21st century fox has been the leader among the big four broadcast and cable conglomerates in driving growth over the last couple years, with Fox News a large part of the reason for that success. Yet with both management and on-air talent in transition, Fox News risks going from the company’s biggest asset to a drag on its business.
Fox has grown faster than the TV businesses at CBS, Disney and NBC Universal over the last three years, taking the top spot on an adjusted basis for eight out of the last 13 quarters. While Disney is going through a downturn fueled by trouble at ESPN, and CBS continues to see modest growth in its TV business, only NBCU comes close to Fox’s growth rate, and then only recently.
The major driver of Fox’s growth during this period has been its cable networks, which continue to outpace its broadcast business (no slouch itself over recent quarters). And the major driver of that growth cited on every quarterly earnings call for the past year? Fox News.
In a March quarter earnings call, Lachlan Murdoch touted a 61st straight quarter of leadership in total day and primetime viewing among cable channels and said Fox News had just concluded its highest ratings quarter ever. That strength in ratings, combined with price increases and rising affiliate fees, has propelled Fox News and, in turn, Fox’s entire cable networks business to 7%-10% revenue growth and high, stable margins at a time when growth in the cable networks sector has been slowing markedly.
|source: Company Reporting, jackdaw research Analysis and estimates; Adjusted for One-Off Events Like Super Bowl and for Merger Activity|
Fox News’ ratings rise has coincided with the presence of increasingly strident voices among a sizable portion of the U.S. population — voices given greater legitimacy by last year’s election of Donald Trump.
Yet the last few months have seen turmoil in both the executive and on-air ranks at Fox News, with the departure, under a sexual-harassment cloud, of Roger Ailes and more recently, Bill O’Reilly. Megyn Kelly left the network in January for NBC.
Fox News could weather this storm by making the right moves and keeping its audience from shrinking. But there’s also the possibility the network loses its advantage as a voice for the Trump crowd, to be replaced not so much by direct competitors like MSNBC but by new or newly important outlets on the right, including Sinclair Broadcast Group.
What’s hard to see at this point is a continued growth in the ratings, prices and affiliate fees that have been so important to Fox News, the broader Fox cable networks business and 21st Century Fox as a whole. That means the company’s overall growth trajectory could slow down quite a bit, making it much less of an outlier and placing it more in the middle of the pack.
Jan Dawson is the founder and chief analyst at Jackdaw Research, an advisory firm for the consumer technology market.