Q2 2024 Fox Corp Earnings Call

February 7, 2024

Operator: Please continue to hold, www.foxcorp.com Ladies and gentlemen, thank you for standing by. Welcome to the Fox Corporation's second quarter fiscal year 2024 earnings conference call. At this time, all participants are in a listen-only mode.

Okay.

[music].

Okay.

Speaker Change: Ladies and gentlemen, thank you for standing by welcome to the Fox Corporation second quarter fiscal year 2024 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 the functionality for the question and answer session.

Operator: Later, we will conduct a question and answer session. I would like to emphasize the functionality of the question and answer session. Questions will be given at that time. If you should require assistance during the call, please press star, then zero.

Speaker Change: In Q will be given at that time, if you should require assistance during the call. Please press Star then zero as a reminder, this conference is being recorded I would now like to turn the conference over to Chief Investor Relations Officer Ms. Gabrielle Brown. Please go ahead Ms Brown.

Operator: As a reminder, this conference is being recorded. I would now like to turn the conference over to Chief Investor Relations Officer, Ms. Gabrielle Brown. Please go ahead, Ms. Brown.

Gabrielle Brown: Thank you, operator. Good morning, and welcome to our fiscal 2024 second quarter earnings call. Joining me on the call today are Lachlan Murdoch, Executive Chair and Chief Executive Officer; John Nallen, Chief Operating Officer; and Steve Tomsic, our Chief Financial Officer.

Gabrielle Brown: Thank you operator, good morning, and welcome to our fiscal 'twenty 'twenty four second quarter earnings call. Joining me on the call today are Lachlan Murdoch Executive Chair and Chief Executive Officer, John Nolan, Chief Operating Officer, and Steve Tomsic, Our Chief Financial Officer, first Lachlan and Steve.

Gabrielle Brown: First, Lachlan and Steve will give some prepared remarks on the most recent quarter, and then we'll 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 company's SEC filing. 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, which are available in the Investor Relations section of our website.

He will give some prepared remarks on the most recent quarter and then we'll take questions from the investment community.

Gabrielle Brown: Please note that this call may include forward looking statements regarding Fox Corporation's financial performance and operating results. These.

Gabrielle Brown: 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 company's SEC filings. Additionally, this call will include certain non-GAAP financial measures, including adjusted EBITDA or EBITDA as.

Gabrielle Brown: We refer to it on this call reconciliations of non-GAAP financial measures are included in our earnings release, and our S. E T filings, which are available in the Investor Relations section of our website and with that I'm pleased to turn the call over to Lachlan.

Lachlan Murdoch: And with that, I'm pleased to turn the call over to Lott. Thank you, Gabby, and thank you all for joining us this morning. Against the backdrop of an active news cycle and another robust fall sports schedule, our fiscal second quarter again illustrated the strength of Fox. The growth we delivered in affiliate fee revenues was the standout this quarter, with the television segment growing by 10% and the cable segment returning to growth, once again demonstrating the power of our brands and our programming. We have now largely completed our fiscal 24 affiliate renewal cycle, having achieved our commercial goals without disruption and setting a solid foundation for renewals in fiscal 2025 and beyond. As expected, advertising revenues in the quarter were down, primarily due to comparisons to last year's major cyclical events, including the midterm elections at the TV stations and the broadcast of the Men's World Cup in the cable and television segments, parsing through the cyclical comparison.

Lachlan Murdoch: Thank you Debbie and thank you all for joining us this morning.

Lachlan Murdoch: Against the backdrop of an active new cycle and another robust fall sports schedule, our fiscal second quarter again illustrated the strength of Fox.

Lachlan Murdoch: The growth we delivered in affiliate fee revenues was the standout this quarter with the TV segment growing by 10% and the cable segment returning to growth once again, demonstrating the power of our brands and our programming.

Lachlan Murdoch: We have now largely completed our fiscal 'twenty four affiliate renewal cycle, having achieved our commercial goals without disruption and setting a solid foundation for renewals in fiscal 2025 and beyond.

Lachlan Murdoch: As expected advertising revenues in the quarter were down primarily due to comparisons to last year's major cyclical events, including the mid term elections at the television stations and the broadcast of the men's World Cup in the cable and television segments.

Lachlan Murdoch: Parsing through the cyclical comparisons our concentration in news and sports coupled with the outstanding performance of <unk> is clearly an advantage and a mixed advertising environment.

Lachlan Murdoch: Our concentration in news and sports, coupled with the outstanding performance at TUBI, is clearly an advantage in a mixed advertising environment. More specifically, sports advertising was very healthy during the quarter, and we saw particularly strong demand for NFL and college football, which continued into the NFL playoffs. In news, the second quarter was more nuanced.

Lachlan Murdoch: More specifically sports advertising was very healthy during the quarter and we saw particularly strong demand for the NFL and college football, which continued into the NFL playoffs.

Lachlan Murdoch: At news the second quarter was more nuanced, while preemption and the direct response market adversely impacted quarterly growth, we sequentially narrowed the gap between the current and prior year and ratings and in pricing.

Lachlan Murdoch: While preemptions and the direct response market adversely impacted quarterly growth, we sequentially narrowed the gap between the current and prior year in ratings and prices. We were also able to increase our viewing share over the previous quarter, and the positive trends in share, ratings, and prices have carried over into the current quarter. Last week, I visited our bureau in Jerusalem, met with our talented and dedicated staff there, and saw firsthand the devastation wrought by Hamas on October 7.

Lachlan Murdoch: We were also able to increase our viewing share over the previous quarter and the positive trends and share ratings and pricing have carried over into the current quarter.

Speaker Change: Last week I visited our Bureau in Jerusalem.

Speaker Change: With our talented and dedicated staff there and saw firsthand the devastation wrought by Hamas on October seven.

Speaker Change: Our hearts, our thoughts and our prayers go out to the victims of that day.

Speaker Change: Innocents killed in Israel and in Gaza.

Speaker Change: And the hostages still denied the embrace of their families and loved ones.

Speaker Change: The work our correspondents are camera people and our producers do reporting on these events is important outstanding and deeply appreciate it.

Speaker Change: Now onto sports.

Speaker Change: In calendar 2023, 96 of the year is 100, most watched telecast or live sports.

Lachlan Murdoch: Fox is responsible for 29 of the year's 100 most watched shows, more than any other network. This marks the fifth straight year that Fox has topped the industry in live sports viewing and demonstrates the unparalleled reach and engagement our content achieves. The 30th NFL regular season on Fox concluded with an average of 19 million viewers across all games, with America's Game of the Week averaging 25 million viewers and an eight-year high, and Fox NFL Sunday logged its 30th straight year as the number one NFL pregame show.

Speaker Change: Fox was responsible for 29 of the year is 100, most watched shows more than any other network.

Speaker Change: This marks the fifth straight year that Fox is top of the industry in live sports viewing and demonstrates the unparalleled reach and engagement our content achieves.

Speaker Change: The 30th NFL regular season on Fox concluded with an average of 19 million viewers across all games with Americas game of the week, averaging 25 million viewers, an eight year high.

Speaker Change: And Fox NFL Sunday logged its 13th straight year as the number one NFL pregame show.

Speaker Change: That strength continued into into the post season with Fox has three postseason windows delivering a best ever play off average of almost 45 million viewers across the wildcard divisional and championship games.

Lachlan Murdoch: That strength continued into the postseason, with Fox's three postseason windows delivering a best-ever playoff average of almost 45 million viewers across the wildcard, divisional, and championship games. In digital, we saw strong engagement on Tubi, which finished with a very impressive 62% growth in total view time and 17% growth in revenue. Tubi's library of over 240,000 movies and TV episodes, coupled with ubiquitous distribution, drove engagement, helping Tubi reach 78 million monthly active users, logged almost 2.5 billion streaming hours in the quarter, and set a new monthly record of 855 million total viewing hours in December alone. Tubi has consolidated its position in the streaming landscape, ranking as the most watched free TV and movie streaming service in the United States, according to Nielsen, and surpassing Peacock At Fox Entertainment, the second quarter saw programming strength, with Fox having the season's number one new broadcast entertainment series in Crapopolis. Hats off to Dan Harmon, the number one new game show debut in Snake Oil, and the number one cooking series in Hell's Kitchen.

In digital we saw strong engagement of <unk>, which finished with a very impressive 62% growth in total view time and 17% growth in revenue.

Speaker Change: <unk> library of over 240000 movies, and TV episodes, coupled with ubiquitous distribution drove engagement, helping to be reached 78 million monthly active users logged almost $2 5 billion streaming hours in the quarter and set a new monthly record of $855 million in total.

Speaker Change: Viewing hours in December alone.

Speaker Change: <unk> has consolidated its position in the streaming landscape ranking as the most watched free TV and movie streaming service in the United States. According to Nielsen and surpassing Peacock, Max Paramount plus and Pluto TV in view time for seven consecutive months.

Speaker Change: At Fox Entertainment, the second quarter, so our programming strength with Fox, having the season's number one new broadcast entertainment series in crap uplifts hats.

Speaker Change: Hats off to Dan Harmon.

Speaker Change: The number one new game show debut in Snake oil and the number one cooking series in health kitchen.

Speaker Change: We're also pleased with the very strong start of our mid season lineup and the early success, we are family and the floor.

Speaker Change: Before I hand over to Steve I'll comment on the sports platform, We announced last night between Fox Disney and Warner Brothers Discovery.

Speaker Change: This new and unique digital distribution platform is focused on sports fans outside of existing pay TV offerings.

Speaker Change: Upon launch in the fall of 2020 for the platform will offer a broad suite of sports, including those from a combined 14 linear networks that broadcast sports today.

Lachlan Murdoch: We're also pleased with the very strong start of our mid-season lineup and the early success of We Are Family and The Floor. Before I hand over to Steve, I'll comment on the sports platform we announced last night between Fox, Disney, and Warner Bros.

Speaker Change: The inclusion of our networks in the platform is consistent with our strategy being proudly consumer first and distribution agnostic.

Speaker Change: Across the distribution ecosystem, our traditional pay TV market will remain our dominant customer base for some time to come.

Speaker Change: As such we remain committed to our existing distribution partners, where our strong portfolio of leadership Sports News and entertainment brands thrive in their bundled offerings.

Speaker Change: This unique new platform opens up a new market for us one that we had talks have not excess before and they were excited to participate in.

Speaker Change: As always we are focused on delivering value for our shareholders in a thoughtful and disciplined manner and.

Speaker Change: And we will continue to explore every opportunity to maximize that value over the long term.

Speaker Change: Let me now turn it over to Steve for his comments on the quarter's financial results.

Steven Silvester Tomsic: Thanks, a lot Glenn and good morning, everyone.

Steven Silvester Tomsic: With the vast majority of our fiscal 2024 affiliate renewals now successfully completed flux delivered 4% growth in total company affiliate fee revenues led.

Lachlan Murdoch: Across the distribution ecosystem, our traditional pay-TV market will remain our dominant customer base for some time to come. As such, we remain committed to our existing distribution partners, where our strong portfolio of leading sports, news, and entertainment brands thrive in their bundled offerings. This unique new platform opens up a new market for us. One that we at Fox have not accessed before and that we're excited to participate in. As always, we are focused on delivering value for our shareholders in a thoughtful and disciplined manner, and we will continue to explore every opportunity to maximize that value over the long term. I will now turn it over to Steve for his comments on the quarter's financial results. Thanks, Lachlan, and good morning, everyone.

Steven Silvester Tomsic: Led by 10% growth of TV and a return to growth in cable. This growth reflects the must have nature of our content and the value that our distribution partners place on it.

Steven Silvester Tomsic: Consistent with our expectations regarding events cycles advertising revenues this quarter were impacted by the absence of the FIFA Women's World Cup at Fox Sports and midterm political revenues at the local television stations, along with lower advertising revenue at Fox News media collectively these factors contributed to a 20% decline in total company Advertiser.

Steven Silvester Tomsic: Revenues.

Steven Silvester Tomsic: Total company other revenues grew by 14% driven by higher sports sub licensing revenues.

Steven Silvester Tomsic: All in flux reported total company revenues of $4 $2 3 billion.

Steven Silvester Tomsic: Down 8% from the prior year.

Steven Silvester Tomsic: Total company expenses decreased 5% over the prior year, primarily due to the absence of the men's World Cup at Fox Sports and fewer hours of original scripted programming or entertainment due to the strikes.

Steven Silvester Tomsic: However, this was partially offset by the first step up under a new NFL rights agreements.

Steven Silvester Tomsic: Quarterly adjusted EBITDA was $350 million as compared to the $531 million reported in the prior year quarter.

Steven Silvester Tomsic: Net income attributable to stockholders of 109 million or <unk> 23 per share compares to the $330 million or <unk> 58 per share reported in the prior year period.

Steven Silvester Tomsic: With the vast majority of our fiscal 2024 affiliate renewals now successfully completed, Fox delivered 4% growth in total company affiliate fee revenue, led by 10% growth at television and a return to growth at cable. This growth reflects the must-have nature of our content and the value that our distribution partners place on it, consistent with our expectations regarding the events cycle. Advertising revenues this quarter were impacted by the absence of the FIFA Men's World Cup at Fox Sports and mid-term political revenues at the local television station, along with lower advertising revenue at Fox News Media. Collectively, these factors contributed to a 20% decline in total company advertising revenue.

Steven Silvester Tomsic: Largely due to the EBITDA impact I, just mentioned along with the net changes in the fair value of the company's investments recognized in other net.

Steven Silvester Tomsic: Our effective tax rate for the quarter came in at 12%, reflecting a one off re measurement of our deferred tax assets as a result of changes in state tax laws.

Steven Silvester Tomsic: Excluding this impact and other noncore items adjusted EPS was <unk> 34 per share versus last year's 48 screens.

Steven Silvester Tomsic: <unk>.

Steven Silvester Tomsic: Turning to our segments, starting with cable, which reported 2% growth in total quarterly revenues cable affiliate fee revenues increased by $5 million.

Steven Silvester Tomsic: With growth in pricing from our distribution renewals outpacing the impact from industry subscriber declines running at approximately 8%.

Steven Silvester Tomsic: Cable other revenues increased $124 million larger.

Steven Silvester Tomsic: Largely driven by high sports sub licensing revenues associated with our college sports and international soccer agreements.

Steven Silvester Tomsic: Is this growth in affiliate and other revenues was partially offset by a 23% decline in cable advertising revenues.

Steven Silvester Tomsic: At Fox News media advertising revenues were impacted by softer direct response marketplace.

Steven Silvester Tomsic: Low comparative writings and higher levels of preemption judo have breaking news coverage of global events.

Steven Silvester Tomsic: Total company other revenues grew by 14%, driven by higher sports sub-licensing revenues. All in, Fox reported total company revenues of $4.23 billion, down 8% from the previous year. Total company expenses decreased 5% over the prior year, primarily due to the absence of the Men's World Cup at Fox Sports and fewer hours of original scripted programming at Fox Entertainment due to the strike.

Steven Silvester Tomsic: Meanwhile, if the national sports networks, we measured against last year's broadcast of the men's World Cup.

Steven Silvester Tomsic: Expenses at the cable segment were 14% lower than the prior year with savings mainly gained from the absence of the men's World Cup as well as lower legal programming and production costs at Fox News media.

Steven Silvester Tomsic: Taking all these factors into account quarterly adjusted EBITDA at the cable segment grew 60% over the prior year quarter.

Steven Silvester Tomsic: Moving to our television segment, which reported total quarterly revenues of $2 five 4 billion.

Steven Silvester Tomsic: Down 13% from the prior year.

Steven Silvester Tomsic: The television segment reported strong 10% growth in affiliate fee revenues as price increases across all Fox affiliated stations more than offset the impact from industry subscriber declines.

Steven Silvester Tomsic: However, this was partially offset by the first year step-up under our new NFL rights. Quarterly adjusted EBITDA was $350 million as compared to the $531 million reported in the prior year. Net income attributable to stockholders of $109 million, or $0.23 per share, compared to $313 million, or $0.58 per share, reported in the prior year period, largely due to the EBITDA impact I just mentioned, along with the net changes in the fair value of the company's investments recognized in other networks. Our effective tax rate for the quarter came in at 12%, reflecting a one-off remeasurement of our deferred tax assets as a result of changes in state tax. Excluding this impact and other non-core items, adjusted EPS was $0.34 per share versus last year's $0.48. Turning to our segments, starting with cable, which reported 2% growth in total quarterly revenue.

Steven Silvester Tomsic: Television advertising revenues were down 19% as solid growth at <unk> was more than offset by comparisons with last year's cycle of major events, including the FIFA Men's World Cup in mid June and political revenues as well as the relative mix of World series match ups and getting counts.

Steven Silvester Tomsic: Television revenues for marriage tenant production companies was impacted by the Sag in WGNA labor disputes.

Steven Silvester Tomsic: This contributed to a $64 million declining TV other revenues most of that most of which was offset by a commensurate reduction in expenses.

Steven Silvester Tomsic: Overall expenses at the television segment remained flat as higher costs than the NFL agreement and a modest increase in investment to these were offset by lower costs from the absence of the men's World Cup low College sports rights costs and fewer ounces original scripted content due to the strikes.

Steven Silvester Tomsic: Together these revenue and expense impacts led to a quarterly adjusted EBITDA loss of $138 million of that TV segment.

Steven Silvester Tomsic: Compared to an EBITDA contribution of $256 million reported in the prior year quarter.

Steven Silvester Tomsic: Turning to free cash flow, where we recorded a deficit of $616 million this quarter.

Steven Silvester Tomsic: This is consistent with the normal seasonality of our working capital cycle with the first half of our fiscal year reflects the concentration of payments to sports rights and the buildup of advertising related receivables.

Steven Silvester Tomsic: In terms of capital allocation fiscal year to date, we have repurchased an additional $550 million through our share buyback through a share buyback programming brings.

Steven Silvester Tomsic: Cable affiliate fee revenues increased by $5 million, with growth in pricing from our distribution renewals outpacing the impact of industry subscriber declines running at approximately $8 billion. Cable other revenues increased $124 million, largely driven by high sports sub-licensing revenues associated with our college sports and international soccer. This growth in affiliate and other revenues was partially offset by a 23% decline in cable advertising revenue.

Steven Silvester Tomsic: Bringing the total cumulative amount repurchased 515 billion.

Steven Silvester Tomsic: Or 25% of our total shares outstanding since the launch of the program in 2019.

Steven Silvester Tomsic: In addition, today, we announced a <unk> 26 cents per share semiannual dividend.

Steven Silvester Tomsic: These capital return measures are supported by a robust balance sheet, where we ended the quarter with $4 $1 billion in cash and $8 4 billion in debt.

Steven Silvester Tomsic: These balances are before taking into account the repayment of one of our $125 billion note in late January and with that I'll turn the call back over to Gary to open up the Q&A.

Steve and now we'll be happy to take questions from the investment community.

Gary: Ladies and gentlemen, I would like to emphasize the functionality for the question and answer queue.

Steven Silvester Tomsic: At Fox News Media, advertising revenues were impacted by a softer direct response marketplace, lower comparative ratings, and higher levels of preemptions due to our breaking news coverage of global events. Meanwhile, at the National Sports Network, we measured ourselves against last year's broadcast of the men's well. Expenses at the cable segment were 14% lower than the prior year, with savings mainly gained from the absence of the Men's World Cup, as well as lower legal programming and production costs at Fox News Media.

Gary: If you wish to ask a question. Please press one then zero on your Touchtone phone you will hear a tone, indicating you have been placed in Q you may remove yourself from queue at any time by once again pressing one then zero. If you are using a speakerphone. Please pick up the handset before pressing the numbers it has.

Gary: It's been requested that you limit yourself to one question. Once again, if you have a question. Please press one zero at this time one moment. Please for the first question.

Gary: We have a question from Ben Swinburne with Morgan Stanley. Please go ahead.

Benjamin Daniel Swinburne: Good morning.

Benjamin Daniel Swinburne: Obviously big news in the new sports joint venture, So I'd love to get your thoughts really around that product and opportunity in kind of two areas. First is what is the opportunity that you guys see in the United States for a product like that.

Steven Silvester Tomsic: Taking all these factors into account, quarterly adjusted EBITDA at the cable segment grew 60% over the prior year quarter. Moving to our television segment, which reported total quarterly revenues of $2.54 billion, down 13% from the prior year. The TV segment reported strong 10% growth in affiliate fee revenues, but price increases across all Fox-affiliated stations more than offset the impact from industry subscribers. TV advertising revenues were down 19%, but solid growth at Tubi was more than offset by comparisons with last year's cycle of major events, including the FIFA Men's World Cup and mid-term political revenues, as well as the relative mix of World Series match-ups and games. Also at TV, revenue from our entertainment production companies was impacted by the SAG and WGA Labor Day strike. This contributed to a $64 million decline in TV other revenues, most of which was offset by a commensurate reduction in expenditures.

Speaker Change: Obviously, we're all focused on the cord cutter.

Speaker Change: Tam.

Speaker Change: Many people do you think are interested in a product like this and.

Speaker Change: And then do you see any risk to particularly Fox news. This is the first time you guys have offered a product with just Fox broadcast to hedge a balance that when you thought about putting this business together. Thanks so much.

Hey, Thank you very much Ben and good morning.

Speaker Change: So the opportunity is huge and that's why because.

Speaker Change: This.

Speaker Change: Sports focused platform is focused entirely on.

Cord noncore cut it for cord Nevers. So if you look at the American market, roughly say 125 million households in America and roughly half of those are not within the traditional.

Speaker Change: Bundled cable ecosystem and so the target for this this product which is going to be.

Speaker Change: I think incredibly innovative when you see it a rollout.

Speaker Change: It's really that that universe of call it <unk>.

Speaker Change: $60 million odd households that currently don't participate in the bundled.

Steven Silvester Tomsic: Overall, expenses at the TV segment remained flat, as higher costs under the NFL agreement and a modest increase in investment at Tubi were offset by lower costs from the absence of the Men's World Cup, lower college sports rights costs, and a few hours of original scripted content due to the strike. Together, these revenue and expense impacts led to a quarterly adjusted EBITDA loss of $138 million at our TVC, compared to an EBITDA contribution of $256 million reported in the prior year. Turning to free cash flow, where we recorded a deficit of $615 million this quarter. This is consistent with the normal seasonality of our working capital cycle, where the first half of our fiscal year reflects the concentration of payments for sports rights and the build-up of advertising-related receivables. In terms of capital allocation, fiscal year to date, we have repurchased an additional $550 million through our share buyback program, bringing the total cumulative amount repurchased to $5.15 billion, or 25% of our total shares outstanding since the In addition, today we announced a 26 cents per share semi-annual dividend. These capital return measures are supported by our robust balance, where we ended the quarter with $4.1 billion in cash and $8.4 billion in debt. These balances are before taking into account the repayment of our $1.25 billion note in late January.

Speaker Change: Cable and pay TV ecosystem. So we think it's a tremendous opportunity we've been working on it for I think it's been reported sworn in fairly accurately for for several months now.

Speaker Change: No.

Speaker Change: <unk> bin.

Speaker Change: Lucky enough to have seen some of the prototypes.

Speaker Change: For this service and again, it will be unique and and I think very innovative when you see when you see it rollout.

Speaker Change: In terms of the risks and particularly for Fox News I think the risks are very low and thats because of the focus of the sports product being on.

Speaker Change: The court the cord Nevers.

Speaker Change: Fox News continues to be operating on a cable network.

Speaker Change: Sure.

Speaker Change: And.

Speaker Change: Our distributors are partners really value.

Speaker Change: Uh huh.

Speaker Change: That channel and that brand as it.

Speaker Change: Really.

Speaker Change: Drives tremendous viewership in audience and engagement for them and we think we will continue to do so within the traditional.

Speaker Change: Cable and pay TV bundle.

Speaker Change: Thank you Ben Operator next question please.

Speaker Change: We'll go to Robert Fishman with Moffett Nathanson. Please go ahead.

Robert S. Fishman: Good morning, everyone sticking with the sports news.

Robert S. Fishman: I'll discuss with you the benefit of stock.

Robert S. Fishman: Sports led skinny bundles. So I'm just wondering any additional background you can share on what pushed the steel forward now, including maybe any flexibility you built into your recent affiliate renewals.

Robert S. Fishman: And then on.

Robert S. Fishman: On a related note should we expect to see any changes in your approach to negotiate future sports rights and any comments you want to share about the Netflix WWE deal that might impact. These negotiations going forward. Thank you.

Speaker Change: Well, let me.

Speaker Change: Start back.

Speaker Change: Back to front are Robert So there is no impact on the Netflix Ww deal at also I don't think that that plays a factor in this and in fact in how we.

Gabrielle Brown: And with that, I'll turn the call back over to Gabby to open up the queue. Thank you, Steve. And now, we would be happy to take questions from the investment community. Ladies and gentlemen, I'd like to emphasize the functionality of the question and answer queue. If you wish to ask a question, please press 1, then 0 on your touchtone phone. You will hear a tone indicating you have been placed in queue. You may remove yourself from the queue at any time by once again pressing 1, then 0.

Speaker Change: Approach are.

Speaker Change: <unk> portfolio of sports rights.

Speaker Change: We will be aggressively competing in the sports market.

Speaker Change: For for sports rights that nothing has changed there.

Speaker Change: The primary.

Speaker Change: Ah.

<unk>.

Speaker Change: Business.

Speaker Change: And valuations and Fox sports is competing both for every.

Speaker Change: Scriber in traditional.

Speaker Change: Cable pay TV bundle.

Speaker Change: And advertisers viewer and ultimately advertisers so sports remains a competitive business.

Speaker Change: Which we frankly, we thrive in and we don't see any difference.

Operator: If you are using a speakerphone, please pick up the handset before pressing the numbers. It has been requested that you limit yourself to one question. Once again, if you have a question, please press 1, then 0 at this time. One moment, please, for the first question.

Speaker Change: To that.

Speaker Change: Led to this now I know I think we've.

Speaker Change: We've answered many questions on these quarterly calls over over.

Speaker Change: Three years.

Speaker Change: About that when we are ready to launch.

Speaker Change: Streaming service such as this and we will do it and we've been monitoring the space obviously for per year. So in past few years in particular.

Benjamin Daniel Swinburne: We have a question from Ben Swinburne with Morgan Stanley. Please go ahead. Good morning, Lachlan. Obviously, there is big news in the new sports joint ventures. I'd love to get your thoughts really around that product and opportunity in kind of two areas. First, what is the opportunity that you guys see in the United States for a product like that? Obviously, we're all focused on the cord-cutting sort of TAM, but how many people do you think are interested in a product like this? And then do you see any risk to, you know, particularly Fox News? This is the first time you guys have offered a product with just a Fox broadcast. So how'd you balance that when you thought about putting this business together? Thanks so much.

Speaker Change: <unk> and <unk> and as we developed.

Speaker Change: With our partners the concept around a very unique and innovative product.

Speaker Change: We felt now was the right time to launch such a product really into a new market right. It's a new market.

Speaker Change: Where theres no products, serving the sports fans that are not within the cable.

Speaker Change: Cable TV bundle. So if access is for us an access as a whole new market and really drives.

Speaker Change: Tremendous amount of new reach that we werent.

Speaker Change: We werent.

Speaker Change: Servicing before.

Speaker Change: Operator next question please.

Speaker Change: John Hodulik with UBS. Please go ahead.

John Christopher Hodulik: Okay. Thank you.

John Christopher Hodulik: First just quickly on the on the sports JV, just any cash contribution or can you size any cash contributions required for Fox and then.

Turning to advertising.

John Christopher Hodulik: Obviously, a number of things impacting the numbers. This quarter you guys had some some positive color as we as we look into next quarter, just any color one I'd say on the TV side, what Youre seeing at this point in terms of political and then.

Lachlan Murdoch: Hey, thank you very much, Ben. And good morning. So, the opportunity is huge. And that's really because this, you know, sports-focused platform is focused entirely on cord-cutters, not cord-nevers. So, if you look at the American market, there are roughly, say, 125 million households in America, and roughly half of those are not within the traditional bundled cable ecosystem. And so, the target for this product, which is going to be, I think, incredibly innovative when you see it roll out, is really that universe of, you know, call it 60 million odd households that currently don't participate in the bundled cable and pay television ecosystem. So, we think it's a tremendous opportunity. We've been working on it for, I think it was reported this morning fairly accurately, several months now.

John Christopher Hodulik: With the improvement in ratings in the year over year gap that Youre seeing closing can we assume that the 22% on the cable outside of sort of the worst number and any color on the sort of slope of the improvement we should see as we head through the year. Thanks, I'll ask I've lost track.

John Christopher Hodulik: Okay.

Speaker Change: Advertising and cable a.

Speaker Change: Cable advertising.

Speaker Change: After this we won't need any more questions and I'll cover that.

Speaker Change: Thanks, John on the on the cash side I'll, let I'll, let Steve fill in but it's obviously this business has both of you.

There's marketing and other costs associated with running the business in the partnership but there's also the revenue that we garner through affiliate fees for our networks.

Speaker Change: That come out.

Speaker Change: As the business grows, but I'll, let Steve yes on the detail side, John I think it's a touch early for us to be giving.

Steven Silvester Tomsic: Some forecast around sort of the contribution of deficit from the JV.

Steven Silvester Tomsic: As we look at it it will be accretive to us from a net net perspective, when you take into account.

Steven Silvester Tomsic: Affiliate fees that we will collect as revenue. This is what is the funding we need to make to the JV. We think from a net net to Fox perspective, it'll be accretive pretty quickly.

Lachlan Murdoch: You know, I've been lucky enough to have seen some of the prototypes for this service. And again, it will be unique and, I think, you know, very innovative when you see it roll out. In terms of the risks, and particularly for Fox News, I think the risks are very low. And that's because of the focus of this sports product being on, you know, the cord nevers.

Steven Silvester Tomsic: And then on advertising.

Steven Silvester Tomsic: Advertising.

Steven Silvester Tomsic: I think the advertising outlook is as mentioned with our with news, but you can apply to this terminal.

Steven Silvester Tomsic: The overall market is a nuanced as we look at it if I start with sports we had a very solid regular NFL season from an advertising perspective.

Steven Silvester Tomsic: And I think a stronger.

Lachlan Murdoch: You know, Fox News continues to be, you know, the top-rated cable network, and our distributors, our partners really value that channel and that brand as it really drives tremendous viewership, audience, and engagement for them. And we think we'll continue to do so within the traditional cable and pay television bundle. Thank you, Ben. Operator. We go to Robert Fishman with Moffett Nathanson. Please go ahead. Good morning, everyone.

Steven Silvester Tomsic: The NFL post season.

We were very pleased by but also that was on.

Steven Silvester Tomsic: It's a smaller revenue line, but but we had a fantastic college football season are really I think the story of this past.

Steven Silvester Tomsic: Awesome.

Steven Silvester Tomsic: It was really the strength.

Steven Silvester Tomsic: College football and particularly as advertisers.

Steven Silvester Tomsic: No.

Steven Silvester Tomsic: You sort of.

Steven Silvester Tomsic: Founded in appreciate it.

Steven Silvester Tomsic: The quality of the audience, Washington College football come.

Steven Silvester Tomsic: Coming up we look forward, obviously, we have the Daytona 500, and then the start of the regular.

Robert S. Fishman: Sticking with the sports news, so we've long discussed with you the benefits of Fox to a sports-led skinny bundle. So I'm just wondering, any additional background you can share on what pushed this deal forward now, including maybe any flexibility you built into your recent Affiliate Fee Renewals? And then, on a related note, should we expect to see any changes in your approach to negotiating future sports rights? And any comments you want to share about the Netflix-WWE deal that might impact these negotiations going forward? Thank you. Well, let me start back to front, Robert.

Steven Silvester Tomsic: Major League Basin baseball season in March and Theres, a lot of them.

Steven Silvester Tomsic: Positive momentum.

Steven Silvester Tomsic: Advertisers with those Fox.

Steven Silvester Tomsic: Fox News.

Steven Silvester Tomsic: You have.

Steven Silvester Tomsic: A positive trends with Dr pricing.

Steven Silvester Tomsic: Direct response pricing is still down but as you start to lap the comparisons from last year.

Speaker Change: It is.

Speaker Change: Certainly improving.

Speaker Change: Right a lot we have an impact from preemption.

Speaker Change: With.

Speaker Change: With the election and unfortunate with our war coverage. So the preemption are affecting and and ratings are continuing to improve so we're happy with where we are at Fox news has all of those trends.

Lachlan Murdoch: So there's no impact on the Netflix WWE deal at all. So I don't think that plays a factor in this. And in fact, how we approach our portfolio of sports rights. We will be aggressively competing in the sports market for sports rights, but nothing has changed there. The primary business and value of Fox Sports is competing, you know, both for every subscriber in the traditional pay TV bundle and advertiser, viewer, and ultimately advertiser. So sports remains a competitive business, which we, frankly, we thrive in, and we don't see any difference to that. What led to this now?

Speaker Change: Our improving steadily our local stations is probably the most mixed but you have a bad comparison, particularly in the in the in the current pacings.

Speaker Change: With Super Bowl comps this time last year, it's probably about $50 million.

Speaker Change: In <unk>.

Speaker Change: Super Bowl revenue just just in the station group.

Speaker Change: This time last year. So the comparisons are quite tough as we go forward, but we remain confident that we will see a record.

Speaker Change: Political.

Speaker Change: Nicole.

Speaker Change: This is slightly.

Speaker Change: Ameliorated I think in the current quarter with the <unk>.

Speaker Change: Lack of AR.

Speaker Change: So our competitive our primary.

Speaker Change: Competition.

Speaker Change: But we're already seeing business in the first half of next year start to flow in from a from a political perspective, and it's obviously, it's sort of natural because our stations.

Lachlan Murdoch: You know, I think we've answered many questions on these quarterly calls over, you know, many years about when we are ready to launch a streaming service such as this, and we will do it. And we've been monitoring the space, obviously, for years, the past few years in particular. And as we developed with our partners a concept around a very unique and innovative product, we felt now was the right time to launch such a product into a new market, right? It's a new market where there's no product serving sports fans that are not within the cable TV bundle. So it accesses, for us, a whole new market and really drives a tremendous amount of new reach that we weren't, we weren't servicing before. Operator, next question please. Next is John Hodulik with UBS.

Speaker Change: Large conversations and in AR.

Key political markets like.

Speaker Change: Georgia, and Michigan, Pennsylvania, Arizona, and Wisconsin, So we're very confident in a very strong.

Speaker Change: Political cycle once that starts to flow.

Speaker Change: And then finally with.

Speaker Change: With <unk> continuing to grow I think it's 62, 63%.

Speaker Change: And and.

Speaker Change: Obviously with a PBT growth.

Speaker Change: The revenue is as.

Speaker Change: Following the revenue growth is slightly less or somewhat less than it was.

Speaker Change: Last year, but in the in.

Speaker Change: And the.

Speaker Change: Sort of streaming environment.

We're very happy with it with its growth so.

Speaker Change: <unk>.

Speaker Change: So that's an advertising scatter pricing is all up above above upfront pricing. So that's positive and then finally on the on the.

Speaker Change: Our cable.

Speaker Change:

Speaker Change: Affiliate.

Speaker Change: Subscribers and <unk>.

Speaker Change: And fees, we are in an environment, where I think we called out of rigs roughly 8%.

Speaker Change: Hi.

Speaker Change: Our cable erosion and yet our cable affiliate fees have grown in this quarter. So I think that really shows the strength of our brands and our programming.

John Christopher Hodulik: Please go ahead. Great, thank you. First, just quickly on the on the sports TV, just any cash contribution or can you size any cash contribution required for from Fox? And then, Turning, you know, to advertising, you know, obviously a number of things affecting the numbers this quarter. You guys have some positive color as we look into next quarter. Just any color, one, I'd say on the TV side, what you're seeing at this point in terms of political, and then, you know, with the improvement in the ratings and the year-over-year, you know, the gap that you're seeing closing, can we assume that the 23% on the cable app side is sort of the worst number and any color on the sort of slope of the improvement that we should see as we head through the year? Thanks. I've lost track. Sorry.

Speaker Change: In the cable universe. So we are very pleased for them. Thanks John.

Speaker Change: Next question please operator.

Speaker Change: It is from Jessica Reif Ehrlich with Bank of America Securities. Please go ahead.

Speaker Change: Thank you back to the sports platform.

Speaker Change: Welcome you seem really confident that it won't affect the pay TV bundle.

Speaker Change: Just wanted to get some color on that given that sports has been really to conclude that kept it together.

Speaker Change: So why do you feel so confident that it will not impact that and then.

Speaker Change: What is the openness to add partners.

Speaker Change: We will then have a separate advertising organization, how will the <unk> your content.

Jessica: So hi, Jessica Fireeye.

Jessica: So the.

Speaker Change: First on <unk>.

Speaker Change: How it affects the overall pay TV bundle.

Speaker Change: Again, the key market the market that we will be driving towards is the.

Speaker Change: Is the market that sits outside the sports fan who sits currently outside of them.

Speaker Change: Traditional pay TV bundle today, and there's there is tens of millions of them. So we are very confident that this is a large market and a large opportunity that we can address without.

Lachlan Murdoch: Okay, so hat competition, advertising, and cable advertising. You got it. After this, we won't need any more questions. We'll cover the whole gamut. Thanks, John. On the cash side, I'll let Steve fill in, but obviously, this business has both the marketing and other costs associated with running the business in the partnership, but there's also the revenue that we garner through affiliate fees for our networks that come out as the business grows. But I'll let Steve fill in the details. Yeah,

Without undermining the traditional.

Speaker Change: Traditional bundle.

Speaker Change: We.

Speaker Change: We are obviously, we've been working on this for several months and we've done lots of sensitivity.

Speaker Change: Sensitivity analysis, and we would not be.

Speaker Change: Launching this product if we thought it was going to significantly.

Speaker Change: Effect.

Speaker Change: <unk>.

Speaker Change: Our pay TV.

Speaker Change: Affiliate partners and Thats very important to us we remain.

Speaker Change: I think the biggest supporters of the traditional pay TV bundle, we think there's tremendous value in the pay TV bundle for the consumer who wants to get it all.

Steven Silvester Tomsic: So, John, I think it's a touch early for us to be giving some forecasts around the contributional deficit from the JV, but as we look at it, it'll be accretive to us from a net-net perspective when you take into account the affiliate fees that we'll collect as revenue versus whatever funding we need to make to the JV. From a Net-Net perspective, it'll be a creative production. And then on advertising, I think, you know, the advertising outlook is, as I mentioned with news, but you could apply this term to the overall market. It's sort of nuanced as we look at it.

Speaker Change: At an affordable price the.

Speaker Change: The big bundle is still the best way.

Speaker Change: To get that programming in those brands. So so we are confident that.

Speaker Change: This product will be additive and will give us incremental subscribers and not not.

Speaker Change: Not.

Speaker Change: Affect significantly the traditional bundle.

Speaker Change: Openness to add partners.

Speaker Change: Desktop.

Speaker Change: Nothing that we're considering at this stage, we think that the the 14 linear networks.

Speaker Change: <unk>.

Speaker Change: Service offers gives people a tremendous.

Speaker Change: Mt.

Lachlan Murdoch: If I start with sports, you know, we had a very solid regular NFL season from an advertising perspective, and I think a stronger NFL postseason, which we were very pleased by. But also, that was, it's a smaller revenue line, but we had a fantastic college football season, really, I think the story of this past. Autumn was really the strength of college football, and particularly as advertisers, they sort of founded and appreciated the quality of the audience watching college football.

Speaker Change: Content between.

Speaker Change: <unk>.

Speaker Change: Our affiliates Fox affiliates ESPN ESPN to ESB news the SEC network.

Speaker Change: <unk>.

Speaker Change: Fox affiliates Fox sports, one and two the Big 10 network TNT TBS.

Speaker Change: In others, it's a tremendous offering that covers.

Speaker Change: The majority of the key sports in this country NFL NBA WNBA Major League baseball and in Charlotte Center College, obviously NASCAR.

Speaker Change: And so on so.

Speaker Change: We think it's incredibly.

Speaker Change: Strong offering and at this stage, we're not contemplating adding partners to it I think the third question that goes on in advertising revenues.

Lachlan Murdoch: Coming up, if we look forward, obviously, we have the Daytona 500 and then the start of the regular Major League Baseball season in March, and there's a lot of positive momentum with advertisers for those. Fox News, you have positive trends with DR pricing. Direct response pricing is still down, but as you start to lap the comparisons from last year, it's certainly improving quite a lot. We have an impact from preemptions with election coverage and, unfortunately, with war coverage, so the preemptions are hurting, and ratings are continuing to improve, so we're happy with where we are with Fox News as all those trends are improving steadily. Local stations are probably the most mixed, but you have a bad comparison, particularly in the current pacings with Super Bowl comps this time last year.

Speaker Change: And so advertising revenues will flow through this so the advertising that we have on our own.

Speaker Change: On our linear networks will flow into this service and we will just give us increased reach.

Speaker Change: To market that Hasnt seen those that advertiser engage with those clients before us. So we think it's a net positive.

Speaker Change: Thank you Jessica operator, we have time for one more question.

Speaker Change: Good that will come from Michael Morris with Guggenheim. Please go ahead.

Michael Nathanson: Hi, Good morning, Thank you guys. So what.

Michael Nathanson: Did you ask about two areas of strength in the quarter. The first one on the sports sub licensing can you share a little more detail on what that was how it impacted profitability and how to think about whether or not that's a recurring revenue and profit source.

Michael Nathanson: And then my second question is on the affiliate acceleration which is.

Lachlan Murdoch: It's probably about $50 million in Super Bowl revenue just in the station group this time last year, so the comparisons are quite tough as we go forward, but we remain confident that we'll see a record political cycle. This is slightly ameliorated, I think, in the current quarter with the lack of a record. So we're a competitive primary competition, but we're already seeing business in the first half of next year start to flow in from a political perspective. And it's obviously, it's sort of natural because our stations; we have a large number of stations in key political markets like Georgia and Michigan, Pennsylvania, Arizona, and Wisconsin. So we're very confident of a very strong political cycle once that starts to flow. And then finally, with Tubi, Tubi's TBTs continue to grow, I think at 62 or 63 percent.

Michael Nathanson: Great to see.

Michael Nathanson: We know that the rate of cord cutting is going to be impactful on that number its very hard to predict but on pricing alone and the precedent that you. Just said should we look at this is the first quarter of a sustained stronger pricing dynamic and how long do you think we should anticipate that you can continue to see this type of of growth being fuel.

Michael Nathanson: By those new contractual relationships. Thank you.

Speaker Change: I thought it was unfair that Steve will get the easy question.

Speaker Change: And then you asked the second question so.

Speaker Change: Hey, Mike Good morning, Michael I'll, let I'll, let Steve address the sports licensing first Hey, Mike.

Steven Silvester Tomsic: As sports sub licensing revenue, we have in the cable segment. So we have.

Steven Silvester Tomsic: We own split sub licensing income in relation to various sort of college sports properties in the international Soccer rights. Some of these rights come with some variable based economics to them, which we saw in the quarter.

Steven Silvester Tomsic: I think you should see this as somewhat of a one off it's not going to repeat like this in future quarters future is.

Lachlan Murdoch: And obviously, with the TBT growth, the revenue is following. The revenue growth is slightly less or somewhat less than it was last year. But in the sort of streaming environment, we're very happy with its growth. So on advertising, scatter pricing is all up above upfront pricing. So that's positive.

Steven Silvester Tomsic: And if you want to try and Dimensionalize. It then the size of the increase in cable other revenues between this quarter and previous quarter last year is a pretty good guide to the the net benefit to us from those sub licensing arrangements.

Steven Silvester Tomsic: So.

Steven Silvester Tomsic: On the affiliate.

Revenue acceleration.

Steven Silvester Tomsic: I think the if you look at it to Amgen can we sustain.

Steven Silvester Tomsic: Staying that.

Steven Silvester Tomsic: We've now completed all of our.

Lachlan Murdoch: And then finally, on cable, cable erosion, and yet our cable affiliate fees have grown in this quarter. So I think that really shows the strength of our brands and our programming in the cable universe. So we're very pleased with that. Next question, please, operator. It is from Jessica Reece Ehrlich with Bank of America Securities. Please go ahead.

Steven Silvester Tomsic: Distributions of renewals.

Steven Silvester Tomsic: In this cycle that will affect the remainder of this fiscal year. So.

Steven Silvester Tomsic: Sure.

Steven Silvester Tomsic: There's no more renewals are negotiated that will affect this this fiscal year and obviously then we're rolling into renewals that will.

Steven Silvester Tomsic: <unk> will take effect.

Steven Silvester Tomsic: After this fiscal.

Steven Silvester Tomsic: If you look at the underlying.

Steven Silvester Tomsic: The rate of decline around 8% and this goes back to.

Jessica Reif Cohen: Thank you. Back to the sports, and welcome, that it won't affect the pay TV bundle, which, I just want to give some color on that given that sports has been really the glue that's kept it together. So why do you feel so confident that it, that, and then?

Steven Silvester Tomsic: John's question.

Steven Silvester Tomsic: If we look at that 8% actually in.

Steven Silvester Tomsic: September and October.

Steven Silvester Tomsic: It was better than 8% that was a little bit better.

Steven Silvester Tomsic: Then and this we believe was.

Steven Silvester Tomsic: The impact of football and <unk>.

Lachlan Murdoch: You know, what is the openness to add partners? Will this have a separate advertising organization? How will the ads work? um, Uh.

Steven Silvester Tomsic: Sports sports viewing in the fall, but then after.

Steven Silvester Tomsic: October sort of and as you get into November and December.

Steven Silvester Tomsic: The rate returned declined returned to two.

Lachlan Murdoch: Hi Jessica, by the way. First on how it affects the overall pay TV bundle, again, the key market, the market that we will be driving towards, is the market that sits outside the sports fan who currently sits outside of the traditional pay TV bundle today. And there are tens of millions of them.

Steven Silvester Tomsic: <unk>.

Steven Silvester Tomsic: Sort of baseline at 8% so so.

Steven Silvester Tomsic: For the immediate future, we don't see that changing there is some cyclicality.

Within that but I think the 8%.

Steven Silvester Tomsic: A number that we're sort of baking into it and into our assumptions.

Steven Silvester Tomsic: With that we believe as we've achieved in over the last year will be renewed.

Lachlan Murdoch: So, you know, we are very confident that this is a large market and a large opportunity that we can address without undermining the traditional bundle. Obviously, we've been working on this for several months. We've done lots of sensitivity analysis, and we would not be launching this product if we thought it was going to significantly affect our pay-to-be affiliate partners, and that's very important to us. We remain...

Steven Silvester Tomsic: One third of our distribution.

Steven Silvester Tomsic: We've been able to achieve.

Steven Silvester Tomsic: <unk>.

Steven Silvester Tomsic: Rate increases that have made up for those for those declines and that is because of the strength of our brands the strength of our programming and really where they sit having sort of a focused strategy on a key number a very core brands that are essential.

Steven Silvester Tomsic: Further.

Steven Silvester Tomsic: Distributors and for their customers.

Steven Silvester Tomsic: We'll be able to maintain.

Steven Silvester Tomsic: Similar rates of change going forward.

Speaker Change: Thanks, Mike.

Speaker Change: At this point, we are out of time, but if you have any further questions. Please give me or Dan Carey a call. Thank you again for joining today's call. Thank you. Thanks, everyone have a good day.

Lachlan Murdoch: I think the biggest supporters of the traditional pay TV bundle think there's tremendous value in the pay TV bundle. For the consumer who wants to get it all at an affordable price, the big bundle is still the best way to get that programming in those brands. So we are confident that this product will be additive and will give us incremental subscribers but not significantly affect the traditional bundle. Although we are open to adding partners, that's not something that we're considering at this stage. We think that the 14 linear networks that this service offers give people a tremendous amount of content between ABC affiliates, Fox affiliates, ESPN, ESPN2, ESPNews, the SEC network, Fox affiliates, Fox Sports 1 and 2, the Big Ten network, TNT, TBS, and others. It's a tremendous offering that covers the majority of the key sports in this country, NFL, NBA, WNBA, Major League Baseball, NHL, Satter We think it's an incredibly strong offering, and at this stage, we're not contemplating adding partners to it.

Speaker Change: Ladies and gentlemen that does conclude your conference call for today. Thank you for using AT&T executive teleconference. You may now disconnect.

Speaker Change: We're sorry your conferences ending now please hang up.

Lachlan Murdoch: I think the third question, Jessica, was about advertising revenues. Advertising revenues will flow through this, so the advertising that we have on our..., on our linear networks will flow into this service and will just give us increased reach to markets that haven't seen that advertiser engaged with those clients before. So we think it's a net benefit. Thank you, Jessica.

Operator: Operator, we have time for one more question. Very good. That will come from Michael Morris with Guggenheim. Please go ahead.

Michael Nathanson: Hi, good morning. Thank you, guys. So I wanted to ask about two areas of strength in the quarter. The first one is sports sub-licensing. Can you share a little more detail on what that was, how it impacted profitability, and how to think about whether or not that's a recurring revenue and profit source? And then my second question is about affiliate acceleration, which is great to see. We know that the rate of cord cutting is going to be impactful on that number, but it's very hard to predict.

Lachlan Murdoch: But on pricing alone and the precedent that you just set, should we look at this as the first quarter of a sustained stronger pricing dynamic? And how long do you think we should anticipate that we can continue to see this type of growth being fueled by those new contractual relationships? Thank you. I thought it was unfair that Steve got the easy question, and then you asked the second question.

Lachlan Murdoch: So anyway, good morning, Michael. I'll let Steve address the sports sub-licensing first. Hey, Mike.

Steven Silvester Tomsic: So our sports sub-licensing revenue we have in the cable segment, so we have... We own sports sub-licensing revenue in relation to various sorts of college sports properties and international soccer rights. Some of these rights come with some variable-based economics to them, which we saw in the quarter. I think you should see this as somewhat of a one-off; it's not going to repeat like this in future quarters, future years. And if you want to try and dimensionalize it, then the size of the increase in cable other revenues between this quarter and the previous quarter last year is a pretty good guide to the net benefit to us from those sub-licensing arrangements. So, on the affiliate... revenue acceleration. I think if you look at it in two years, can we sustain that?

Steven Silvester Tomsic: We've now completed all of our distributions of renewals in this cycle that will affect the remainder of this fiscal year. So there are no more renewals negotiated that will affect this fiscal year, and obviously, we're rolling into renewals that will take effect after this fiscal year. If you look at the underlying rate of decline around 8 percent, and this goes back to a little bit of John's question, if we look at that 8 percent, actually, in September and October, it was better than 8 percent; it was a little bit better, and this we believe was the impact of football and sports viewing in the fall. But then after October, as you get into November and December, the rate declined and returned to its baseline at 8 percent

Steven Silvester Tomsic: So for the immediate future, we don't see that changing. There's some cyclicality within that, but I think the 8 percent is a number that we're baking into our assumptions. With that, we believe, as we've achieved over the last year, where we've renewed over a third of our distribution, we've been able to achieve rate increases that have made up for those declines. And that is because of the strength of our brands, the strength of our programming, and really where they sit, having sort of a focus and strategy on a key number of very core brands that are essential for distributors and for their customers that will be able to maintain similar rates of change going forward. Thanks, Mike. At this point, we are out of time, but if you have any further questions, please give me or Dan Carey a call.

Speaker Change: [music].

Gabrielle Brown: Thank you again for joining today's call. Thank you. Thanks, everyone. Have a good day.

Operator: Ladies and gentlemen, that does conclude your conference call for today. Thank you for using AT&T Executive Teleconference. You may now disconnect. We're sorry, your conference is ending now. Please hang up. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Ladies and gentlemen, thank you for standing by.

Operator: Welcome to the Fox Corporation second quarter fiscal year 2024 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. The Q will be given at that time. If you should require assistance during the call, please press star, then zero.

Gabrielle Brown: As a reminder, this conference is being recorded. I would now like to turn the conference over to Chief Investor Relations Officer, Ms. Gabrielle Brown. Please go ahead, Ms. Brown.

Gabrielle Brown: Thank you, Operator. Good morning, and welcome to our fiscal 2024 second quarter earnings call. Joining me on the call today are Lachlan Murdoch, Executive Chair and Chief Executive Officer; John Nallen, Chief Operating Officer; and Steve Tomsic, our Chief Financial Officer.

Lachlan Murdoch: And with that, I'm pleased to turn the call over to Gabby. Thank you, Gabby, and thank you all for joining us this morning. Against the backdrop of an active news cycle and another robust fall sports schedule, our fiscal second quarter again illustrated the strength of Fox. The growth we delivered in affiliate fee revenues was the standout this quarter, with the television segment growing by 10% and the cable segment returning to growth, once again demonstrating the power of our brands and our programming. We have now largely completed our fiscal 24 affiliate renewal cycle, having achieved our commercial goals without disruption and setting a solid foundation for renewals in fiscal 2025 and beyond. As expected, advertising revenues in the quarter were down, primarily due to comparisons to last year's major cyclical events, including the midterm elections at the TV stations and the broadcast of the Men's World Cup in the cable and television segments, parsing through the cyclical comparison.

Speaker Change: [music].

Lachlan Murdoch: Our hearts, our thoughts, and our prayers go out to the victims of that day, the innocents killed in Israel and in Gaza, and the hostages still denied the embrace of their families and loved ones. The work our correspondents, our camera people, and our producers do reporting on these events is important, outstanding, and deeply appreciated. Now, on to sports. In calendar 2023, 96 of the year's 100 most watched telecasts were live sports. Fox is responsible for 29 of the year's 100 most-watched shows, more than any other network. This marks the fifth straight year that Fox has topped the industry in live sports viewing and demonstrates the unparalleled reach and engagement our content achieves. The 30th NFL regular season on Fox concluded with an average of 19 million viewers across all games, with America's Game of the Week averaging 25 million viewers, an eight-year high, and Fox NFL Sunday logged its 30th straight year as the number one NFL pre-game show.

Lachlan Murdoch: That strength continued into the postseason, with Fox's three postseason windows delivering a best-ever playoff average of almost 45 million viewers across the wildcard, divisional, and championship games. In digital, we saw strong engagement for Tubi, which finished with a very impressive 62% growth in total view time and 17% growth in revenue. Tubi's library of over 240,000 movies and TV episodes, coupled with ubiquitous distribution, drove engagement, helping Tubi reach 78 million monthly active users, log almost 2.5 billion streaming hours in the quarter, and set a new monthly record of 855 million total viewing hours in December alone. Tubi has consolidated its position in the streaming landscape, ranking as the most watched free TV and movie streaming service in the United States, according to Nielsen, and surpassing Peacock, Max, Paramount Plus, and Pluto TV in view time for seven consecutive months.

Lachlan Murdoch: At Fox Entertainment, the second quarter saw programming strength, with Fox having the season's number one new broadcast entertainment series in Crapopolis. Hats off to Dan Harmon, the number one new game show debut in Snake Oil, and the number one cooking series in Hell's Kitchen. We're also pleased with the very strong start of our mid-season lineup and the early success of We Are Family and The Floor. Before I hand over to Steve, I'll comment on the sports platform we announced last night between Fox, Disney, and Warner Bros. Discovery

Speaker Change: Session queue will be given at that time, if you should require assistance during the call. Please press Star then zero.

Speaker Change: As a reminder, this conference is being recorded I would now like to turn the conference over to Chief Investor Relations Officer. Mr. Gavriel Brown. Please go ahead Ms Brown.

Gavriel Brown: Thank you operator, good morning, and welcome to our fiscal 2024 second quarter earnings call. Joining me on the call today are Lachlan Murdoch Executive Chair and Chief Executive Officer, John Nolan, Chief Operating Officer, and Steve Tomsic, Our Chief Financial Officer, first Lachlan and Steve.

Lachlan Murdoch: This new and unique digital distribution platform is focused on sports fans outside of existing pay TV offerings. Upon launch in the fall of 2024, the platform will offer a broad suite of sports, including those from a combined 14 linear networks that broadcast sports today. The inclusion of our networks in the platform is consistent with our strategy of being proudly consumer-first and distribution agnostic. Across the distribution ecosystem, our traditional pay-to-play market will remain our dominant customer base for some time to come. As such, we remain committed to our existing distribution partners, where our strong portfolio of leadership sports, news, and entertainment brands thrive in their bundled offerings. This unique new platform opens up a new market for us. One that we at Fox have not accessed before and that we're excited to participate in. As always, we are focused on delivering value for our shareholders in a thoughtful and disciplined manner, and we will continue to explore every opportunity to maximize that value over the long term. Let me now turn it over to Steve for his comments on the quarter's financial results. Thanks, Lachlan. Good morning, everyone.

Gavriel Brown: We will give some prepared remarks on the most recent quarter and then we'll take questions from the investment community.

Gavriel Brown: Please note that this call may include forward looking statements regarding Fox Corporation's financial performance and operating results.

Gavriel Brown: 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 company's SEC filings. Additionally, this call will include certain non-GAAP financial measures, including adjusted EBITDA or EBITDA as we.

Gavriel Brown: We refer to it on this call reconciliations of non-GAAP financial measures are included in our earnings release, and our SEC filings, which are available in the Investor Relations section of our website and with that I'm pleased to turn the call over to Lachlan.

Lachlan Murdoch: Thank you Debbie and thank you all for joining us this morning.

Lachlan Murdoch: Against the backdrop of an active new cycle and another robust fall sports schedule, our fiscal second quarter again illustrated the strength of Fox.

The growth we delivered in affiliate fee revenues was the standout this quarter with the TV segment growing by 10% and the cable segment returning to growth once again, demonstrating the power of our brands and our programming.

Steven Silvester Tomsic: With the vast majority of our fiscal 2024 affiliate renewals now successfully completed, Fox delivered 4% growth in total company affiliate fee revenue, led by 10% growth at television and a return to growth at cable. This growth reflects the must-have nature of our content and the value that our distribution partners place on it. Consistent with our expectations regarding event cycles, advertising revenues this quarter were impacted by the absence of the FIFA Men's World Cup at Fox Sports and mid-term political revenues at the local television station, along with lower advertising revenue at Fox News Media. Collectively, these factors contributed to a 20% decline in total company advertising revenue.

Lachlan Murdoch: We were also able to increase our viewing share over the previous quarter and the positive trends and share ratings and pricing have carried over into the current quarter.

Steven Silvester Tomsic: Total company other revenues grew by 14%, driven by higher sports sub-licensing revenues. All in, Fox reported total company revenues of $4.23 billion, down 8% from the price. Total company expenses decreased 5% over the prior year, primarily due to the absence of the Men's World Cup at Fox Sports and fewer hours of original scripted programming at Fox Entertainment due to the strike. However, this was partially offset by the first-year step-up under our new NFL rights. Quarterly adjusted EBITDA was $350 million as compared to $531 million reported in the prior year.

Lachlan Murdoch: Last week I visited our Bureau in Jerusalem met with our talented and dedicated staff there and saw firsthand the devastation wrought by Hamas on October 7th.

Lachlan Murdoch: Our hearts, our thoughts and our prayers go out to the victims of that day.

Lachlan Murdoch: Innocents killed in Israel and in Gaza.

Lachlan Murdoch: And the hostages still denied the embrace of their families and loved ones.

Lachlan Murdoch: The work our correspondents are camera people and our producers do reporting on these events is important outstanding and deeply appreciate it.

Lachlan Murdoch: Now onto sports.

Lachlan Murdoch: In calendar 2023, 96 of the year is 100, most watched telecast or live sports.

Lachlan Murdoch: Fox was responsible for 29 of the year is 100, most watched shows more than any other network.

Steven Silvester Tomsic: Net income attributable to stockholders of $109 million, or $0.23 per share, compared to $313 million, or $0.58 per share, reported in the prior year period, largely due to the EBITDA impact I just mentioned, along with the net changes in the fair value of the company's investments recognized in other networks. Our effective tax rate for the quarter came in at 12%, reflecting a one-off remeasurement of our deferred tax assets as a result of changes in state tax. Excluding this impact and other non-core items, adjusted EPS was $0.34 per share versus last year's $0.48. Turning to our segments, starting with cable, which reported 2% growth in total quarterly revenue. Cable affiliate fee revenues increased by $5 million, with growth in pricing from our distribution renewals outpacing the impact from industry subscriber declines running at approximately $8 billion.

Lachlan Murdoch: This marks the fifth straight year that Fox is top of the industry in live sports viewing and demonstrates the unparalleled reach and engagement our content achieves.

Lachlan Murdoch: The 30th NFL regular season on Fox concluded with an average of 19 million viewers across all games with Americas game of the week, averaging 25 million viewers, an eight year high.

Lachlan Murdoch: And Fox NFL Sunday logged its 30th straight year as the number one NFL pregame show.

Lachlan Murdoch: That strength continued into into the post season with Fox has three postseason windows delivering our best ever playoff average of almost 45 million viewers across the wildcard divisional and championship games.

Lachlan Murdoch: In digital we saw strong engagement at <unk>, which finished with a very impressive 62% growth in total view time and 17% growth in revenue.

Lachlan Murdoch: <unk> library of over 240000 movies, and TV episodes, coupled with ubiquitous distribution drove engagement, helping to be reached 78 million monthly active users logged almost $2 5 billion streaming hours in the quarter and set a new monthly record of $855 million in total.

Lachlan Murdoch: Viewing hours in December alone.

Lachlan Murdoch: <unk> has consolidated its position in the streaming landscape ranking as the most watched free TV and movie streaming service in the United States. According to Nielsen and surpassing Peacock, Max Paramount plus and Pluto TV and view time for seven consecutive months.

Steven Silvester Tomsic: Cable Leather revenues increased $124 million, largely driven by high sports sub-licensing revenues associated with our college sports and international soccer agreements. This growth in affiliate and other revenues was partially offset by a 23% decline in cable advertising revenue. At Fox News Media, advertising revenues were impacted by a softer direct response marketplace, lower comparative ratings, and higher levels of preemptions due to our breaking news coverage of global events. Meanwhile, at the National Sports Network, we measured ourselves against last year's broadcast of the Men's World Cup. Expenses at the cable segment were 14% lower than the prior year, with savings mainly gained from the absence of the Men's World Cup, as well as lower legal programming and production costs at Fox News Media.

At Fox Entertainment, the second quarter, so our programming strength with Fox, having the season's number one new broadcast entertainment series in crap uplifts hats.

Lachlan Murdoch: Hats off to Dan Harmon.

Lachlan Murdoch: The number one new game show debut and Snake oil and the number one cooking series in health kitchen.

Lachlan Murdoch: We're also pleased with a very strong start of our mid season lineup and the early success, we are family and the floor.

Before I hand over to Steve I'll comment on the sports platform, We announced last night between Fox Disney and Warner Brothers Discovery.

Lachlan Murdoch: This new and unique digital distribution platform is focused on sports fans outside of existing pay TV offerings.

Lachlan Murdoch: Upon launch in the fall of 2020 for the platform will offer a broad suite of sports, including those from a combined 14 linear networks that broadcast sports today.

Steven Silvester Tomsic: Taking all these factors into account, quarterly adjusted EBITDA at the cable segment grew 60% over the prior year quarter. Moving to our television segment, which reported total quarterly revenues of $2.54 billion, down 13% from the prior year. The TV segment reported strong 10% growth in affiliate fee revenues. However, price increases across all Fox-affiliated stations more than offset the impact from industry subscribers. Although TV advertising revenues were down 19%, the solid growth of TV was more than offset by comparisons with last year's cycle of major events, including the FIFA Men's World Cup and mid-term political revenues, as well as the relative mix of World Series match-ups and games.

Lachlan Murdoch: The inclusion of our networks in the platform is consistent with our strategy being proudly consumer first and distribution agnostic.

Lachlan Murdoch: Across the distribution ecosystem, our traditional pay TV market will remain our dominant customer base for some time to come.

Lachlan Murdoch: As such we remain committed to our existing distribution partners, where our strong portfolio of leadership Sports News and entertainment brands thrive in their bundled offerings.

Lachlan Murdoch: This unique new platform opens up a new market for us one that we had talks have not accessed before and they were excited to participate in.

Lachlan Murdoch: As always we are focused on delivering value for our shareholders in a thoughtful and disciplined manner.

Lachlan Murdoch: And we will continue to explore every opportunity to maximize that value over the long term.

Lachlan Murdoch: Let me now turn it over to Steve for his comments on the quarter's financial results.

Steven Silvester Tomsic: Also at TV, revenue from our entertainment production companies was impacted by the SAG and WGA later this year, contributing to a $64 million decline in TVA, most of which was offset by a commensurate reduction in expenses. Overall, expenses at the TV segment remained flat, as higher costs under the NFL agreement and a modest increase in investment at Tubi were offset by lower costs from the absence of the Men's World Cup, lower college sports rights costs, and fewer hours of the original scripted content due to the strike. Together, these revenue and expense impacts led to a quarterly adjusted EBITDA loss of $138 million at our TVC, compared to an EBITDA contribution of $256 million reported in the prior year. Turning to free cash flow, where we recorded a deficit of $615 million this quarter.

Steven Silvester Tomsic: Thanks, a lot Glenn and good morning, everyone.

Steven Silvester Tomsic: With the vast majority of our fiscal 2024 affiliate renewals now successfully completed flux delivered 4% growth in total company affiliate fee revenues led.

System with our expectations regarding events cycles advertising revenues this quarter were impacted by the absence of the FIFA Women's World Cup at Fox Sports and midterm political revenues at the local television stations, along with lower advertising revenue at Fox News media collectively these factors contributed to a 20% decline in total company advertising revenues.

Steven Silvester Tomsic: Yeah.

Steven Silvester Tomsic: Total company other revenues grew by 14% driven by high sports sub licensing revenues.

Steven Silvester Tomsic: All in flux reported total company revenues of $4 to $3 billion.

Steven Silvester Tomsic: Down 8% from the prior year.

Steven Silvester Tomsic: However, this was partially offset by the <unk> step up under a new NFL rights agreements.

Steven Silvester Tomsic: Quarterly adjusted EBITDA was $350 million as compared to the $531 million reported in the prior year quarter.

Steven Silvester Tomsic: Net income attributable to stockholders of $109 million or 23 per share compares to the $330 million or <unk> 58 per share reported in the prior year period.

Steven Silvester Tomsic: This is consistent with the normal seasonality of our working capital cycle, where the first half of our fiscal year reflects the concentration of payments for sports rights and the build-up of advertising-related receivables. In terms of capital allocation, fiscal year to date, we have repurchased an additional $550 million through our share buyback program, bringing the total cumulative amount repurchased to $5.15 billion, or 25% of our total shares outstanding since the launch of the program in 2009. In addition, today we announced a 26 cents per share semi-annual dividend. These capital return measures are supported by a robust balance, where we ended the quarter with $4.1 billion in cash and $8.4 billion in debt. These balances are before taking into account the repayment of our $1.25 billion note in late January.

Steven Silvester Tomsic: Largely due to the EBITDA impact I, just mentioned along with the net changes in the fair value of the company's investments recognized in other net.

Steven Silvester Tomsic: Our effective tax rate for the quarter came in at 12%, reflecting a one off re measurement of our deferred tax assets as a result of changes in state tax laws.

Steven Silvester Tomsic: Excluding this impact and other noncore items adjusted EPS was <unk> 34 per share versus last year's 48.

Steven Silvester Tomsic: <unk>.

Steven Silvester Tomsic: Turning to our segments, starting with cable, which reported 2% growth in total quarterly revenues cable affiliate fee revenues increased by $5 million.

Steven Silvester Tomsic: With growth in pricing from our distribution renewals outpacing the impact from industry subscriber declines running at approximately 8%.

Steven Silvester Tomsic: Cable other revenues increased $124 million, largely driven by high sports sub licensing revenues associated with our college sports and international soccer agreements.

Steven Silvester Tomsic: This growth in affiliate and other revenues was partially offset by a 23% decline in cable advertising revenues at.

Steven Silvester Tomsic: At Fox News media advertising revenues were impacted by softer direct response marketplace low comparative writings and higher levels of preemption joab breaking news coverage of global events.

Steven Silvester Tomsic: Meanwhile, if the national sports networks, we measured against last year's broadcast of the men's World Cup.

Steven Silvester Tomsic: Expenses at the cable segment with 48% lower than the prior year with savings mainly gained from the absence of the men's World Cup as well as lower legal programming and production costs at Fox News media taking.

Steven Silvester Tomsic: Taking all these factors into account quarterly adjusted EBITDA at the cable segment grew 60% over the prior year quarter.

Steven Silvester Tomsic: Moving to our television segment, which reported total quarterly revenues of $2 five 4 billion.

Steven Silvester Tomsic: Down 13% from the prior year.

Steven Silvester Tomsic: Television segment reported strong 10% growth in affiliate fee revenues as price increases across all Fox affiliated stations more than offset the impact from industry subscriber declines.

Steven Silvester Tomsic: Television advertising revenues were down 19% as solid growth at <unk> was more than offset by comparisons with last year's cycle of major events, including the FIFA Women's World Cup and midterm political revenues as well as the relative mix of World series match ups and gang counts.

Steven Silvester Tomsic: Also TV revenues for marriage tenant production companies was impacted by the Sag in WGNA labor disputes is.

Operator: If you are using a speakerphone, please pick up the handset before pressing the numbers. It has been requested that you limit yourself to one question. Once again, if you have a question, please press 1, 0 at this time. One moment, please, for the first question. www.foxcorp.com. We have a question from Ben Swinburne with Morgan Stanley. Please go ahead. Good morning.

Steven Silvester Tomsic: This contributed to a $64 million declining TV other revenues most of most of which was offset by a commensurate reduction in expenses.

Steven Silvester Tomsic: Overall expenses at the television segment remained flat as higher costs than the NFL agreement and a modest increase in investment in <unk> were offset by lower costs from the absence of the men's World Cup low College sports rights costs and fewer ounces original scripted content due to the strikes.

Steven Silvester Tomsic: Together these revenue and expense impacts led to a quarterly adjusted EBITDA loss of $138 million of that TV segment.

Steven Silvester Tomsic: Compared to an EBITDA contribution of $256 million reported in the prior year quarter.

Benjamin Daniel Swinburne: Lachlan, obviously, big news in the new sports joint ventures. I'd love to get your thoughts really around that product and opportunity in kind of two areas. First of all, what is the opportunity that you guys see in the United States for a product like that? Obviously, we're all focused on the cord-cutting sort of TAM, but how many people do you think are interested in a product like this? And then do you see any risk to, you know, particularly Fox News? This is the first time you guys have offered a product with just Fox News. So how'd you balance that when you thought about putting this business together? Thanks so much.

Steven Silvester Tomsic: Turning to free cash flow, where we recorded a deficit of $615 million this quarter.

Steven Silvester Tomsic: And the buildup of advertising related receivables.

In terms of capital allocation fiscal year to date, we have repurchased an additional $550 million through our share buyback through a share buyback programming.

Steven Silvester Tomsic: Bringing the total cumulative and that repurchased 515 billion.

Steven Silvester Tomsic: 25% of that total shares outstanding since the launch of the program in 2019.

Steven Silvester Tomsic: In addition, today, we announced a <unk> 26 per share semiannual dividend.

These capital return measures are supported by a robust balance sheet, where we ended the quarter with $4 $1 billion in cash and $8 4 billion in debt. These.

These balances are before taking into account the repayment of one of our $1 $25 billion note in late January and with that I'll turn the call back over to Gary to open up the Q&A. Thank.

Gary: Thank you, Steve and now we'll be happy to take questions from the investment community.

Lachlan Murdoch: Hey, thank you very much, Ben. And good morning. So the opportunity is huge. And that's really because this, you know, sports-focused platform is focused entirely on, you know, cord-cutters, but cord never. So if you look at the American market, there are roughly 125 million households in America, and roughly half of those are not within the traditional bundled cable ecosystem. And so the target for this product, which is going to be, I think, incredibly innovative when you see it roll out, is really that universe of, you know, call it 60 million odd households that currently don't participate in the bundled cable and pay television ecosystem. So we think it's a tremendous opportunity. We've been working on it for, I think it was reported this morning fairly accurately, several months now.

Gary: Ladies and gentlemen, I would like to emphasize the functionality for the question and answer queue. If you wish to ask a question. Please press one then zero on your Touchtone phone.

Gary: We'll hear a tone, indicating you have been placed in Q you may remove yourself from queue at any time by once again pressing one then zero. If you are using a speakerphone. Please pick up the handset before pressing the numbers. It has been requested that you limit yourself to one question. Once again, if you have a question. Please press.

Gary: One zero at this time.

Gary: One moment please for the first question.

Gary: We have a question from Ben Swinburne with Morgan Stanley. Please go ahead.

Benjamin Daniel Swinburne: Good morning.

Benjamin Daniel Swinburne: Lachlan obviously, the big news in the new sports joint venture, So I'd love to get your thoughts really around that product and opportunity.

Benjamin Daniel Swinburne: Two areas first is what is the opportunity that you guys see in the United States for a product like that.

Lachlan Murdoch: You know, I've been lucky enough to have seen some of the prototypes for this service. And again, it will be unique. And I think, you know, very innovative when you see it roll out. In terms of the risks, and particularly for Fox News, I think the risks are very low. And that's because of the focus of this sports product being on, you know, the cord nevers.

Benjamin Daniel Swinburne: Obviously, we're all focused on the cord cutter sort of Tam, but how many people do you think are interested in a product like this and then do you see any risk to particularly Fox news. This is the first time you guys have offered a product with just Fox broadcast.

Speaker Change: Would you balance that when you thought about putting this business together. Thanks, so much.

Speaker Change: Hey, Thank you very much Ben and good morning.

Speaker Change: So the opportunity is huge and that's why because.

Lachlan Murdoch: You know, Fox News continues to be, you know, the top-rated cable network, and our distributors, our partners really value that channel and that brand as it really drives tremendous viewership, audience, and engagement for them. And we think we'll continue to do so within the traditional cable and pay television bundle. Thank you, Ben. We go to Robert Fishman with Moffett Nathanson. Please go ahead. Good morning, everyone.

Speaker Change: This.

Speaker Change: Sports focused platform.

Speaker Change: Is focused entirely on.

Speaker Change: Cord noncore cutover cord Nevers. So if you look at the American market, roughly say 125 million households in America.

Speaker Change: And roughly half of those are not within the traditional bus.

Speaker Change: Bundled cable ecosystem and so the target for this this product which is going to be.

Speaker Change: I think our incredibly innovative when you see it rollout.

Speaker Change: It's really that that universe of call it.

Speaker Change: $60 million odd households that currently don't participate in the bundled.

Speaker Change: Cable and pay TV ecosystem. So we think it's a tremendous opportunity we've been working on it for four I think it's been reported sworn it fairly accurately for for several months now.

Speaker Change: <unk>.

Speaker Change: Being.

Speaker Change: Lucky enough to have seen some of the prototypes for this service and again, it will be unique and and I think.

Speaker Change: <unk> innovative when your C&I when you see it rollout.

Speaker Change: In terms of the risks and particularly for Fox News I think the risks are very low and thats because of the focus of the sports product being on.

Speaker Change: The court the cord Nevers.

Speaker Change: Fox News continues to be operating a cable network.

Speaker Change: And.

Speaker Change: Our distributors are partners really value.

Lachlan Murdoch: So there's no impact on the Netflix WWE deal at all. So I don't think that plays a factor in this. And in fact, in how we approach our portfolio of sports rights, you know, we will be aggressively competing in the sports market for sports rights, but nothing has changed there. The primary uh uh, business, and value of Fox Sports is competing both for every subscriber in the traditional cable pay TV bundle and advertiser, viewer, and ultimately advertiser. So sports remains a competitive business, which frankly, we thrive in. We don't see any difference between that. What led to this now?

Speaker Change: Uh huh.

Speaker Change: That channel and that brand as it.

Speaker Change: Really.

Speaker Change: Drives tremendous viewership in audience and engagement for them and we think we will continue to do so within the traditional.

Speaker Change: Cable and pay TV bundle.

Speaker Change: Thank you Ben Operator next question. Please we.

Speaker Change: Go to Robert Fishman with Moffett Nathanson. Please go ahead.

Robert S. Fishman: Good morning, everyone sticking with the sports news.

Robert S. Fishman: Long discussed with you the benefit of stock.

Robert S. Fishman: On to a sports led skinny bundle. So I'm just wondering any additional background you can share on what pushed the steel forward now, including maybe any flexibility you built into your recent affiliate renewals and then.

Lachlan Murdoch: I think we've answered many questions on these quarterly calls over many years about when we are ready to launch a streaming service such as this, and we will do it. And we've been monitoring the space, obviously, for years, the past few years in particular. And as we developed with our partners a concept around a very unique and innovative product, we felt now was the right time to launch such a product into a new market, right? It's a new market where there's no product serving sports fans that are not within the cable TV bundle. So for us, it accesses a whole new market and really drives a tremendous amount of new reach that we weren't aware of or servicing before. Operator, next question, please. Next is John Hodulik with UBS.

Speaker Change: Uh huh.

Speaker Change: Well, let me.

Speaker Change: Start back.

Speaker Change: Back to front are Robert So there is no impact on the Netflix Ww deal at also I don't think Thats. The plays a factor in this and in fact in how we.

Speaker Change: Approach are.

Speaker Change: <unk> portfolio of sports rights.

Speaker Change: We will be aggressively competing in the sports market.

Speaker Change: For for sports rights that nothing has changed there.

Speaker Change: The primary.

Speaker Change:

Speaker Change: Business.

Speaker Change: And valuations and.

Speaker Change: And Fox Sports is competing both for every subscriber in the traditional.

Speaker Change: Our cable pay TV bundle and advertiser viewer and ultimately advertisers so sports remains a competitive business.

Speaker Change: Which we.

Speaker Change: We thrive in and we don't see any any difference.

John Christopher Hodulik: Please go ahead. Great, thank you. First, just quickly on sports TV, just any cash contribution or can you size any cash contribution required from Fox? And then, on advertising, you know, obviously a number of things affecting the numbers this quarter. You guys have some positive color as we look into next quarter. Just any color, one, I'd say on the TV side what you're seeing at this point in terms of politics.

To that.

Speaker Change: Led to this now I think we've.

Speaker Change: We've answered many questions on these quarterly calls over over many years.

Speaker Change: About that when we are ready to launch.

Speaker Change: Streaming service such as this and we will do it and we've been monitoring the space obviously for per year. So in past few years in particular.

Speaker Change: And as we developed.

Speaker Change: With our partners.

Speaker Change: Concept around a very unique and innovative product.

Speaker Change: We felt now was the right time to launch a product really into a new market right. It's a new market.

Lachlan Murdoch: And then, you know, with the improvement in the ratings and the year-over-year, you know, the gap you're seeing closing, can we assume that the 23% on the cable ad side is sort of the worst number, and any color on the sort of slope of the improvement we should see as we head through the year? Thanks. I've lost track. Sorry.

Speaker Change: Where there is no product serving the sports fans that are not within the cable.

Speaker Change: Cable TV bundle. So if access is for us at access as a whole new market and really drives.

Tremendous amount of new reach that we werent.

Speaker Change: We werent.

Speaker Change: Servicing before.

Lachlan Murdoch: Okay, so cash contribution, advertising, and cable. Cable advertising. You got it. After this, we won't need any more questions.

Speaker Change: Operator next question please.

Speaker Change: As John Hodulik with UBS. Please go ahead.

John Christopher Hodulik: Okay. Thank you.

John Christopher Hodulik: First just quickly on the on the sports JV, just any cash contribution or can you size any cash contributions required for Fox and then.

John Christopher Hodulik: Turning to advertising.

John Christopher Hodulik: Obviously, a number of things impacting the numbers. This quarter you guys had some some positive color as we look into next quarter, just any color one I'd say on the TV side, what youre seeing at this point in terms of political and then.

Lachlan Murdoch: We'll cover the whole gamut. Thanks, John. On the cash side, I'll let Steve fill in, but obviously, this business has both a marketing and other costs associated with running the business in the partnership, but there's also the revenue that we garner through affiliate fees for our networks that come out as the business grows. But I'll let Steve fill in the details.

John Christopher Hodulik: With the improvement in the ratings and the year over year gap that Youre seeing closing can we assume that the 22% on the cable outside of sort of the worst number and any color on the sort of slope of the improvement we should see as we head through the year. Thanks, I've lost I've lost track.

John Christopher Hodulik: Okay.

Speaker Change: Advertising and cable a.

Speaker Change: Cable edge.

Speaker Change: Cable advertising.

Speaker Change: After this we won't need any more questions.

Speaker Change: Thanks, John on the cash side I'll, let I'll, let Steve fill in but it's obviously this business has both of you.

Steven Silvester Tomsic: Yeah. So, John, I think it's a touch early for us to be giving. Some forecasts around sort of the contributional deficit from the JV, but sort of as we look at it, it'll be accretive to us from a net-net perspective when you take into account the affiliate fees that we'll collect as revenue versus whatever funding we need to make to the JV. From a NetNet perspective, it'll be a creative production. And then on advertising, I think, you know, the advertising outlook is, as I mentioned, with news, but you could apply this term to the overall market, sort of nuanced as we look at it. If I start with sports, you know, we had a very solid regular NFL season from an advertising perspective, and I think a stronger NFL postseason, which we were very pleased by. But also, that was, it's a smaller revenue line, but we had a fantastic college football season. Really, I think the story of this past Autumn was really the strength of college football, and particularly as advertisers sort of found and appreciated the quality of the audience watching college football.

John: There's marketing and other costs associated with running the business in the partnership but there's also the revenue that we garner through affiliate fees for our networks.

Speaker Change: That come out.

As the business grows, but I'll, let Steve yes on the detail side, John I think it's a touch early for us to be giving.

Steven Silvester Tomsic: Some forecast around sort of the contribution of deficit from the JV.

Steven Silvester Tomsic: Sort of as we look at it it will be accretive to us from a net net perspective, when you take into account.

Speaker Change: Affiliate fees that we'll collect as revenue versus what is the funding we need to make to the JV. We think from a net net to Fox perspective, it'll be accretive pretty quickly.

Speaker Change: And then on an advertiser.

Speaker Change: Advertising.

Speaker Change: I think the advertising outlook is as mentioned with our with news, but if you could apply this terminal.

Speaker Change: The overall market is sort of nuanced as we look at it if I start with sports we had a very solid regular NFL season from an advertising perspective.

Speaker Change: And I think a stronger.

Speaker Change: The NFL post season.

Speaker Change: We were very pleased by but also that was on.

It's a smaller revenue line, but but we had a fantastic college football season are really I think the story of this past.

Speaker Change: Awesome.

Speaker Change: It was really the strength.

Speaker Change: College football and particularly as advertisers.

Speaker Change: No.

Speaker Change: You sort of.

Speaker Change: Founded in appreciate it.

Speaker Change: The quality of the audience, Washington College football.

Speaker Change: If we look forward obviously, we have the Daytona 500, and then the start of the regular.

Speaker Change: A major league basin baseball season in March and Theres, a lot of them.

Our positive momentum with advertisers with those.

Speaker Change: Fox News.

You have.

Speaker Change: A positive trends with Dr pricing.

Speaker Change: Direct response pricing is still down but as you start to lap the comparisons from last year.

Speaker Change: It is.

Speaker Change: Certainly improving.

Speaker Change: Quite a lot.

Speaker Change: And impacts from preemption.

Speaker Change: With.

Speaker Change: With the election and unfortunate with our war coverage. So the preemption are affecting and ratings are continuing to improve so we're happy with where we are at Fox news has all of those trends.

Speaker Change: Our improving steadily our local stations is probably the most mixed but you have a bad comparison, particularly in the in the in the current pacings.

Speaker Change: With Super Bowl comps this time last year, it's probably about $50 million.

Lachlan Murdoch: It's probably about $50 million in Super Bowl revenue just in the station group this time last year, so the comparisons are quite tough as we go forward, but we remain confident that we'll see a record political cycle. This is slightly ameliorated, I think, in the current quarter with the lack of a So we're a competitive primary competition, but we're already seeing business in the first half of next year start to flow in from a political perspective. And it's obviously, it's sort of natural because our stations; we have a large number of stations in key political markets like Georgia and Michigan, Pennsylvania, Arizona, and Wisconsin. So we're very confident of a very strong political cycle once that starts to flow. And then finally, with Tubi, Tubi's TBTs continue to grow, I think at 62 or 63%.

Speaker Change: In.

Speaker Change: Super Bowl revenue just just in the station group.

Last year. So the comparisons are quite tough as we go forward, but we remain confident that we'll see a record.

Speaker Change: Political cycle.

Speaker Change: This is slightly.

Speaker Change: Ameliorated I think in the current quarter.

Speaker Change: With the <unk>.

Lack of.

Speaker Change: So our competitive our primary.

Speaker Change: Competition.

But we're already seeing business in the first half of next year start to flow in from a from a political perspective, and it's obviously, it's sort of natural because our stations.

Speaker Change: Large conversations and in.

Speaker Change: Key political markets like.

Speaker Change: Georgia, and Michigan, Pennsylvania, Arizona, and Wisconsin, So we're very confident in a very strong.

Speaker Change: Political cycle once that starts to flow.

Speaker Change: And then finally with <unk>, our <unk> continue to grow I think it's 62, 63%.

Lachlan Murdoch: And obviously, with the TBT growth, the revenue is following. The revenue growth is slightly less or somewhat less than it was last year. But in the sort of streaming environment, we're very happy with its growth. So that's on advertising; scatter pricing is all up above upfront pricing. So that's positive. And then, finally, on cable, and Dr. Hank Reid.

Speaker Change: And obviously with the PBT growth.

Speaker Change: The revenue is as following the revenue growth is slightly less or somewhat less than it was.

Speaker Change: Last year, but.

Speaker Change: In the.

Speaker Change: And it sort of streaming environment.

Speaker Change: We're very happy with it with its growth so.

Speaker Change: Sure.

Speaker Change: So that's an advertising scatter pricing is all up above above upfront pricing. So that's positive and then finally on the on the.

Speaker Change: Our cable.

Speaker Change:

Lachlan Murdoch: Thank you. I appreciate it. Thank you. Thank you.

Speaker Change: Affiliate.

Speaker Change: Subscribers.

Speaker Change: And fees, we are in an environment, where I think we called out of rigs roughly 8%.

Lachlan Murdoch: Cable erosion, and yet our cable affiliate fees have grown in this quarter, so I think that really shows the strength of our brands and our programming in the cable universe. So we're very pleased with that. Next question, please, operator. It is from Jessica Reese Ehrlich with Bank of America Securities. Please go ahead.

Speaker Change: Hi.

Speaker Change: Our cable erosion and yet our cable affiliate fees have grown in this quarter. So I think that really shows the strength of our brands and our programming.

Speaker Change: In the cable universe. So we are very pleased for them. Thanks John.

Speaker Change: Next question please operator.

Speaker Change: It is from Jessica Reif Ehrlich with Bank of America Securities. Please go ahead.

Jessica Reif Cohen: Back to the sport, that it won't affect the pay TV bundle, which, I just want to get some color on that given that sports has been really the glue that's kept it together. So why do you feel so confident that it, that, and then?

Speaker Change: Thank you back to the sports platform.

Speaker Change: Welcome you seem really confident that it won't affect the pay TV bundle.

Speaker Change: Which is.

Speaker Change: Just wanted to get some color on that given that sports has been really to conclude that kept it together.

Speaker Change: So why do you feel so confident that it will not impact that and then.

Lachlan Murdoch: You know, what is the openness to add partners? Will this have a separate advertising organization? How will the ads work? I'm, Uh. So, hi Jessica, by the way.

Speaker Change: What is the openness to add partners.

Speaker Change: We will then have a separate advertising organization, how will the antibody and your content.

Speaker Change:

Jessica: So hi, Jessica Fireeye.

Jessica: So the first one.

Lachlan Murdoch: So, first on how it affects the overall pay TV bundle. Again, the key market, the market that we will be driving towards, is the market that sits outside the sports fan who is currently outside of the traditional pay TV bundle today, and there are tens of millions of them. So, we are very confident that this is a large market and a large opportunity that we can address without undermining the traditional bundle. Obviously, we've been working on this for several months. We've done lots of sensitivity analysis, and we would not be launching this product if we thought it was going to significantly affect our pay-to-be affiliate partners, and that's very important to us. We remain...

Jessica: How it affects the overall pay TV bundle.

Jessica Reif Cohen: Again, the key market the market that we will be driving towards is the.

Jessica Reif Cohen: Is the market that sits outside the sports fan who sits currently outside of them.

Jessica Reif Cohen: Traditional pay TV bundle today, and there is tens of millions of them. So we are very confident that this is a large market and a large opportunity that we can address without.

Jessica Reif Cohen: Without undermining the traditional.

Jessica Reif Cohen: The traditional bundle.

Jessica Reif Cohen: We.

Jessica Reif Cohen: Obviously, we've been working on this for several months, we've done lots of sensitivity.

Jessica Reif Cohen: Sensitivity analysis, and we would not be.

Jessica Reif Cohen: Launching this product if we thought it was going to significantly.

Jessica Reif Cohen: Effect.

Jessica Reif Cohen: <unk>.

Jessica Reif Cohen: Our pay TV.

Jessica Reif Cohen: Affiliate partners and that's very important to us we remain.

Lachlan Murdoch: I think the biggest supporters of the traditional pay TV bundle think there's tremendous value in the pay TV bundle. For the consumer who wants to get it all at an affordable price, the big bundle is still the best way to get that programming and those brands. So we are confident that this product will be additive and will give us incremental subscribers but not significantly affect the traditional bundle. Although we are open to adding partners, that's not something that we're considering at this stage. We think that the 14 linear networks that this service offers give people a tremendous amount of content between ABC affiliates, Fox affiliates, ESPN, ESPN2, ESPNews, the SEC network, Fox affiliates, Fox Sports 1 and 2, the Big Ten network, TNT, TBS, and others.

Jessica Reif Cohen: I think the biggest supporters of the traditional pay TV bundle, we think there's tremendous value in the pay TV bundle for the consumer who wants to get it all.

Jessica Reif Cohen: At an affordable price the.

Jessica Reif Cohen: The big bundle is still the best way.

Jessica Reif Cohen: To get that programming in those brands. So so we are confident that.

Jessica Reif Cohen: This product will be additive and will give us incremental subscribers and not not.

Jessica Reif Cohen: Not.

Jessica Reif Cohen: Affect significantly the traditional bundle.

Jessica Reif Cohen: Openness to add partners.

Jessica Reif Cohen: Sure.

Jessica Reif Cohen: Something that we're considering at this stage, we think that the the 14 linear networks.

Jessica Reif Cohen: This.

Jessica Reif Cohen: Service offers gives people a tremendous.

Jessica Reif Cohen: Amount of of.

Jessica Reif Cohen: Content between.

Jessica Reif Cohen: ABC.

Jessica Reif Cohen: Our affiliates Fox affiliates ESPN ESPN to ESP news the SEC network.

Jessica Reif Cohen: <unk>.

Jessica Reif Cohen: Fox affiliates Fox sports, one and two the Big 10 network TNT TBS.

Lachlan Murdoch: It's a tremendous offering that covers the majority of the key sports in this country, NFL, NBA, WNBA, Major League Baseball, NHL, etc., college, obviously NASCAR, and so on. We think it's an incredibly strong offering, and at this stage, we're not contemplating adding partners to it. I think the third question, Jessica, was about advertising revenues. Advertising revenues will flow through this, so the advertising that we have on our..., on our linear networks will flow into this service and will just give us increased reach to a market that hasn't seen that advertiser engaged with those clients before. So we think it's a net...

Jessica Reif Cohen: It's a tremendous offering that covers.

Jessica Reif Cohen: The majority of the key sports in this country NFL NBA WNBA Major League baseball and in Charlotte Center College, obviously NASCAR.

Jessica Reif Cohen: And so on so.

We think it's incredibly.

Jessica Reif Cohen: Strong offering and at this stage, we're not contemplating adding partners to it I think your third question Jessica was on advertising revenues.

Jessica Reif Cohen: So advertising revenues will flow through this so the advertising that we have on our.

Jessica Reif Cohen: On our linear networks will flow into the service and we will just give us increased reach.

Jessica Reif Cohen: To market that Hasnt seen those that advertiser engage with those clients before us. So we think it's a net positive.

Lachlan Murdoch: Thank you. Operator, we have time for one more question. Very good. That will come from Michael Morris with Guggenheim. Please go ahead.

Jessica Reif Cohen: Thank you Jessica operator, we have time for one more question very good that will come from Michael Morris with Guggenheim. Please go ahead.

Michael Nathanson: Hi, good morning. Thank you, guys. So I wanted to ask about two areas of strength in the quarter. The first one is sports sub-licensing.

Michael Nathanson: Hi, Good morning. Thank you guys. So wanted to ask about two areas of strength in the quarter. The first one on the sports sub licensing can you share a little more detail on what that was how it impacted profitability and how to think about whether or not that's a recurring revenue and profit source.

Steven Silvester Tomsic: Can you share a little more detail on what that was, how it impacted profitability, and how to think about whether or not that's a recurring revenue and profit source? And then my second question is about affiliate acceleration, which is great to see. We know that the rate of cord cutting, you know, is going to be impactful on that number. It's very hard to predict, but on pricing alone and the precedent that you just said, should we look at this as the first quarter of a sustained, stronger pricing dynamic? And how long do you think we should expect to continue to see this type of growth being fueled by those new contractual relationships? Thank you. I thought it was unfair that Steve would get the easy question, and then you asked the second question.

Michael Nathanson: And then my second question is on the affiliate acceleration which is.

Michael Nathanson: Great to see.

Michael Nathanson: By those new contractual relationships. Thank you.

Speaker Change: I thought it was unfair that Steve will get the easy question.

Speaker Change: And then you asked the second question so.

Speaker Change: Hey, Mike Good morning, Michael I'll, let I'll, let Steve address the sports licensing first Hey, Mike.

Lachlan Murdoch: Anyway, good morning, Mike. I'll let Steve address the sports sub-licensing first. Hey, Mike.

Speaker Change: No.

Speaker Change: <unk> sub licensing revenue we have in the cable segment. So we have.

Speaker Change: We own sports sub licensing income in relation to various sort of college sports properties in the international Soccer rights.

Steven Silvester Tomsic: Some of these rights come with some variable based economics to them, which we saw in the quarter.

Speaker Change: I think you should see this as somewhat of a one off it's not going to repeat like this in future quarters future years.

Speaker Change: And if you want to try and Dimensionalize. It then.

Speaker Change: The increase in cable other revenues between this quarter and previous quarter last year is a pretty good guide to the the net benefit to us from those sub licensing arrangements.

Speaker Change: So.

Speaker Change: On the affiliate.

Speaker Change: Revenue acceleration.

Speaker Change: I think the if you look at it too Ken can we sustain sustain that.

Steven Silvester Tomsic: We've now completed all of our distributions or renewals in this cycle that will affect the remainder of this fiscal year. So there are no more renewals negotiated that will affect this fiscal year, and obviously, we're rolling into renewals that will take effect after this fiscal year. If you look at the underlying rate of decline, around 8 percent, and this goes back to a little bit of John's question, if we look at that 8 percent, actually, in September and October, it was better than 8 percent; it was a little bit better, and this we believe was the impact of football and sports viewing in the fall. But then after October, sort of as you get into November and December, the rate declined to return to its sort of baseline at 8 percent.

Speaker Change: We've now completed all of our.

Speaker Change: Distributions of renewals.

Speaker Change: In this cycle that will affect the remainder of this fiscal year. So.

Speaker Change: Sure.

Speaker Change: There's no more renewals are negotiated that will affect this this fiscal year and obviously then we're rolling into renewals that will.

Speaker Change: We will take effect.

Speaker Change: After this fiscal.

Speaker Change: If you look at the underlying.

Speaker Change: The rate of decline around 8% and this goes back to.

Speaker Change: John's question.

Speaker Change: If we look at that 8% actually in.

Speaker Change: September and October.

Speaker Change: It was better than 8% it was a little bit better.

Speaker Change: Then and this we believe it was.

Speaker Change: The impact of football and <unk>.

Speaker Change: Sports sports viewing in the fall, but then after October sort of and as you get into November and December.

Speaker Change: The rate returned declined returned to towards.

<unk>.

Speaker Change: Thats sort of baseline at 8% so so.

Steven Silvester Tomsic: So for the immediate future, we don't see that changing. There's some cyclicality within that, but I think the 8 percent's a number that we're sort of baking into our assumptions. With that, we believe, as we've achieved over the last year where we've renewed over a third of our distribution, we've been able to achieve rate increases that have made up for those declines. And that is because of the strength of our brands, the strength of our programming, and really where they sit, having sort of a focus and strategy on a key number of very core brands that are essential for distributors and for their customers that will be able to maintain similar rates of change going forward.

Speaker Change: For the immediate future, we don't see that changing there's some cyclicality.

Speaker Change: Within that but I think the 8%.

A number that we're sort of baking into it and into our assumptions.

Speaker Change: With that we believe as we've achieved in over the last year we've renewed.

Speaker Change: One third of our distribution.

Speaker Change: We've been able to achieve.

Speaker Change: <unk>.

Speaker Change: Rate increases that have made up for those for those declines and that is because of the strength of our brands the strength of our programming and really where they sit having sort of a focused strategy on a key number a very core brands that are essential.

Speaker Change: Further.

Speaker Change: Distributors and for their customers that we'll be able to maintain.

Mike: Thanks, Mike. At this point, we are out of time, but if you have any further questions, please give me or Dan Carey a call. Thank you again for joining today's call. Thank you. Thank you, everyone. Ladies and gentlemen, that does conclude your conference call for today. Thank you for using AT&T Executive Teleconference. You may now disconnect.

Speaker Change: Rates of change going forward.

Speaker Change: Thanks, Mike.

Speaker Change: Yes.

Speaker Change: Ladies and gentlemen that does conclude your conference call for today. Thank you for using AT&T executive teleconference. You may now disconnect.

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