Fox Credits Midterm Ad Surge for Topping Revenue Forecasts With $3.19 Billion in Q1

The television giant said its deliberations on recombining with News Corp, the publishing arm split off in 2013, will continue

Fox Earnings
Photo illustration by TheWrap

Fox Corp. on Tuesday said revenue rose 5% in the first quarter of television giant’s fiscal year to $3.19 billion, getting a lift from hefty ad spending ahead of the midterm elections and growth from Tubi, its nascent streaming app.

That was on par with the $3.17 billion expected, on average, by Wall Street analysts.

Ad revenue rose 8 percent in the quarter to $1.22 billion, said the owner of the Fox broadcast network, Fox News, Fox Sports and ad-supported streaming service Tubi. Higher political advertising revenue at Fox television stations propelled the gains, which also got a boost from high pricing across the company’s news and sports brands.

The New York-based company reported net income attributable to Fox shareholders of $605 million, or $1.10 per share, for the three months ended Sept. 30. That was down 16% from $701 million, or $1.21 per share, in the first quarter of last year. The quarter’s higher revenue was offset by higher expenses, particularly continued investment in digital initiatives and increased costs at Fox Sports.

On an adjusted basis, however, net income of $1.21 per share came in above the $1.14 per share forecast by analysts.

While the results were broadly positive, the company did not provide any updated details on its exploration of a recombination of Fox with News Corp, the publishing arm and parent of the New York Post that was spun off in 2013. Fox founder Rupert Murdoch, 91, is executive chair of both companies. His son Lachlan is co-chair of News Corp, as well as Fox executive chair and CEO.

The companies both formed special committees to review a remarriage last month. In its press release, Fox said its committee “has not made any determination at this time, and there can be no certainty that the company will engage in such a transaction.”

During the conference call, Murdoch noted that both companies would have to sign off on any deal, which would also have to be supported by shareholders.

Fox shares gained $1.38, or 4.8%, to $30.25 in morning trading, rising faster that the broader markets, which were all in the green.

During the quarter, Fox said affiliate fees edged up 2.6% higher, to $1.71 billion. In the television segment, affiliate fees rose 6%.

Television saw an 8% revenue increase, as advertising revenue leaped 11% to $86 million for the quarter. The increase reflected higher political advertising revenue at Fox television stations and continued growth at Tubi.

However, the company has seen a decline in pay TV of about 7%, on top of a 5% drop last year, Murdoch said during the call that reduction “looks to have stabilized at 7%”and the company is that focusing on its brands, particularly news and sports, to hold that audience. “There’s only one place you can get Fox News and there’s only one place you can get Fox Sports, ” Murdoch said. “So our strategy is to continue to invest and be essential for all of our distributors.”

Cable advertising revenue rose 2%, to $1.03 billion, driven by higher prices for Fox News. Cable affiliate revenue was essentially flat from last yea, but a 9% increase in Fox Nation subscription revenue pushed the segment’s revenue higher.

“We’re in the early days of our next distribution renewal cycle,” said CFO Steve Tomsic during the call. “We are pleased with the outcomes of our earliest renewals and we continue to expect to see these benefits take effect in the back half of our fiscal year, and initially concentrated towards the television segment.”

Lachlan Murdoch said during the conference call that advertising growth in the quarter was driven by strong pricing at Fox News and Fox Sports, and record first-quarter political revenue at local stations. “And in a quarter were industry wide digital advertising revenues appear to have been under pressure, Tubi posted standout revenue growth of almost 30%,” he said.

“These are great results for Fox,” the CEO said, noting that that a week before Election Day, the company has already beaten its fiscal 2021 record at local stations, excluding the 2021 Georgia Senate runoff.

“However, we recognize that there’s a lot of commentary around advertising headwinds as the macro environment evolves,” he said. “Yes, the broader national advertising market is looking more fluid compared to the time of our last earnings call. However, the macro impact is not uniform across our verticals.”

Fox has seen “some softness” in television, but that was largely offset by growth at Tubi, he said. Fox acquired the streaming service for $440 million in 2020.

“The story at Tubi is breathtaking,” Murdoch said. Tubi revenue soared 29% to $165 million. “This marks the first time that Tubi revenue has surpassed the advertising revenue generated by Fox entertainment in a meaningful way,” the CEO said.

He boasted that Tubi’s large library with 48,000 titles has “five times the Netflix library,” and along with cross-platform opportunities, including sports, helped drive viewing time higher.

“It’s not pricing that that’s accelerating,” he said, but an increase viewing time that’s drawing advertising. The company said viewing time leaped 53% in the quarter. “The growth has been really across the entire platform,” Murdoch said.

Heading into a potential recession, the fact that Tubi is a free service is also a potential boon, he added.

“We will continue to invest in the short- to medium-term, and to be I think particularly in an environment where there are potential sort of economic stress in households, having a free service is a great position to be in,” he said. “I think Tubi will benefit from any , frankly, from any economic chills that people people might feel.”