litigation, which amounted to $850 million. CFO Tomsic commented that he expects them to subsidize in the next quarters, as most expenses have already been incurred.
One last topic is one of the most pressing in the media and entertainment industry: the writer strike. In response to John Hodulik (UBS), Murdoch stated that Fox is well-positioned:
“We think that with our strategic priorities and [...] strengths in sports but also in news, these are two areas that are not affected by the writer strike. And the audience will pivot [...] when they're watching television to those categories.”
