Fox Sports parent company 21st Century Fox released its earnings (for their fourth quarter and also their whole fiscal year) Wednesday, and there’s plenty of interesting data in their release. It’s difficult to separate out how FS1 is doing (because it’s lumped into Cable Network Programming with Fox News, which is much bigger, and other channels like FX, National Geographic and Fox Business are in there as well, as well as their regional sports networks), but there are some notes worth paying attention to on the sports front, especially when it comes to their big-event sports programming on Fox. The key takeaway is that 21st Century Fox is up significantly year-over-year for the full year (in earnings per share, revenues, and operating income before depreciation and amortization; they’re up nine per cent in that last category to $7.17 billion), and that they cite several sports elements as part of the reason why. Here are some of their comments on their full-year sports programming on the broadcast network:
The very successful broadcasts of Super Bowl LI and the Major League Baseball (“MLB”) World Series, which delivered the most watched baseball game in a quarter century, grew Fox Sports broadcast viewership by approximately 25% over the prior year driving a 20% increase in television segment contributions.
…The Television segment generated annual OIBDA of $894 million, a $150 million, or 20%, increase over the $744 million reported in the prior year. Annual segment revenues were 11% higher than the prior year due primarily to strong sports advertising revenue growth led by the broadcast of Super Bowl LI, the MLB World Series, which benefited from strong ratings and two additional games versus last year, and the inclusion of one additional National Football League divisional playoff game. Higher local political advertising spending at the television stations and continued growth of retransmission consent revenues also contributed to the segment revenue growth. These revenue increases were partially offset by lower network entertainment advertising revenues reflecting lower general entertainment ratings.
And a few comments on cable networks’ full-year performance, including FS1 and regional sports networks:
Cable Network Programming annual segment OIBDA increased 9% to $5.60 billion, driven by a 7% revenue increase led by continued growth in both affiliate and advertising revenues partially offset by a 7% increase in expenses. The increase in expenses was primarily due to higher domestic sports programming costs driven by higher professional team rights costs at the regional sports networks (“RSNs”) and increased MLB and National Association for Stock Car Auto Racing (“NASCAR”) rights costs at FS1, higher programming and marketing costs at FX Networks and National Geographic and higher entertainment programming costs at Fox Networks Group International (“FNG International”) and STAR India (“STAR”). Domestic affiliate revenue increased 8% reflecting continued contractual rate increases, led by Fox News, FS1 and FX Networks. Domestic advertising revenue grew 6% over the prior year led by higher ratings and pricing at Fox News and higher postseason baseball ratings at FS1. Domestic OIBDA contributions increased 10% over the prior year led by higher contributions from Fox News, FS1 and FX Networks.
How does this compare to ESPN? Well, it’s really not directly comparable. There are plenty of differences between broadcast and cable, including that ESPN receives per-subscriber fees that Fox doesn’t (FS1 gets those as well, but on a much smaller scale) and that Fox has a somewhat broader reach. The more accurate comparison would be between ESPN and FS1, and it’s very difficult to get a handle on how FS1 is doing from Fox’s earnings release. FS1 also doesn’t fully compare with ESPN, as ESPN generally receives its company’s top sports rights (apart from some NBA and college football content on ABC), while the biggest sports properties at Fox tend to mostly wind up on broadcast TV.
It is worth reading the Fox release in light of Tuesday’s Disney Q3 earnings report, though. That report saw ESPN again cited as a big reason for a year-over-year decline, and a key part of their cable networks’ segment’s 23 per cent drop in operating revenue. That’s part of why Disney’s going bold with the acquisition of a majority share in BAMTech and the launch of streaming services.
Keep in mind that the Disney report is a quarterly report, not a whole-year one, and while Fox’s quarterly results were still up year-over-year in revenue, they’re not up by as much as the whole-year results; that’s another dimension that makes it difficult to compare the companies. But it is notable that sports keep being referenced as a reason for year-over-year Disney declines, and that broadcast sports in particular are being referenced as a reason for year-over-year Fox growth. Whether that growth is sustainable is another question, as 2016-17 saw Fox broadcast both the first Chicago Cubs’ World Series win in over a century (which went seven games, no less) and the Super Bowl, and they won’t have either of those factors in 2017-18.
Also, none of that indicates that ESPN is losing its lead on FS1. It’s still in many more homes, it still has better ratings, and most importantly, it has a much higher per-subscriber fee. And we really don’t know if FS1 is actually doing well from a financial perspective, as there’s so much else lumped into its segment; about all we know from the comments in there that its per-subscriber fees have been rising and that it got good MLB postseason ratings. It’s also worth remembering that earnings reports are about momentum, or year-over-year change, rather than absolute magnitude, and it’s worth noting that the Fox broadcast network overall has had some major struggles and has its ratings more propped up by sports than any other network.
With all that said, though, the positive comments about sports’ contributions to the overall corporate bottom line and broadcast sports’ year-over-year improvement in Fox’s release are a significant difference from what we’ve seen about ESPN in the last year-plus of Disney earnings releases. That doesn’t mean there will be further growth this coming year, especially as they don’t have the Super Bowl and they probably won’t have a World Series quite as highly-rated as the 2016 edition. And it doesn’t mean that everything’s rosy at FS1; there’s some boosted affiliate revenue, but we don’t know too much beyond that. But it’s clear that broadcast sports in particular were a big boost for Fox in 2016-17, and a key part of what helped them post these increases.