Fox's Ad Sales Not So Super Without February Football Finale

  • CEO James Murdoch forecasts cable ad growth in current quarter
  • Company sees fees from pay-TV accelerating into next year

Take away the Super Bowl, and 21st Century Fox Inc.’s latest quarter looked a lot like its competitors’ -- reflecting a tough climate for advertising sales.

While ad revenue surged at the Fox broadcast network from the big game and an additional playoff, cable ad sales at Rupert Murdoch’s film and TV company slumped as they have for other major entertainment companies posting quarterly results the past two weeks, including Walt Disney Co.’s ESPN sports network.

Fox joins Disney, Time Warner Inc. and Comcast Corp., some of the biggest U.S. TV programmers, in reporting a slack quarter for advertising -- the result of shrinking TV audiences and growing resistance by marketers to keep paying ever higher ad rates. The results are spilling out just as major network owners prepare to unveil their new schedules to ad buyers.

But Chief Executive Officer James Murdoch predicted on a call with investors that cable ad sales will rise at a high single-digit rate for both domestic and international cable networks this quarter. Fox News has maintained its ratings dominance and the company remains confident in the business, despite the loss of Bill O’Reilly, its most popular host.

Fox has spent $45 million so far on legal settlements and provisions related to the departure of former Fox News Chairman Roger Ailes, including $10 million in the most recent quarter.  

Pay-TV fees are accelerating and will continue to do so in 2018, Chief Financial Officer John Nallen said on the call. Based on those comments, the stock should be near a bottom, John Janedis, analyst at Jefferies LLC, said in a note.

The stock fell 1.4 percent to $27.50 in extended trading after the announcement. It lost 1.2 percent to $27.90 at the close in New York.

With help from the Super Bowl, 21st Century Fox’s fiscal third-quarter profit rose to 54 cents a share, beating analysts’ estimates of 48 cents. Revenue, aided by $500 million in game-day advertising, grew 4.6 percent to $7.56 billion in the period ended March 31, but that was short of the $7.64 billion projected by analysts.

Revenue from cable programming, Fox’s largest business, rose 2.1 percent to $4.02 billion, held back by flat domestic advertising and a decline outside the U.S. Analysts were estimating $4.13 billion on average. Profit grew to $1.45 billion, compared with estimates of $1.41 billion, on the strength of fees from pay-TV services.

While the company has faced numerous lawsuits over accusations of sexual and racial discrimination at its flagship cable channel Fox News, the litigation so far has had no visible impact on earnings.

Broadcast TV revenue grew 30 percent, fueled by the Fox network’s Super Bowl telecast and the additional playoff game. Profit rose 52 percent.

Revenue from the film studio slumped from a year ago, when the company had the surprise hit “Deadpool” in theaters.

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