Fox Corporation (FOXA) has been strengthening its portfolio to gain traction and increase its user base. It recently announced the debut of the iconic series Cops on Fox Nation, which will feature new episodes every Friday.
The first series of Cops, an action-packed police series received overwhelming reactions from the audience and Fox expects this season to be a hit as well.
Fox Nation, which is an entertainment streaming service designed to complement the Fox News Channel (“FNC”), is further expanding its portfolio with original content like Duck Family Treasure, Sharon Osbourne: To Hell & Back (to be streamed on Sep 26) and the upcoming Yellowstone: One-Fifty with Kevin Costner.
Fox also signed Roseanne Barr, a comedy icon in America for a comedy show named A Roseanne Comedy Speciala few days ago.
The Fox News Channel has been benefiting from Fox Nation as it increased FNC’s subscriber base by approximately 80% in fiscal 2022. The conversion rate of trialists to paid subscribers has been high and retention rates were above industry averages.
Fox News Channel once again closed August as the best-performing news brand for 18 consecutive months as it reached more than 2.9 billion total multiplatform minutes, 1.5 billion total multiplatform views and 77 million multiplatform unique visitors, per Comscore data.
Along with this, Fox Business is also driving its user base as it achieved 151 million multiplatform views as of last month. Fox Business surpassed CNN Business and Comcast’s (CMCSA) MSNBC in multiplatform views for the fifth straight month.
Comcast’s MSNBC lost 19% of prime-time viewers in the first half of 2022. Per Nielsen data,their ratings have plummeted ever since The Rachel Maddow show shifted to a once-per-week format from four times per week.
Fox’s investment in Flutter has benefitted its sports business division as well. Together they entered into a national media and sports wagering partnership in the U.S. The partnership offers the FOX Bet Super 6 national free-to-play game, which has generated a user base of more than 6 million registered accounts as of June 2022.
However, the wagering business will not be easy for Fox given that it faces stiff competition from companies like DraftKings (DKNG).
DraftKings is focusing on its iGaming products as it launched a sportsbook in Kansas at the start of this month. Its Same Game Parlay, which allows multiple betting outcomes from the same game into one parlay bet and the feature enhancements like the Web3 strategy, has gained significant anticipation among players.
What’s Next for Fox Corp?
Fox’s shares have declined 13% year to date compared with Comcast, which fell by 35.5% during the same period. The Zacks Consumer & Discretionary Sectoralso declined 37.2% over the same time frame.
However, Fox’s cable TV business faces a serious threat from OTT platforms due to cord-cutting and changing consumer preferences. This cord-cutting does not bode well for Fox.
In fourth-quarter fiscal 2022, Cable Network Programming EBITDA decreased 6.8% year over year to $628 million. EBITDA margin contracted 520 bps to 43%.
Fox also faces competition for ad dollars, which forms its main source of revenue. This is further intensified by offerings from tech giants like Facebook, Twitter (TWTR), Google, YouTube and Amazon, as they too have been fighting for ad dollars.
Twitter’s initiatives to add features and focus on effectively tackling abuse issues are helping it to expand the monetized user base, thereby driving ad revenues.
However, Fox remains confident for fiscal 2023 as the financial gains from Super Bowl 57, the early exit of Thursday Night Football, the momentum heading into November's midterm elections and the start of its next major distribution cycle are expected to deliver record revenues and EBITDA. Currently, Fox carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
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