Q4 2021 Fox Corp Earnings Call
Ladies and.
Gentlemen, thank you for standing by welcome to the Fox Corporation fourth quarter of 2021 earnings Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session I would like to emphasize that functionality for the question and answer queue will be given at that time.
If you require any assistance during the call. Please press Star then zero as a reminder, this conference is being recorded.
I'll now turn the conference over to Chief Investor Relations Officer, Mr. Joe <unk>. Please go ahead Sir.
Thank you operator, good afternoon, and welcome to our fiscal 2021 fourth quarter earnings call. Joining me on the call today are Lachlan Murdoch Executive Chairman and Chief Executive Officer, John Nolan, Chief Operating Officer, and Steve Tomsic, Our Chief Financial Officer.
First Lachlan and Steve will give some prepared remarks on the most recent quarter and then we will take questions from the investment community.
Please note that this call may include forward looking statements regarding Fox Corporation's financial performance and operating results.
These statements are based on management's current expectations and actual results could differ from what is stated as a result of certain factors identified on today's call and in the Companys SEC filings.
Additionally, this call will include certain non-GAAP financial measures, including adjusted EBITDA or EBITDA as we refer to it on this call reconciliations of non-GAAP financial measures are included in our earnings release, and our SEC filings both of which are available in the Investor Relations section of our website and with that I'm pleased to turn the call.
Over to Lachlan.
Thanks, Joe Good afternoon, and thank you all for joining us to discuss our fourth quarter and fiscal 2021 results.
At the outset I want to emphasize the exceptional financial and operational results that we have delivered over the last year. Despite the challenges posed operating through the COVID-19 pandemic.
The virus brought significant impact to our production to our processes and to our people.
However, we stayed resolute and focused and demonstrated that even in the most unexpected and challenging times, our focus on a handful of powerful highly engaging brands produces exceptional results.
Over the past fiscal year, we have reinforced our competitive advantages of our core brands and.
Enhanced our digital capabilities.
Solidified our growth potential.
Turned 1 in a quarter billion dollars of capital to shareholders through buybacks and dividends.
And otherwise prudently allocated our capital.
We have a strongly differentiated position in the market, which continues to benefit us to know and.
But our greatest strength is our people who have really stood up this year and performed extremely well under such difficult circumstances.
I know myself my father, the board and the management team I appreciate all their hard work and all of their achievements this year.
In fiscal 2021, we generated revenue and profit, which exceeded even our own bullish expectations are affiliated revenue increased 9% year over year, which is net of the distribution credits that we recognized last fall due to COVID-19.
Our advertising revenue was up 2%, which is tremendous when you recall that we broadcast of Super Bowl in the prior fiscal year during which we generated around $500 million of net advertising revenue.
Importantly, the fiscal fourth quarter saw these trends accelerate as quarterly revenues increased 20% led once again by double digit affiliate revenue growth in advertising revenue growth of 38%.
This growth was underpinned by the ability of our core businesses to consistently deliver audiences at scale and capture the upward momentum of a rallying advertising market.
We finished the fiscal year with historically strong upfront sales and are currently also enjoying enjoying sustained scatter demand with pricing at significant premiums.
We finished the fiscal year are strong.
And we feel we are in a very good place or we are in a very good place with great momentum starting the new fiscal year.
Fox News media continued its ratings leadership and his platform multi platform growth in the fourth quarter.
Fox News channel was the most Washington network in primetime across all of basic cable for the sixth consecutive year and <unk> 78 straight quarter at the leading cable news channel in total viewers.
While the year over year ratings comparisons are difficult due to last year's heightened news cycle. The Fox News channel has retained more of its audience and CNN and MSNBC since the presidential election.
In fact since the election Fox News has solidified its leadership position in cable news, having reasserted its pre election market share.
For total day audience is Fox news increased its market share by 11% in the fourth quarter compared to the prior year, while CNN and MSNBC lost 9% and 3% respectively over that same period.
From a prime time perspective, we once again find ourselves in a familiar position as we routinely C. Our ratings exceeding those of our peers combined.
We are also pleased with the performance of Fox News media digital assets.
The news remains the most engaged news brand across social media channels, extending this run to nearly 7 consecutive years.
This is a critical pathway to reaching engaging and growing the broadest possible audience is with the Fox News brand.
On the last call I told you that Fox nation, the direct to consumer offering from Fox News media had recorded its strongest quarter for customer acquisitions since launch and.
And this quarter, thanks to new and expanded content offerings Fox nation, once again notched its best ever quarter for customer acquisitions.
Later this year, we will expand our Fox news media portfolio further with the launch of Fox weather.
Fox weather is just 1 example of how we plan to grow the Fox news brand across multiple verticals.
And the power of our brands and the growth potential of their digital extensions was also on display at the Fox network with another round of ratings wins on broadcast and record breaking results at <unk>.
Fox is the home to the best Entertainment programs in television, which together with sport helped propel the Fox network to its second consecutive broadcast season as the top network in primetime among the key demo adults 18 to 49.
This fall we are strongly performing returning kits and a slate of promising new shows in particular, we are looking forward to the addition of 2 new dramas to our fall lineup.
These are the big leap and our kind of people.
Fox has always thrived with shows featuring music and dance.
And the big Leap like Lee and so many others before lives right in that sweet spot.
The Big Leap is an optimistic dramedy about second chances and chasing dreams.
We think these themes are spot on coming out of the pandemic.
Our kind of people is inspired by Lawrence <unk> book of the same name.
It is executive produced by Empire creator Lee Daniels and stars Karen just.
It's an absorbing story that takes place in the aspirational world of Oak bluffs on Martha's vineyard.
And I am very pleased today to announce a new partnership with Gordon Ramsay studio Ramsey Global which will acquire Gordon's current TV business and will develop produce and distribute new culinary and lifestyle programming across all fox platforms, including <unk>.
Now, let's take a moment to talk about <unk>.
At the end of the fiscal year to be surpassed 3 billion hours streamed up more than 50% over the prior year.
During our recent June quarter, total view time surpassed 900 million hours up more than 40% over the prior year quarter.
We spoke about it together last quarter, but I cannot emphasize enough the importance of total view time or TVT as the critical metric for AD supported streaming.
It is the best measure a burgeoning engagement on tubing and correlates directly to the monetization of the platform.
And there is no shortage of great content to keep audiences watching 2 leads the industry with the largest library of content with more than 35000 movies and TV series available.
And that library continues to expand with 2 B's first original movies tardy genres that are informed activities machine learning capabilities and supported by tight production budgets and just weeks. These titles have exceeded our financial and strategic objectives.
Throughout the fall, we will modestly ramp the launch of TUI originals, a number of which will be produced in house by Fox Alternative Entertainment and our animation studio Bento box.
But let me be crystal clear about 1 thing.
<unk> our original programming strategy is very different from the strategies of an S thawed streamer.
We have no interest or plans to invest in high cost programming to drive subscriber acquisition as we are not in the subscriber business.
We are focused on delivering programming that drives total viewing time enhanced monetization in very short order.
The return on our programming investment is measured in weeks not years and should be viewed from a completely different lens that investments in the <unk> universe.
We're in a very different space.
It's a space focus on advertisers and advertisers are increasingly seeking out <unk> as a leading platform to reach a younger audience that is both largely on duplicated from our traditional fox audience and not regularly streaming other ewald services.
In the recent quarter to be featured adds more than half of <unk> of the AD age top 200 brands.
With the reach and brand recognition of Fox behind it to be nearly double the number of brands buying its inventory in the upfront and more than tripled its upfront dollar commitments over the prior year.
Despite the COVID-19 related headwinds earlier in the fiscal year.
Fox television stations per quarter core advertising revenue that was on pace with the prior year when excluding the Super Bowl comp last year and the record political revenue in the current year.
I just 1 example, the adoption of legalized gambling is driving increased advertising spend particularly in Philadelphia and Detroit.
We anticipate additional markets, including Arizona, and Wisconsin to launch legalized sports betting in fiscal 'twenty 2.
The Fox television stations are particularly well positioned to capitalize on this opportunity given the strength of our stations in these markets.
Fox Sports also had a noteworthy year expanding its ratings dominance in live sport, while also extending and enhancing our long term rights agreements per agreement with the NFL.
We will remain not only the leader in football ratings, but also the home of the Premier NFC rights package through the 2033 season, thanks to our new multiplatform rights deal with our partners at the NFL, which includes the designation of Fox bet as an authorized sports book operator of the league.
We expect the companywide momentum our fiscal 'twenty, 1 to carry into our current fiscal year.
Macroeconomic trends bode well for a strong advertising market and brands are increasingly turning to our linear and digital assets to reach the largest collection of loyal and engaged viewers.
The return of normal sports and entertainment schedules, coupled with the ongoing leadership of Fox News media will enable us to capitalize on the robust ad market.
In addition to delivering strong underlying operating and financial results in fiscal 'twenty..2 we are focused on expanding our digital businesses.
We are reinvesting a portion of the profit and free cash flow from our core businesses into the high growth and high opportunity digital assets that we know to be essential elements of our future.
This past quarter also saw the completion of a wide range of transformational technology investments that provide us with a range of modern state of the <unk> platforms that will power the growth of our businesses for years to come.
These new capabilities include a new distribution and streaming operation in Arizona due.
Due to brand new data and advertising platforms that will underpin and evolve and evolving an advanced set of commercial offerings for clients across all of our products and services.
These investments now complete position us strongly to seize on the growth opportunities that lie ahead.
We continue to deploy capital in a responsible manner to support <unk>, The Fox News media digital properties, including Fox Nation, and the launch of Fox weather as well as our other emerging digital businesses. We believe these investments relatively modest compared to those being made by our peers.
Subscription streaming areas will yield long term significant returns and position us well to continue to adapt and take advantage of the evolving media landscape.
And now Steve will take us through the details of the fiscal year and the fourth quarter.
Thanks, a lot Glenn and good afternoon.
Looking back at our recently completed fiscal year Fox delivered total revenues of $12.9 billion.
Up 5% versus the price. This is despite the impact of COVID-19, and the cyclical comparison with revenues generated from last year's broadcast of Super Bowl 54.
Notwithstanding these 2 headwinds full year advertising revenue still increased 2% propelled by a record political cycle. The significant contribution of <unk> and robust mid teens growth at the cable segment led by Fox News media.
Our best in class affiliate revenue growth was particularly noteworthy.
Total company affiliate revenues increased 9% on a reported basis and 10% on an underlying basis after adjusting for potential distribution credits at the cable segment due to COVID-19.
This underlying double digit companywide growth was led by 20% growth at the television segment.
Momentum across our digital businesses continues to be strong with digital revenue is growing over 40% to reach almost $1.4 billion those for the full fiscal year.
Taken together these impressive revenue achievement once again underlines differentiated strategy centered on our leadership brands and focused portfolio of assets built around built around live event programming, including news and sports.
From a bottom line perspective, the company delivered full year adjusted EBITDA of $3.1 billion, an increase of 11% over the prior year and a record in the company's short history.
Full year net income attributable to stockholders was $2.2 billion or $3.61 per share while adjusted EPS was $2.88 per share up 16% versus $2.48 last year.
Now turning to our results for the fourth quarter.
Total company revenues increased 20% to $2.9 billion driven by our fourth consecutive quarter of underlying double digit total the company affiliate revenue growth and strong pricing gains across the national and local ad markets.
Total company affiliate revenues increased 10% with 16% growth at the television segment and healthy 6% growth at the cable segment.
The rate of subscriber declines was stable in the quarter was trailing 12 months industry sub losses now running below 4.5%.
Total company advertising revenues increased 38% with a 15% growth at the television segment as the local market continued to rebound from Kobe COVID-19 to be delivered another record quarter and the Fox network benefited from a healthy linear and digital marketplace.
Total company other revenues increased 30%, primarily due primarily due to the timing of sports sub licensing revenues as a result of Covid higher production volume at Bento box and continued momentum at Fox nation.
Quarterly adjusted EBITDA was $717 million down 3% over the comparative period in fiscal 'twenty, primarily due to higher programming and production costs as we return to a more normalized programming schedule as compared to the COVID-19 related delays and cancellations experienced in prior quarters.
Additionally, we also increased our investment in our high growth digital initiatives at Fox News media and tubing.
Net income attributable to stockholders of $253 million or <unk> 43 per share was notably higher than the $122 million or <unk> 20 per share in the prior year quarter.
This increase reflects the absence of impairment and restructuring charges booked in the prior year quarter net of the impact of Mark to market adjustments associated with the company's investments recognized in other net.
Excluding these impacts and other non core items adjusted EPS of <unk> 65 per share was up.
5% over last year's <unk> 62 per share.
Turning to the performance of our operating segments for the quarter, where cable networks reported a 10% increase in revenues.
Cable affiliate revenues increased 6% once again led by double digit pricing gains at Fox News.
Cable advertising revenues increased 17% driven by continued strength in digital monetization at Fox News media and the return of live events and studio show programming at Fox Sports, which were both impacted by Covid in the prior year.
Cable other revenues increased by $25 million.
Primarily due to the timing of sports sub licensing revenues as a result of Covid and continued subscription momentum at Fox nation.
EBITDA at our cable segment was flat against the prior year as the revenue increases were offset by higher programming and production costs at Fox sports following the Covid related postponements and cancellations in the prior year.
We also increased our investment in key digital key digital initiatives at Fox News media, including Fox Nation, and the pending launch of Fox waiver.
Turning now to the TV segment, which reported a 30% increase in quarterly revenues.
Television affiliate revenues increased 16%, reflecting double digit increases for both our programming fees from Nona and station affiliates.
And for our direct retransmission revenues at our owned and operated stations.
This once again reaffirms that we are on track to achieve the TV affiliate revenue growth, we outlined at our Investor day.
Television advertising revenues increased by over 50% as we benefited from a meaningful rebound in the base market of the local Fox television stations.
Achieved strong pricing gains at Fox Entertainment and saw the return of Major League baseball at Fox Sports. This spring.
While 2 the continues to exceed expectations comfortably surpassing $100 million in revenue for the quarter typically its seasonally slowest quarter.
This brings to these full year revenue to almost $400 million.
Up nearly 170% versus the full prior year.
Other revenue that TV increased 18% in the quarter led by higher production volume of Bento box and higher co production revenues at Fox Entertainment.
EBITDA at our television segment was down $21 million versus prior year as gains at our local stations were more than offset by our investment in <unk> and higher costs at Fox network, primarily due to schedule changes caused by Covid.
Switching net of cash flow.
During the year, we generated free cash flow, which we define as net cash provided by operating activities less capex.
$2.2 billion.
As we foreshadowed on our last earnings call, we deployed $1 billion of capital in fiscal 'twenty, 1 to repurchase over 22 million class a shares.
And over 9 million class B shares.
Against our initial buyback authorization of $2 billion we.
We have now cumulatively repurchased over $1.6 billion.
Representing 8% of our total shares outstanding since the launch of the buyback program in November 2019.
And as a reminder, our board recently approved an additional $2 billion to our buyback authorization, meaning that we have over $2.3 billion of that combined authorization remaining.
Underlining our continued commitment to shareholder returns today, we announced an increase in net semiannual dividend to 2004 sales per share.
Over the course of the fiscal year, we returned $1.3 billion to shareholders in the form of share repurchases and dividends.
Which when including the payment of the dividend we declared today will take the total cumulative amount of capital returned to shareholders to approximately $2.5 billion since since the spin of Fox Corporation in March of 2019.
From a balance sheet perspective, we ended the quarter with $5.9 billion in cash and approximately $8 billion in debt.
Finally, let me take a few moments to provide some markers for a fiscal 'twenty 2.
We are anticipating robust top line growth across our businesses over the course of next fiscal year.
This is predicated on disruption free programming schedules and comes despite the comparison with a record net political revenues of over $350 million, we saw in fiscal 'twenty 1.
As Lachlan referenced we expect the underlying company wide advertising that I mentioned, we sold anything.
Okay.
To carry into fiscal 'twenty 2.
With approximately 5% of our total company affiliate revenue due for renewal, we expect a moderation in the growth of distribution revenues in fiscal 'twenty, 2 as we comp against the major renewal in the prior year and prepare for the start of the next renewal cycle in fiscal 'twenty 3.
Using the strength of our core businesses as a platform we will use fiscal 'twenty 2 to investing in the expansion and acceleration of our digital assets.
We anticipate investing in the range of $200 million to $300 million of net EBITDA with a particular focus on to the Fox nation and the launch of Fox with Us.
This is an appropriately sized investment for these high growth assets that will be a key part of our future.
Looking further out to fiscal 'twenty 3 the confluence of Premier sporting events, including the Super Bowl and the World Cup in combination with the midterm election cycle will make for a unique opportunity across our leadership brands and platforms.
These cyclical items, coupled with the start of our next major distribution renewal cycle. The early exit from at this day night football deal and continued growth of our digital initiatives.
To provide a strong financial tailwind for our business.
Coming back to today, we enter fiscal 'twenty, 2 from a position of operating and financial strength.
<unk> is reflected in our balance sheet, we will use existing cash balances to pay down the $750 million debt maturity that will come to you in January.
Beyond this we will continue to take a balanced approach to allocating capital between direct investment in our businesses strategic M&A and capital returns to shareholders.
With that I'll now turn the call back to Joe.
Thank you Steve.
And now we'd be happy to take some questions from the investment community.
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1 moment please for the first question.
We do have a question from Jessica Reif Ehrlich.
<unk> Securities. Please go ahead.
Hum.
A follow up and then a question.
So my follow up is you.
You laid out Steve in particular day towards the end on your investment priorities for fiscal 'twenty, 2 including digital assets and original et cetera, I mean.
Just if you can clarify is this the peak year of spend and whatever you can say about sports rights and sports sports rights in sports betting as part of this investment here would be helpful. But even with all of that you still have an incredibly strong balance sheets.
Do you feel like you need to get bigger and then my question is you've had a great really fantastic upfront as it gets.
The whole industry has had can.
Can you give us color on pricing and sell out pretty much across all of the assets not just the network.
Cable assets as well as Tobey. Thank you.
Thanks Jessica.
So.
I would like to cash characterization I have a follow up and then a question because that's all I've got 2 questions.
That's fine.
Good day or good to hear your voice.
So.
First of all in terms of.
The investment in the digital assets, our digital assets are growing very impressively I think this year. If you look at the fiscal year. We ended up at a $1.4 billion of digital revenue, which was up 44% year on year or so so.
Obviously, we like these assets and we're going to continue to invest in them to continue to grow them.
But we're I think we're doing so pretty young pretty prudently balancing.
Balancing.
The opportunity with <unk>.
With the costs that we're putting against them.
Do we need to get.
Bigger.
We're always looking at how to grow both both organically and Inorganically.
We don't feel any pressing strategic need.
To get bigger we don't have any.
Kind of holes in our portfolio, particularly when you look at our kind of.
Strength in live news and live sports and now in entertainment.
And to be in and it's really pleasing to see now how quickly our <unk> is growing so we don't need so we don't see.
Strategic.
Need to.
Our grow differentially went up we're not if you look at the.
Consolidation that's been happening around the industry a lot of that is around subscription.
Subscription video streaming and thats, not a and the desire to et cetera.
Acquire.
Larger entertainment libraries and production capabilities.
That's not of that.
Is that sort of scale and then not a not a space that we are.
We need to be in right now so so we feel pretty confident where we are but we I'm pretty comfortable where we are but we do continue to look at opportunities as they come up in terms of the.
Upfront pricing and I think you asked to go into some.
Detail around it.
So in current scatter pricing.
Look this was a absolutely historic.
Upfront season.
For us, but I'm sure for some of our our peers as well as the AD market rebounded from from the depths and the lows over the net of Covid affected our year last year. So the comparisons are.
Or kind because of because of we were a year ago, but having said that all of our categories.
Our up very strongly with the exception of 2 which are auto and telecom.
Telecom and there are specific reasons around around those categories. I know we've spoken on prior quarterly earnings calls about about the auto supply issues, they're having but if you look at retail.
This is I'm talking sorry, Jessica this is for our local our local business at the moment.
So the TV stations, our retail is up like 10% or entertainment, which includes that are there.
That really growing in an exploding our wagering category is up 300% year on year media up 43%.
Pharmaceutical pharmaceutical up 25%, even travel which is a much smaller category for us locally up 76%. So so a lot of growth in <unk> across the majority of categories again with the exceptions of auto and telco if you exclude political advertising.
Our sales are pacing up about 8% locally so so we feel.
We feel really good there and obviously the momentum is carrying the momentum into the new year.
From a a national point of view said the Upfronts were were very strong our pricing was was all up over the 20% Mark.
<unk> and.
Then pushing into the mid twenties.
And since the upfront or scatter.
Our pricing is again up.
That much again in <unk> and more.
The NFL is selling very well our major league baseball as interesting as a as an aside and this I think this bodes well for the.
The rest of the season and post season.
A field of dreams game on next week, and Thats that set a record.
For a regular season.
Baseball game so.
So a lot of positive momentum across all of our categories are.
Not the least of which is Fox news, which is strong very strong sales with expanded demographics and obviously the digital platform as well so now we feel.
We feel very good about the AD market and we think it's going to continue for some time.
Operator, we can go to the next question.
We have Robert Fishman of Moffett Nathanson. Please go ahead.
Hi, good afternoon.
And to be Glenn to expand on your prepared remarks, how do you measure the ROI of of content investment and can you further explain whether the shift to original has essentially moved away from the more standard Avon model of revenue share and just lastly unrelated note how he wished how do we think about <unk> margin.
<unk>.
As revenue growth and reaches your $1 billion guidance.
Sure so.
Let me start with the.
How about giving us in the right order, but but.
But there are sort of how we look at the ROI on our content and then we can get into the.
But the margins and maybe Steve can take the.
The financial aspects of that question. So so when we look at.
To be content make I remember from a from a and AA volume perspective, and as I mentioned in my prepared remarks.
And last quarter.
Ah.
It's all around our total viewing time and how much the advertising impressions that we can generate through increasing and expanding the engagement.
As measured through total viewing time and it was really pleasing that.
I think in the <unk>.
Fiscal year, we did 3 billion hours of total viewing time, which was up 50%.
Year on year.
So the way to grow obviously total viewing time is if we can grow.
Viewers.
And multiply it by the amount of content and the length of time, they're spending in Washington that content and we look at the content and basically.
I'd say 5 different categories.
Third party content.
And that's where we have about 34.35000 hours of library.
Which is which is which is growing as well as our third party content, that's a mixture of.
Of our revenue share and sort of.
And licensed content.
There is an increasing amount of Fox owned our content and IP that we're able to put put onto tubing, which is which is our really pleasing a C and I think I think.
Helps drive to be awareness and the brand.
There is a news category, which is really starting to take shape and increase engagement.
There is a sports category, which we'll be launching.
Our sports channels soon.
Soon I know, including the.
The NFL.
Channel.
And from others Force and then and then finally there is.
To be originals.
And.
To be original has only just.
<unk> begun to launch, but we are seeing the return in a very short order. These movies are.
Very price effective and we're able through <unk>.
Technology to really target them very specifically to vary.
Well defined genres that we know if we promote them correctly on the <unk> platform They will drive.
A consistent.
The expected amount of viewing which we can then monetize very efficiently.
So the.
The model.
From the investment into the original programming.
It's really derive specifically.
The exact amount of revenue that we are we can derive out of that original program. So it's unlike <unk>, where you are creating original programming too.
Postal scrubbers in.
Once they are in the platform. They don't watch that program that I watch other library programming, where non interest in subscriber acquisition acquisition were purely interested and the time they spend on the platform and the amount of content.
Consumer.
Steve do you want to talk to the margins yeah. So Robert just in terms of margin listen that.
The biggest single cost of the business is obviously programming and even without steps towards original programming. The library is going to be heavily concentrated towards revenue share titles.
Both movies and series on on that front and so therefore, it kind of galvin's a lot of your margin because that revenue share come straight off with revenue and then you've got Ya.
Customer acquisition of your acquisition costs as well as technology now as you sort of called out the $1 billion target that we have which is an interim target that we have for the business.
Well, we're still in a kind of it's almost like a market establishment sites for this business and so you Shouldnt expect this business to be.
<unk> contributed to us anytime soon we're going to continue to investing as we've called out on the call today.
That investment will go towards a sort of 3 core pillars.
The content user acquisition slash marketing as well as technology. If you look at sort of the to be in the first 3 quarters of this fiscal year was virtually a push for us financially.
So we can almost dial up and dial down that margin as we see fit but with asset sales.
Certainly our bias at the moment is to lean into investing in that business, which will be a drag on margin for the next year or 2 to come.
Operator next question please.
Next we have John <unk> from Wolfe Research. Please go ahead.
Thanks.
Got to maybe I'll call those follow ups. If you don't mind, 1 would be can you talk more about how you are thinking about spending that incremental investment dollar loss.
When he talks about growth. So when you speak to those growth areas does that suggest investment in the linear cable and network businesses exports will be fairly modest going forward and then separately it sounds a lot.
They've had services out there went out aggressively in the upfront that somehow have a pretty big tailwind on CPM and so can you talk about how you think to be priced relative to other services and to what extent Theres a GAAP and then a practical level how quickly can you close it.
Thanks, Sean so.
So in terms of in terms of the investment going forward.
<unk>.
As I've mentioned in my in my prepared remarks.
Big investment in terms of Arb.
That's partially in terms of our linear business from a technology point of view has been.
Arizona.
Play out in data Center Technology Center, which is now completed and that brings us into I think there are.
Yeah.
Best in class kind of.
Infrastructure for all of our product obviously that's.
Built today to be multi platform. So it's an investment in both in the linear business, but also as importantly in the digital businesses as a digital business continues to grow.
$202 million to $300 million, Steve as called out in terms of the investments of this year.
Further investment in our in our in our digital assets is really split between as I think Steve mentioned, Fox nation, which which.
Which is a subscription service.
But continues to grow engagement.
As.
Really tremendously low churn and <unk> and <unk>.
Remains.
Kind of a fantastic conversion rate from from trial users to paid users.
Well over 80%.
Fox News Dot Com will continue to push into.
Our new verticals of content.
There planning and exploring content around sort of real estate around cooking around sort of are some engaging games and crosswords and things is as we drive.
The Fox news brand into index sort of more of lifestyle.
Lifestyle categories.
And and <unk>.
<unk>.
I think we've addressed so those are the key areas of investment this year not the.
Not the linear.
Businesses.
In.
Avon.
To be in terms of how we price the upfront.
I think the important thing for us and I can't talk to our competitors and I wouldn't know, but the <unk> revenue in our upfront is entirely incremental right and that's.
That's really important we.
We are careful to not.
Move revenue from 1 pocket to another and say that I look at all the revenue. We are we've been able to attach or pushing to be the <unk> revenue is entirely incremental to what we otherwise sold on our on our linear assets and Thats, a really pleasing thing to see because of the way <unk> structured with.
With our programmatic advertising in fact, we got a very high rate for our programmatic advertising on <unk> and so we're careful actually to constraint solve somewhat to what we sold into the into the upfront.
<unk>, because we feel towards some as the year progresses, and we will do extremely well through our programmatic.
Advertising in the Cpm's, we get through through programmatic. So when we hit the triple revenue Mark in the upfront for <unk>. We decided that was that was enough. We would stop there and we would leave plenty of impressions for our programmatic, which I think is the right strategy for us.
Okay.
Thank you operator next question please.
Ben Swinburne Morgan Stanley. Please go ahead.
Thanks, Good afternoon.
Steve You mentioned renewal cycle, starting again in fiscal 'twenty 3 and you guys were really helpful back at your initial Investor day, and kind of helping us think about the timing of that over the course of the next few years, which are now wrapping up I didn't know if there was any thing you could help us in thinking about the cycle that starts in 'twenty 3 if it looks like the last 1 in terms of the.
Curve or anything you would add and then on to the.
Sure.
I don't know this for Lachlan or whoever wants to take it maybe you could just give us sort of the pitch to advertisers.
Who have a number of Avon or SaaS option.
Including buying I think 2 of the inventory through people like Roku and Vizio and stuff what is it that you offer an advertiser, that's better or differentiated.
From Pluto or Hulu, or even buying Avon inventory through 1 of the plan.
Platforms that have the ability to aggregate, an even larger audience and maybe more specific data I would just love to hear more about how you guys go to market.
Thanks, Ben So and Stephen do you want to jump in on distributions, but but.
Sure.
Well effectively.
Steve will go into detail, but yes, 'twenty fiscal 'twenty 3 'twenty 4 is about a third of our <unk>.
Distribution.
Kind of volume comes up so so this year is relatively quiet compared to that and then.
30 odd percent of 33, 34% of our deals come up in 'twenty, 3 and then again in 'twenty 4.
Yeah. It was on a steeper.
Exactly.
Yes.
But really like single digits. This year, it's 30 mid Thirty's. The following year, then 24 again mid Thirty's and then a better quarter than the year after that so and remember that the 23 renewals will largely hit us will give us the benefit in terms of affiliate revenue growth in the back half of that fiscal year.
And so.
Ben you reminded us or me.
The.
Yes.
Investor Day, the original Investor Day, we had and I think we called out there.
We were going to incur.
Increase our affiliate revenue in the TV segment by $1 billion by I think it was calendar 'twenty 2 and.
We're well on track to them to achieve that.
That objective and net debt target that we set for ourselves.
Back at that Investor day so.
We're very very bright.
Very pleased with that for.
<unk> in terms of advertisers.
The debt.
<unk> is a very.
It's not about you don't sell these advertisers around so the mass mass scale and so.
I understand your point about some of the the Avon Aggregators.
With <unk>, we have an audience that is younger more diverse that can be very targeted we have very sophisticated advertising tools to ensure that advertisers and frankly they are there.
The people.
People, who are trying to reach are not inundated with our with our digital advertising.
Over over frequently right. So we have these on frequency tools that make sure that the advertising on <unk>.
It is appropriate in that.
Viewers getting a mix.
A mix of our AD server to them. So there's a dynamic technology behind which is behind <unk>, which is very unique and very valuable to them to our clients.
We're also not duplicated so we're very low duplication not only with the Fox network, but also.
To be viewers are unlikely a very small percentage of them are watching any other ewald service. They are into a large part exclusive to <unk>. So it really is a unique offering and offering that our clients are seeing the value in and really the proof is in the putting if you look at tripling their <unk>.
Revenue in.
In.
In the upfront and I think it was sort of doubling the.
The number of top brands.
On the platform I think the.
The proof is in the putting that this the <unk> story in the tube sales story.
Is really resonating with the top advertising.
Brands and clients are in the United States.
Okay.
Operator, we have time for 1 more question.
Our last question comes from the line of Doug Mitchelson of Credit Suisse. Please go ahead.
I think if I have the rules right I can ask a follow up a clarification and a question.
As many follow ups as you often.
Thank you Lachlan.
For Steve My follow up was I just wanted to.
Be clear on on the <unk> investment it sounds like from Laughlin commentary that any incremental investment you're making originals you expect a fairly quick payoff. So is it right to think that within your 200 to 300 million of EBITDA investment in growth. The 2 b portion of that.
Net basis is really just the content and user acquisition.
Excuse me, the user acquisition and marketing and technology and not the content from sensor content return should be.
So quick in Laughlin the clarification is on NFL advertising.
Pre sales.
Does that compare to the entertainment upfront or are you seeing similar pricing or is there any difference there and the question Lachlan C. N N launching a streaming service next year not necessarily unexpected but is that interesting from a competitive standpoint does that influence your strategy at all with the digital offerings, you're pursuing on the Fox News site.
Thank you.
Thank you very much Doug.
I think the first question or clarification my follow up for you might be in for C. But the answer is yes.
Is that the the <unk> investment.
It is.
<unk> acquisition.
Marketing, which obviously feeds in the subscriber acquisition and technology spend here so.
The majority of the investment could you remind me wrong, Steve I'll hop off now.
All right and as I think you've got to look at content into kind of buckets. There's the originals, where it was and I think that's going to be modest from both a cash and P&L perspective, because you're physically just kind of ramp that up that quickly and then the second piece with the container investment is just building that bigger library with licensed content and so that's going to come in the form of both.
Revenue share deals and license deals in the license deals will obviously have a P&L impact and the Leds.
And then on.
I'm glad I was right along with us.
And then on.
Our non NFL, a pre sales NFL NFL is.
Is selling very well.
Cpm's of our strong positive.
We couldnt be.
Are you more pleased with our with the sales there.
We think.
We think.
For a lot of.
Issues in the marketplace, we think scatter pricing as well is going to remain a robust pricing through the end of the year, just because of the availability of spots across the kind of TV Yoon.
Universe. So we were confident in our very strong <unk>.
I felt a year by the way I didn't mentioned this and its not NFL, but on the sports side.
The all star game from Major League baseball.
It was a.
Terrific.
Revenue our results for us are nationally, but interestingly locally in Atlanta.
We generated.
Oh really.
Stronger amount of political revenue on that local station for the for the all Star game.
Which was obviously.
Driven by the controversy around.
Major League baseball moving the game from from Atlanta to Denver.
And that debt.
Net political advertising was all.
Focused on the.
Midterm elections next year and so when we when we look at that the lessons I think we're taking from that is the next political season. The midterm season is going to be another record political season next year. It's off this year next year.
But we're going to C.
A staggering amount from political dollars flowing into enter into these these local stations and we can we can see that from simply just.
The 1 example of the Atlanta station in the for the for the <unk>.
All star game.
Non.
C N N.
C N N plus I think it's called.
Look we think.
No.
Uh huh.
It's a what's the word when someone southern copper as you, it's our best form of flattery.
We think.
Fox Nation continues to grow we think we're doing all the right all the right things with Fox nation.
About it before but but.
Tremendous our growth.
In the quarter.
Driven off of our clubs.
Clever clever acquisition and clever hi.
High quality programming, so we don't see.
C N N launching into that spaces as anything other than a M.
<unk>.
Affirm and of our strategy and what we're doing really driving the engagement and the tremendously high engagement from.
From Fox News.
Into our into our paid for.
Subscription service when we look at our competitors we are.
Heartened 5 by their ratings trends as I mentioned in my.
Prepared comments, we are now regularly.
Beating both the combined ratings I am primetime of AR and many times in all day of CNN and MSNBC combined if.
If you take just last night as 1 example on the ratings.
Ratings, just just dropped a half an hour or so ago, while we're on the call.
In Prime time.
Fox News day.
$2.4 million.
9 people in Pizza plus C.
N N to under 750000 and MSNBC under <unk>.
Under our $1.2 million so you've got it.
2.
2.400 million versus a.
1.1, 0.9.2 million. So we're regularly we beat them combined plus with a margin of 20 per cent or so so very very.
Our strong ratings trends.
Strong engagement with our audience and that really goes to our whole digital strategy. How do we how do we take that audience and take that engagement and expanded across multiple platforms.
Thank you for the question.
At this point, we're out of time, but if you have any further questions. Please give me or Dan Carey a call.
Thank you once again for joining today's call.
Ladies and gentlemen that does conclude your conference call for today. Thank you for using AT&T executive teleconference, and you may now disconnect.
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