Author Topic: FOXA - Twenty-First Century Fox Inc  (Read 40131 times)

spartan

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #120 on: October 17, 2020, 12:37:17 PM »
Thought it would be useful to inject some data into this discussion.

Michael Nathanson (respected media analyst) asked 5,000 households the following question: are you a regular sports viewer? (Defined as weekly/daily/monthly viewing of sports.) You could argue that 5,000 households is a relatively small sample size, but he seems to think the data is reliable.

Yes = 53%, of which 90% still pay for the cable bundle.
No = 47%, of which 67% still pay for the cable bundle.

Nathanson found that most sports viewers are predominantly male (no surprise), there is no significant difference in age amongst viewers (somewhat surprising), and there is a clear positive correlation between sports viewing and income levels (very surprising). Sports fans tend to have much higher income levels.

Of those regular sports viewers, what other content do they watch? 84% of them said news.

Based on this sample, along with other studies, Nathanson was able to conclude that of all the pay TV subscribers (98 Million at the time of the study):

- 51% are regular sports and news fans (50 Million)
     - 81% are still paying for traditional TV
     - 10% have vMVPD
- 9% are regular sports viewers only (9 Million)
     - 69% are still paying for traditional TV
     - 16% have vMVPD
- 26% are regular news viewers only (25 Million)
     - 74% are still paying for traditional TV
     - 6% have vMVPD
- 14% are non-sports and news viewers (high risk cord cutters – 14 Million)
     - 44% are still paying for traditional TV
     - 7% have vMVPD

So, what is the resting place of cord cutting? Big question, but we can at least agree that the non-sports and news viewers (14%) will cut quickly. Therefore, that leaves roughly 85 Million. However, as I’m sure many would agree, it will likely be much less. (Maybe 40-50 Million?) Fundamentally unknowable variable. Nathanson uses an interesting analogy: will pay TV mirror the decline of magazines or music (pre-streaming)? In other words, will the decline be rapid or gradual? Interestingly, niche lifestyle magazines (InStyle, People, etc.) grew total paid subscribers over the past 20 years. “There’s something about the magazine and delivery of that content that stayed valuable.” Nathanson is of the view that live news/sports fall into this category.

Another question he posed: How often do you or someone in your household use the following service to stream content?

- Netflix
     - 40% daily
     - 40% few times a week
- Amazon Prime
     - 25% daily
     - 40% a few times a week
- Hulu
     - 40% daily
     - 35% a few times a week

Nathanson also reiterated what many have already said on this forum: the next few years (he predicts around 5 years) are going to be great for consumers, producers, people who own facilities, people who do hair and makeup, and many others in the “content supply chain”. This could lead to other interesting investment opportunities. It is hard to argue against the notion that Amazon, Disney, Hulu, Netflix, Apple, et. al. will continue to spend for content in a race to scale up.

Therefore, IMO the overarching thesis for an investment in Fox has to be this: smaller revenue base but higher take rate. Higher pricing power regardless of volume declines. Live news and sports will not be severely disrupted. In addition, Fox's strong balance sheet and unique assets (Fox Studio Lot, gambling investments) give investors a reasonable cushion.

IMO a major weakness to the Fox investment thesis is the threat of Amazon and the rising cost of sports rights. Much to Nathanson’s surprise, Amazon is the only Big Tech player that’s making a serious foray into sports rights. They’ve purchased rights for select games in the past and recently acquired rights for an NFL playoff game (https://www.wsj.com/articles/amazon-expands-nfl-coverage-with-playoff-game-11602702168). They seem to be willing to pay up for the real/imagined synergies with Prime Video. As a side note, this made me respect Amazon a bit more. They make data-driven decisions and aren't afraid to take chances.

Another weakness is the possibility that Netflix, YouTube, and other streaming services will add more advertising minutes in their videos. What if Netflix decides to change their pricing model and add a minute of ads here and there? (Another Nathanson point.) Where will that ad money come from? As ads become more targeted and data-driven, Fox’s lack of “relationship with the customer” will become a weakness when trying to sell ads.

And lastly, there is a real weakness with Lachlan. Although he has made some impressive bets in the past (REA Group), he doesn't seem to be driven by shareholder return. The guy paid $150 Million for the Chartwell Mansion...I'll let you draw your own conclusions on that one. In addition, John Nallen (COO) mentioned that the company prefers growth acquisitions over "reducing the denominator". While it might make sense for someone like Mark Leonard to say something like that - presumably because there are many more accretive opportunities in vertical market software - it's a little cringe to hear that from a company that operates in a somewhat stagnating industry.

One last general point: Nathanson thinks many vMVPD's have a profitless future (and I think correctly). The rise of vMVPD subs is slowing the decline of pay TV subs, but the networks/content they’ve chosen as bedrocks of the vMVPD experience have immense pricing power. As the price of content continues to grow, higher COGS = lower profit. Either they increase subscription prices or absorb losses to maintain subs. Either way, the future doesn’t look good for vMVPD’s.

Talk 1: https://www.youtube.com/watch?v=UEkbclAjt74
Talk 2: https://www.youtube.com/watch?v=A02X0gL1aQ8
« Last Edit: October 17, 2020, 12:41:00 PM by spartan »


Spekulatius

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #121 on: October 17, 2020, 03:32:36 PM »
The growth over value statement from Lachlan makes me think twice investing in FOX. It makes no sense whatsoever for Fox shareholders. Fox is a mature cash cow business. If Fox doesn’t distribute cash now, when will they do so?
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Spekulatius

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #122 on: November 14, 2020, 04:43:56 AM »
How credible is the threat that as a fallout from the election, Foxnews could get hew competition? It seems like Newsmax is the most credible contender and it is easy to see that if Trump endorses (or invests in them) they could peel of 20% of Foxes viewer, as this article stipulates?
https://www.nbcnews.com/business/business-news/trump-separates-fox-news-what-s-next-both-n1245549

I don’t have cable, but when I had, I don’t think newsmax was anywhere in the channel lineup. Is this the case now? the other one seems to be OAN which I don’t think has much distribution either. With streaming , distribution would be easy to achieve with some marketing, if those two outlets bundle together and gain some heft.

When ai looked at this a while ago, the thesis is that Foxnews owns right wing media for the foreseeable future, but now, I am not that sure. (No position currently).
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JRM

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #123 on: November 14, 2020, 05:02:06 AM »
I think there are probably enough people programmed to watch Fox News that won't switch to anything else.  They're talking about viewership numbers being down.  Could it possibly be because the election is over?

My guess is Fox News will continue to find ways to spread anger and fear to its loyal viewer base (same as all the other 'news' channels).

Habits are hard to change, and people have short memories. 

Spekulatius

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #124 on: November 14, 2020, 06:20:18 AM »
^ I think you should revise your post and avoid value statements. i don’t generally watch Fox news (I don’t have cable TV) so this is solely meant from an investment perspective.

I owned the stock before and got two good trades out of it and one went bust when I sold at $24-25. My thesis at that point is that Fox owns right leaning media and now I am not sure any more it’s a given.

I assume the pie (for right leaning media) stays the same and if Newsmax or another source can get a much larger slice of the pie, then this has to come from Foxnews viewership. Foxnews constitutes the vast majority of FOX Corporation’s value so this could be material even if only 20% of the viewership get lost, as the NBC news article stipulates. It is pretty simple conceptually, but I don’t  know how to handicap the probabilities. I think it would be priced in if FOX trades around $20/ share (the recent lows in March) but maybe not fully at $26.
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JRM

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #125 on: November 14, 2020, 08:18:45 AM »
I'm sorry if my post came off as overly political.  I didn't think they were value statements, just statements of opinion.  Worth every penny it cost. 

I'm coming at it from the standpoint that most of the news media is more about entertainment and less about unbiased news.  I've been thinking about the Fox situation a lot recently.  I was a shareholder in Fox prior to the sale of assets to Disney.  I'm having a hard time getting over the concentration risk with NFL rights and Fox News.


dwy000

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #126 on: November 14, 2020, 09:17:27 AM »
I'm sorry if my post came off as overly political.  I didn't think they were value statements, just statements of opinion.  Worth every penny it cost. 

I'm coming at it from the standpoint that most of the news media is more about entertainment and less about unbiased news.  I've been thinking about the Fox situation a lot recently.  I was a shareholder in Fox prior to the sale of assets to Disney.  I'm having a hard time getting over the concentration risk with NFL rights and Fox News.

Politics aside it is unlikely that Fox keeps its "monopoly" on right leaning views and will have viewers carved off into more extreme niches (like Newsmax and OAN).  This is similar to what happened with CNN a couple of years ago with the emergence of MSNBC on the further left.  In addition, on the "middle" front there are 3-4 new national challengers who aim to be centrist news (not opinion) organs. Like any monopoly it tends to not last long as challengers see excess returns and dive in.

I suspect viewership will drop until next election cycle. But that doesn't mean its a bad business outlook.  The Fox streaming channel seems to be doing extremely well and a good chunk of the revenues are from contracted carriage.that will erode but slowly. 

Maybe it all comes down to just how much they can charge thst MyPillows guy to put in 20 commercials per hour.

Foreign Tuffett

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #127 on: November 16, 2020, 07:22:12 AM »
^ I think you should revise your post and avoid value statements. i don’t generally watch Fox news (I don’t have cable TV) so this is solely meant from an investment perspective.

I owned the stock before and got two good trades out of it and one went bust when I sold at $24-25. My thesis at that point is that Fox owns right leaning media and now I am not sure any more it’s a given.

I assume the pie (for right leaning media) stays the same and if Newsmax or another source can get a much larger slice of the pie, then this has to come from Foxnews viewership. Foxnews constitutes the vast majority of FOX Corporation’s value so this could be material even if only 20% of the viewership get lost, as the NBC news article stipulates. It is pretty simple conceptually, but I don’t  know how to handicap the probabilities. I think it would be priced in if FOX trades around $20/ share (the recent lows in March) but maybe not fully at $26.

Spekulatius I agree with you. I just scrolled through Trump's tweets, and over the past seven days he has either promoted OANN and/or Newsmax or attacked Fox News no less than 14 times. One November 12th OANN hit a higher level on interest on Google Trends than its level of interest on election night.

If Trump is maneuvering to own or control his own right wing media empire, then this could be a big problem for Fox.
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