Fox’s pending agreement with Hulu to offer its broadcast and cable channels as part of a streaming bundle will be a “precedential” move that should help drive the growth of competing digital packages, 21st Century Fox CEO James Murdoch told Wall Street analysts on Wednesday.
Murdoch was peppered with questions about Hulu’s plan to make a skinny bundle package of TV channels available to consumers for about $40 a month. During the conference call to discuss Fox’s fiscal third-quarter earnings, Murdoch described Hulu’s plan as a “re-imagined digital video service” that will offer live and on-demand programming through a “simpler and more straightforward set of rules” that should be more attractive to consumers. Fox is a part owner of Hulu with Disney and NBCUniversal.
But Murdoch made it clear that the Hulu deal will open the door at Fox to licensing of its core channels to competing digital services. Fox already has channels included in Dish Network’s similar Sling TV service. It’s understood that Hulu expects to improve on Sling’s $20 offering with the breadth of its bundle and the ease of navigation.
“Our view is we’d like to make our programming more available, not less,” he said, adding that Fox expects “new entrants in the downstream distribution market” to boost the overall value of strong TV channels.
Murdoch was pressed about affiliate fee rates and whether Hulu and other upstart bundle distributors will pay higher fees that traditional MVPDs. He indicated that rates would be in line with traditional distributors and he emphasized that the additional competition will be good for programmers and consumers alike. New entrants “paying a fair price is going to spur the growth of the overall universe of video customers,” he said.
Murdoch also asserted that the advertising component of streaming channel bundles has the potential to be richer than traditional linear TV. Streaming offers “the ability to monetize advertising in a different way” by offering more targeted options to marketers and the ability to experiment with a variety of ad loads and “engagement units.”
Hulu’s plan includes all of Fox’s regional sports networks, as live sports is going to be a big selling point for the service, which is tentatively eyeing a debut early next year. “Sports in the streaming environment is going to be enormously attractive” to consumers, Murdoch said.
The discussion of the Hulu plan came as word surfaced that YouTube is also stepping up its long-gestating effort to offer its own channel bundles. Murdoch indicated in his remarks that Fox sees a moment for the company to re-evaluate its operations in light of the massive swings in consumer behavior. That extends to its approach to ad sales during the coming upfront derby.
The current heat of the short-term scatter market is setting up traditional networks to take in more upfront dollars for long-term advance commitments from advertisers for the coming season. But Murdoch said Fox is trying to take a wider view of the new world of on-demand viewing, with digital becoming a bigger component. “It’s less about (selling) audiences sliced and diced by commercial windows and more about how do we sell a total audience to our advertising partners,” he said.