UPDATED with executive comment, 3:10 PM: As merger talk continues to percolate throughout the media business, 21st Century Fox reported solid results in its fiscal first quarter. Revenue climbed 8% to $7 billion, ahead of Wall Street estimates, and adjusted net was 49 cents a share, down from 51 cents in the year-ago period. The adjusted earnings figure matched estimates.
During a conference call with analysts kept to a tight 35 minutes, the company pre-emptively said it would not discuss “press speculation” about its reported talks with Disney for a sale of film and TV assets or the state of regulators’ review of its $14 billion-plus Sky bid. That didn’t stop analysts from at least trying, among them Michael Nathanson of MoffettNathanson, who inquired about strategy and noted that the Rupert Murdoch-controlled iterations of the company were known to be “asset collectors,” rather than sellers.
“We’re not a collector, we’re an operator,” replied CEO James Murdoch. “What we try to do is build a business that can grow.” He added that the company recently has “taken a lot of steps to change our portfolio” and “simplified our operating model.” Executive chairman Lachlan Murdoch chimed in, “We’ve always been asset builders.”
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While they were not very chatty about the news of the week, the Murdochs did address some other key topics, including progress at Hulu. “I wouldn’t read too much into the management change,” James Murdoch said of the appointment of Fox exec Randy Freer as CEO to replace Mike Hopkins, who left for a top job at Sony.
Hulu’s live TV service is “growing well, early days,” James Murdoch said. We feel great about the roadmap. … We think the pay-TV universe is actually going to grow.” His brother agreed and said he considers YouTube TV’s sponsorship of Fox’s baseball playoff telecasts a sign that skinny bundles are coming of age.
Speaking of distribution, James Murdoch noted that the quarter marked an important milestone he had predicted in past months: It was the first time there was an offsetting effect whereby revenues from ad-free premium services such as Hulu’s no-ad tier as well as advertising on non-linear, on-demand platforms, made up for declines in traditional linear revenues.
On a similar note, execs talked about their push to increase the number of non-exclusive streaming deals for TV and film titles. “The global exclusives that Netflix favors don’t always fit,” James Murdoch said, noting that licensing revenue from the streaming service declined in the quarter but was offset by gains elsewhere. “Our product performs extremely well in the streaming environment” and “it doesn’t make any sense for the consumer” to have it tied up with a single platform, whatever the upfront premium.
Fox shares gained 1% on the day at $27.35 but have drifted down 1% over the past 12 months despite steady growth across many of the company’s units through fiscal 2017 and into 2018. Asked if he gets frustrated by the disparity between results and share price — a problem not affecting some media peers — James Murdoch shrugged. “All we can do is build and run a company that grows,” he said.
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