21st Century Fox income drops due to spending on new channels
21st Century Fox saw its income drop from $2.287 billion during the first quarter a year ago to $1.255 billion in the first quarter of 2014, with the launch of Fox Sports 1 and FXX the main culprits.
The two channels launched with a significant investment, much of it spent on locking down long-term sports rights.
21st Century Fox COO Chase Carey says that the company exceeded its expectations in terms of distributing those channels, but that “ratings were mixed.”
“Our programming schedules are clearly a work in progress, we knew this would take years, not months,” he told investors on a conference call.
Fox did see revenue growth in all of its sectors, driven by higher cable carriage fees among its channels, like Fox News Channel and FX, as well as higher retransmission consent fees for the Fox broadcast network.
Carey estimated that the new sports channels generated around $130 million in revenue this year, compared to nothing a year ago.
Much like Comcast, lower political spending and the lack of Olympics coverage (Fox has some Olympics rights in Europe) resulted in lower ad growth. When politics and the Olympics are factored out, ad revenue was up year over year.
Fox News and the broadcast stations were hit hardest by the lack of political spending.
“Fox News, although as dominant as ever competitive, faced year over year headwinds due to lower political spending,” 21st Century Fox COO Chase Carey told investors Tuesday.
Carey also spoke about the company’s digital stray, which includes a substantial investment in Hulu (which former Fox distribution president Mike Hopkins now oversees), as well as changing consumer behavior.
“There are opportunities to both create something that supports the existing distribution ecosystem as well as a platform that competes in it own way with the Netflix’s of the world,” Carey said of Hulu. “What is clear, whether it is Fox or FX or sports or news for that matter, is that we are moving into a multidimensional, multiplatform world.”