Even without Bill O’Reilly, Fox News continues to be the golden goose at Rupert Murdoch’s media empire. The cable news giant helped offset a box office slowdown and weaker broadcast television results at 21st Century Fox during its most recent fiscal quarter. The company’s fourth quarter profits beat Wall Street’s expectations even as the media conglomerate’s revenues fell just short of projections.
Revenues at the company behind 20th Century Fox, FX, and Fox News increased 2% to $6.75 billion for the three-month period ending in June. Adjusted quarterly income came in at 36 cents a share, down from 45 cents a share in the prior-year quarter. The company said its gains were attributable to profits in its cable operations, which helped offset weaker results in its film and broadcast television arms. Net income at the company fell more than 16% to $476 million, a drop that was partly due to tax expenses.
Analysts were looking for earnings of 35 cents a share on $6.77 billion in revenue, according to Thomson Reuters. Following the report’s release, the company’s stock was essentially flat at $27.50 in after-hours trading.
The earnings report comes as Fox is looking to close its deal to take full control of European pay TV giant Sky. The $15 billion play suffered a setback after British culture secretary Karen Bradley asked communications regulator Ofcom to look at Fox’s bid for Sky again, and set a deadline of Aug. 25 to clarify details. On an earnings call with analysts, Fox CEO James Murdoch said he was “confident” the deal will be approved, but speculated it would not get the go-ahead until the first quarter of 2018. The company previously said it expected the pact to be approved this year.
It was an eventful quarter for Fox, one that included the ouster of Fox News star O’Reilly amid allegations of sexual harassment. In April, the network replaced “The O’Reilly Factor” with “Tucker Carlson Tonight.” O’Reilly’s exit followed that of Roger Ailes, the late Fox News founder, who resigned in 2016 in the wake of his own sexual harassment scandal. Despite the controversy, Fox News’ ratings have continued to be strong.
Fox’s cable network programming unit, which also includes RSNs, FX, and FS1, saw quarterly segment OIBDA increase 19% to $1.44 billion, driven by higher affiliate fees and stronger ad sales.
On the film front, it was a mixed bag. Fox had a hit with DreamWorks Animation’s “Boss Baby,” but “Alien: Covenant” stumbled, leading to questions about the horror franchise’s viability, and the Amy Schumer comedy “Snatched” was a box office disappointment. The lack of a major hit caused the division to have a quarterly segment OIBDA loss of $22 million, a $186 million decrease from the $164 million contribution it reported in the same period a year ago. Fox’s film division was also weighed down by weaker home entertainment sales. In the year-ago quarter, “Deadpool” hit store shelves, making comparisons difficult.
Fox’s broadcast division also suffered in comparison to its prior-year results. The television division reported quarterly segment OIBDA of $137 million, a $7 million decrease caused by lower national and local advertising revenues.
The emergence of digital MVPD services from Hulu, YouTube, and DirecTV Now, along with other skinny bundle services, has added 2 million-plus subscribers to 21st Century Fox’s cable networks. Lachlan Murdoch made a point of highlighting Fox’s “robust domestic affiliate fee gains” for the fiscal year in an effort to assuage investor concerns about the biggest financial pressure point for media conglomerates these days.
James Murdoch hailed the new entrants for contributing to subscriber growth and spurring competition. “They are a great catalyst to innovation in the sector,” he said.
FX Plus is a new subscription offering that is similar to HBO Now — you can pay $5.99 a month and get all FX series old and new with no commercials. It was launched on Monday in partnership with Comcast.
Fox also reported its fiscal year results. The company’s annual income topped out at $3 billion or $1.61 per share, compared with $2.76 billion or $1.42 per share in the prior year. Annual revenues climbed 4% to end up at $28.5 billion.
Cynthia Littleton contributed to this report.