FOX Q3 2023 Earnings Report

FOX EPS Results

• Actual EPS: $0.94
• Consensus EPS: $0.49
• Beat/Miss: Beat by +$0.45
• One Year Ago EPS: $0.54

FOX Revenue Results

• Actual Revenue: $4.08 billion
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

FOX Announcement Details

• Quarter: Q3 2023
• Date: 5/9/2023
• Time: Before Market Opens
• Conference Call Date: Tuesday, May 9, 2023
• Conference Call Time: 8:30AM ET

FOX (NASDAQ:FOX) (NASDAQ: FOX) is a U.S. media company that produces and distributes news, sports, and entertainment programming. Its portfolio includes FOX News Media, FOX Sports, FOX Entertainment, FOX Television Stations, and the Tubi streaming service.

FOX News Media operates FOX News Channel, FOX Business Network, FOX News Digital, FOX Nation, and FOX Weather. FOX Sports provides national and regional sports programming, while FOX Entertainment develops and broadcasts scripted and unscripted television content. The company’s television station group operates local broadcast stations in major U.S. markets, and Tubi offers an ad-supported streaming library of movies, television programs, and original content.

Fox Corporation was formed in 2019 following the acquisition of much of 21st Century Fox’s entertainment assets by The Walt Disney Company. The remaining businesses were reorganized as an independent public company focused on news, sports, and broadcast television. FOX primarily serves audiences in the United States, with certain digital and programming activities reaching international viewers. Lachlan Murdoch serves as executive chair and chief executive officer.

FOX Q3 2023 Earnings Call Transcript

Key Takeaways

• Q3 revenue rose 18% with 43% advertising growth, led by record Super Bowl 57 generating over $650 million in ad revenue and boosting the Television segment’s ad sales 61%.
• Tubi saw 31% revenue growth and a 38% increase in view time, surpassing 1% of total U.S. TV viewing minutes and becoming the most‐watched FAST service, fueled by a viral Super Bowl spot.
• Fox News Channel and Fox Business maintained their leadership positions, ranking #1 in cable news total day and prime time, and #1 in business network viewership for the fourth consecutive quarter.
• The company reported a $54 million net loss attributable to stockholders, primarily from litigation-related charges associated with the Dominion settlement, though adjusted net income grew 8% to $494 million and EPS rose to $0.94.
• Fox generated $1.48 billion in free cash flow and accelerated $1 billion of share repurchases, bringing total buybacks to $4.4 billion out of its $7 billion authorization to return capital to shareholders.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the Fox Corporation third quarter fiscal year 2023 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. I would like to emphasize that functionality for the question and answer queue will be given at that time. If you should require assistance during the call, please press star then zero. As a reminder, this conference is being recorded. I'll now turn the conference over to Chief Investor Relations Officer, Ms. Gabrielle Brown. Please go ahead, Ms. Brown.

[Gabrielle Brown, Chief Investor Relations Officer at Fox Corporation]

Thank you, Kiley. Good morning, and welcome to our fiscal 2023 third quarter earnings call. Joining me on the call today are Lachlan Murdoch, Executive Chair and Chief Executive Officer, John Nallen, Chief Operating Officer, and Steve Tomsic, our Chief Financial Officer. First, Lachlan and Steve will give some prepared remarks on the most recent quarter, and then we'll take questions from the investment community.

[Gabrielle Brown, Chief Investor Relations Officer at Fox Corporation]

Please note that this call may include forward-looking statements regarding Fox Corporation's financial performance and operating results. These statements are based on management's current expectations, and actual results could differ from what is stated as a result of certain factors identified on today's call and in the company's SEC filings. Additionally, this call will include certain non-GAAP financial measures, including adjusted EBITDA, or EBITDA as we refer to it on this call.

[Gabrielle Brown, Chief Investor Relations Officer at Fox Corporation]

Reconciliations of non-GAAP financial measures are included in our earnings release and our SEC filings, which are available in the investor relations section of our website. With that, I'm pleased to turn the call over to Lachlan.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

Thank you, Gabby. Thanks to everyone for joining us this morning. Fox's strong fiscal third quarter operating results once again demonstrate the power of our content and the brands it underpins, and the repeated capability of our focus strategy to deliver solid financial results. In the quarter, we grew top-line revenue by 18%, led by the remarkable 43% growth in advertising and a solid 3% growth in affiliate revenue. Underpinning this performance was a record Super Bowl LVII on the FOX Broadcast Network, which generated approximately $650 million of gross advertising revenue across our businesses and was the key driver of our 61% advertising revenue growth at our television segment.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

This year's Super Bowl matchup between Kansas City and Philadelphia delivered 115 million viewers across Fox platforms, making Super Bowl LVII the most-watched program in U.S. television history and the pinnacle of an extraordinary year for Fox Sports. The strong lineup of programming and advertising demand for Fox Sports continues into our fourth quarter, which includes the return of NASCAR, the second season of the USFL, the start of Major League Baseball's 2023 season, the finals of the UEFA Nations League, and a first for Fox, the Belmont Stakes. Leveraging the reach of a Super Bowl lead-in, we launched the second season of Next Level Chef, which promises to be the next big lifestyle franchise from our Studio Ramsay partnership.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

Our entertainment business also found success with the number-one new series and new drama of the year in Accused and the number-one new unscripted series in Special Forces: World's Toughest Test. Fox has now debuted the top new unscripted series for five consecutive seasons. In fact, the combined power of our sports and entertainment programming places Fox at number one amongst broadcast network season to date in the key 18-49 demo. Our strong sports calendar also had a halo effect at the Fox television stations, which saw many local advertising verticals higher in the quarter. In what continues to be mixed local advertising market conditions, we are encouraged by growth in categories including auto, restaurants, and entertainment, but are watchful across other categories including bedding, retail, and telecom.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

Meanwhile, Tubi's performance in the third quarter was nothing short of stellar, with revenue growth of 31% supported by sustained gains in engagement, where total view time increased 38% year-over-year. While still early in the fourth quarter, the April results for Tubi show the momentum across the platform accelerating. Having recently marked the three-year anniversary of our acquisition of Tubi, our progress over this longer-term timeframe is just as impressive, having grown quarterly TVT by over 200% and revenue by 400%. Just as importantly, the Tubi brand has asserted itself on the broader media landscape. Our viral Tubi spot in the Super Bowl, which received massive press coverage, had almost 7 billion impressions.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

Our strong growth in engagement has now led to Tubi's inclusion in Nielsen's The Gauge, marking the first time Tubi has reached 1% of total TV viewing minutes and making Tubi the most-watched FAST service in the United States. Just last month, we announced the formation of Tubi Media Group under Paul Cheesbrough, which brings together our digital capabilities in a more formalized and coordinated way to help us better monetize our digital touchpoints across all our Fox properties. We thank Farhad for his entrepreneurial leadership at Tubi over the last three years and of course before. He leaves the business in terrific shape with an outstanding team to drive continued strong growthAt Fox News Media, we retained our leadership position amongst our peers.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

The FOX News Channel ended the third quarter as the most-watched cable network in total day and prime time, while maintaining its lead as the most-watched cable news network, beating CNN and MSNBC combined. Notably, the FOX Business Network ended the quarter as the most-watched business cable network, beating CNBC in total viewers during the business day and market hours for the fourth consecutive quarter.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

Let me briefly address the settlement of our dispute with Dominion Voting Systems. We made the business decision to resolve this dispute and avoid the acrimony of a divisive trial and a multi-year appeal process, a decision clearly in the best interest of the company and its shareholders. The settlement in no way alters Fox's commitment to the highest journalistic standards across our company or our passion for unabashedly reporting the news of the day.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

We're proud of our Fox News team, the exceptional quality of their journalism, and their stewardship of the Fox News brand. Whether it be our coverage of politics and elections, world events, such as the war in Ukraine, or domestic issues, such as the crisis at the border, our journalists bring compelling news home to our viewers every day. The standards behind this reporting are not only what makes us the number one cable news network, but the number one network in all of cable. In fact, in a recent poll, 41% of respondents chose Fox News as their most trusted network news provider. As we look ahead, we are confident in the strength of the Fox brands and the strength of our balance sheet.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

While we are not completely immune to the headwinds facing the broader industry and the general economy, we are well-positioned given our areas of differentiation. Nonetheless, you can expect us to be even more focused on our cost base as we look to reinforce our strategy for future growth. We remain committed to driving long-term shareholder value creation through the thoughtful management of our existing business, the pursuit of new and exciting adjacencies, and returning capital to our shareholders. With that, I'll turn it over to Steve to take you through the details of the quarter.

[Steve Tomsic, CFO at Fox Corporation]

Thanks, Lachlan. Good morning, everyone. Fox again delivered strong underlying financials in our fiscal third quarter, with 18% revenue growth and 3% EBITDA growth, bolstered by a record-breaking Super Bowl LVII. Our advertising revenues increased 43%, led by the Super Bowl, along with a higher volume of NFL playoff windows and accelerating growth at Tubi. Meanwhile, our affiliate revenues grew 3% on the back of pricing benefits from recent renewals, partially offset by trailing 12-month subscriber losses continuing to run in the 7% range. Quarterly adjusted EBITDA was $833 million, up $22 million over the prior year quarter, as these revenue increases were partially offset by higher expenses. This was primarily due to higher sports rights amortization and production costs associated with our NFL Super Bowl and playoff schedule.

[Steve Tomsic, CFO at Fox Corporation]

The net loss attributable to stockholders was $54 million, or -$0.10 per share, compared to net income of $283 million, or $0.50 per share, reported in the prior year period. The variance was primarily due to other net, where we recognized charges associated with the Fox News Media litigation, partially offset by the gain associated with the change in fair value of the company's investments. Excluding these and other non-core items, earnings growth was strong, with adjusted net income growing 8% to $494 million and adjusted EPS of $0.94 per share, up $0.13 against last year's $0.81 per share. Turning to our segments, starting with television, where revenue grew an impressive 36% in the quarter.

[Steve Tomsic, CFO at Fox Corporation]

Television advertising revenues led this growth with a 61% increase, fueled by Super Bowl LVII, which, as Lachlan mentioned, generated over $650 million in gross revenue. We also benefited from two additional NFL playoff games, one divisional and one wild card, partially offset by the timing of one less regular-season game. Momentum at Tubi remained strong, with advertising revenues up 31% to $170 million on the back of increased engagement and stable pricing.

[Steve Tomsic, CFO at Fox Corporation]

These strong advertising tailwinds in the television segment were partially offset by lower primetime ratings at the Fox network and mixed base market conditions at our local stations when excluding the Super Bowl. Television affiliate fee revenues were up 9%, with healthy growth in pricing across Fox owned and operated and affiliated stations continued to outpace the impact from subscriber declines.

[Steve Tomsic, CFO at Fox Corporation]

Other revenues remained essentially unchanged from the prior year quarter. EBITDA at our television segment was up $82 million-$117 million. Expenses increased in the quarter, driven by higher costs related to the Super Bowl and a higher volume of NFL games. The increase in expenses was partially offset by lower costs at FOX Entertainment, including the absence of a write-down of certain scripted programming in the prior year quarter. Our net EBITDA investment in Tubi of approximately $60 million was broadly in line with the prior year quarter. At Cable, we saw revenues generally in line with the prior year. Cable advertising revenues were down 7% due to the impact of a softer direct response marketplace at FOX News Media, while being partially offset by the benefit of the World Baseball Classic at the national sports networks.

[Steve Tomsic, CFO at Fox Corporation]

Cable affiliate fee revenues were broadly flat, coming in at $1.1 billion, with rate growth broadly offset by subscriber declines.

[Steve Tomsic, CFO at Fox Corporation]

Cable other revenues were up 10% in the quarter, led by higher FOX Nation subscription revenues. EBITDA at our cable segment was $792 million compared to the $864 million reported last year, largely due to these revenue impacts, along with elevated legal costs at FOX News Media and higher expenses associated with the second season of the USFL and the World Baseball Classic at FOX Sports. Turning to cash flow, where we generated strong free cash flow of $1.48 billion in the quarter, reflecting our normal seasonal cycle of collecting advertising revenues from our fall programming, coupled with our major sports rights payments being concentrated in the first half of our fiscal year.

[Steve Tomsic, CFO at Fox Corporation]

From a share repurchase perspective, as we foreshadowed on our last call, we continued with our normal course buyback activity of $250 million in the quarter and deployed $1 billion of additional capital to an accelerated share repurchase transaction.

[Steve Tomsic, CFO at Fox Corporation]

We retired approximately 80% of the shares associated with the ASR in the March quarter and expect the remainder to settle in the coming months. We remain committed to fully utilizing our current $7 billion authorization, where we now cumulatively repurchased approximately $4.4 billion, representing 20% of our total shares outstanding since the launch of the buyback program in November 2019. These meaningful capital return measures are enabled by the strength of our financial position, where we closed the quarter with $4.1 billion in cash and $7.2 billion in debt.

[Steve Tomsic, CFO at Fox Corporation]

While this reported cash balance does not include the impact of the Dominion settlement, we continue to maintain a very robust balance sheet that supports our ongoing commitment to capital returns, as well as flexibility to pursue value-accreted investment. With that, let me turn it back to Gabby to open Q&A.

[Gabrielle Brown, Chief Investor Relations Officer at Fox Corporation]

Thank you, Steve. Now we would be happy to take questions from the investment community.

[Operator]

Thank you. Ladies and gentlemen, I'd like to emphasize the functionality for the question-and-answer queue. If you wish to ask a question, please press one, then zero on your touchtone phone. You will hear a tone indicating that you've been placed in queue. You may remove yourself from queue at any time by once again pressing one, then zero. If you're using a speakerphone, please pick up your handset before pressing the numbers. It has been requested that you limit yourself to one question. Once again, if you have a question, please press one, zero at this time. One moment, please, for the first question. We'll go to the line of Robert Fishman with MoffettNathanson.

[Robert Fishman, Senior Research Analyst at MoffettNathanson]

Good morning, everyone. I have a couple of related questions, if I can. Lachlan, after the Dominion settlement, is there anything that you can share to better understand the future settlement risk? Related, can you discuss whether the departure of Tucker Carlson will lead to changes in the prime-time programming strategy and then potential opportunities for more national advertising?

[Robert Fishman, Senior Research Analyst at MoffettNathanson]

For John and Steve, just if you can expand on the early confidence you have from recent MVPD renewals. After seeing the acceleration in retrans growth this quarter, any more insight on whether you can get better pricing to outpace the elevated levels of cord cutting or just more economics from your affiliate partners? Thanks very much.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

Thanks, Robert. I don't know where to start. I lost track of the seventh question. No, thank you very much and good to hear from you. Let me start and hand over, I suppose, to Steve for the final questions. I'm obviously limited about what I can say about any ongoing litigation, but I can make the following comments in regards to Dominion. I refer to some of this in my prepared remarks.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

Look, as we've stated many times, we always acted as a news organization reporting on the newsworthy events of the day, which certainly included allegations being made by the sitting president of the United States and his lawyers in the aftermath of a hotly contested presidential election. We have been and remain confident in the merits of our position that the First Amendment protects a news organization's reporting on allegations being made by a sitting president of the United States.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

The Delaware court severely limited our defenses at trial through pretrial rulings. One example being not being able to point to the newsworthy nature of the allegations. We determined that the best course of action for the company and its shareholders was to settle instead of proceeding with a six-week trial and potentially two or even three years of appeals.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

As you know, we have a pending case with Smartmatic, which is a fundamentally different case than Dominion, in that all of our full complement of First Amendment defenses remain. We'll be ready to defend this case surrounding extremely newsworthy events when it goes to trial, likely not until the calendar year 2025. As regards to our programming strategy, in prime time, there's no change to our programming strategy at Fox News. It's obviously a successful strategy. As always, you know, we are adjusting our programming and our lineup, and that's what we continue to do.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

We are pleased with the strength of the advertising demand throughout our schedule, but particularly prime time.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

Steve, do you wanna talk to the MVPDs?

[Steve Tomsic, CFO at Fox Corporation]

Yeah, sure, on the affiliate. Robert, yeah, listen, we're pleased with the way our affiliate negotiations are going. You know that this year we had roughly 34% of the total affiliate book up for renewal. We've been successful in generating and establishing new pricing benchmarks for the network and Fox Sports or retrans and Fox Sports in those negotiations. With another sort of third of our book due for renewal in fiscal 2024 and a touch under 30% due in fiscal 2025, we feel pretty confident that we can continue to deliver pricing gains as subscribers. If the subscriber rate of attrition stays at the same level, we expect to post ongoing affiliate revenue growth for the company.

[Gabrielle Brown, Chief Investor Relations Officer at Fox Corporation]

Operator, we can take the next question.

[Operator]

That will come from the line of Ben Swinburne with Morgan Stanley.

[Ben Swinburne, Head of U.S. Media Research at Morgan Stanley]

Thanks. Good morning. I just wanna ask about advertising as you guys look into the rest of the year and head into the upfront. You know, does Tubi give you guys an advantage as you go in to what is, at least I would describe as a soft, you know, demand environment for advertising, in trying to drive pricing kind of across your properties, particularly with the new Tubi Media Group? Just wondering if you think that's gonna matter enough this year for us to maybe notice as we head into the fall? Then just on the direct response weakness at Fox News, do you guys have any visibility on sort of whether that's improving here in Q4 or what the drivers of that are? Any, any relationship to sort of some of the broader volatility around Fox News?

[Ben Swinburne, Head of U.S. Media Research at Morgan Stanley]

Just wanted to get your updated thoughts on that. Thanks. Thanks very much.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

Hey, thanks, Ben. I'm glad Robert left you a question because. No, just, on advertising, look, we, I think you've alluded to a softness in the market. We're really not seeing that across our major platforms. I'll give you a bit of the detail. The national market, the sports market for us, is very strong, very robust. Obviously, as we, you know, enter the summer, it's a slower, quieter, always is a quieter period for us, until the fall when our key marquee sports programming is on air.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

We're seeing, you know, pretty robust demand for time and availability in the sports market. We're very confident with sports. In news, the direct response issues are which is a market issue, it's not a Fox News issue, has stabilized, so we're not seeing any more deterioration in direct response pricing. We feel pretty confident in the stabilization of that piece of revenue. Again, that's really a product or a result of oversupply in with our competitors with direct response.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

It's not so much a Fox News issue, it's something that certainly has affected our ability to achieve the premium pricing that we've been used to. Again, that issue has stabilized, and we think is, you know, offers us a pretty good platform going forward. The other thing to mention on news, which is just a small data point, we're seeing political revenue earlier than we've ever seen before. It's still small, but it's sort of unheard of to have it this early in the political cycle. Again, we think that bodes well for the fall and, you know, as we enter the more significant part of the political cycle.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

Then coming on to Tubi, you know, the revenue is accelerating there. Revenue is, while it's accelerating pretty strongly, Gabby doesn't want me to give the number. It would break most of your models. It's not keeping pace with TVT. TVT continues to grow even faster, which is a great metric. We have the avails. We're looking forward to Tubi being a central part of our upfront negotiations. It is clearly not only a strategic driver for us, but an important driver going forward.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

Then when you get down to local base markets, that's where we're seeing more mixed mixed results in the different kind of verticals of revenue. You know, we're very pleased to see, you know, auto again, continuing its rebound with strong growth in the auto category.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

The entertainment category, we're also seeing growth in, and restaurant category we're seeing growth in. But this is offset by weakness across other categories such as, you know, retail, telecom, and obviously sports wagering and betting. So the local market does feel soft overall. But again, we're looking forward for our businesses, particularly in sports and news. We're looking forward to, you know, a strong, a decent summer and a strong, fall season. I think that's all the questions. Thanks, Ben.

[Gabrielle Brown, Chief Investor Relations Officer at Fox Corporation]

Next question, please.

[Operator]

We'll go to the line of Phil Cusick with JPMorgan.

[Phil Cusick, Managing Director at JPMorgan]

Hi. Thanks. A couple questions and then a quick one. On Tubi, it sounds like your TVT is still outgrowing revenue, but are you starting to unleash the revenue and profit there a little bit? On the legal side, any direction on legal expenses from here? One standalone. Any thoughts on appropriate leverage and capital return from here? We appreciate the $1 billion, but how should we think about this? Are you still gonna sit on the cash until we get to the next sort of legal view, or should something happen between now and then? Thank you.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

Thanks, very much, Phil. On, let me start with Tubi and I'll throw this to Steve for some of the capital management element of the question. On Tubi, you know, we're gonna continue to invest in Tubi. It's at the same levels we've been investing over the last year or so. We just think it's a tremendous opportunity for us. As I mentioned in my comments, you know, the fact that we're now Nielsen's The Gauge now has us on over 1% of the U.S. television viewing is a tremendous sort of benchmark to have hit and to see continued growth there.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

From a consumer aspect and from a marketer's aspect, Tubi's becoming, you know, more and more a central part of a usage and sort of an opportunity. This is really real because, you know, the focus Tubi's had over, you know, not only we think of it over the last three years with our involvement, but obviously the team there has done a tremendous job, not only over the last three years, but before that and really sort of driving, you know, sort of best in class personalized AVOD experience, you know, building an incredible library with nearly 55,000 titles in the U.S. alone.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

Again, to put that in context, that's five times the size of the Netflix library and now really being able to monetize that viewing in a more efficient, better way. We're incredibly optimistic, and I would say the results are in. We're incredibly pleased with the performance of Tubi going forward, and we think it's an appropriate area for us to continue to invest in. I'll turn over to Steve on sort of capital management. I'll just start by saying, look, we have a $7 billion buyback authorization. I think we've spent about $4.4 billion of that.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

If my math not incorrect this time in the morning, $2.6 billion remaining of the authorization. You know, we fully expect to deploy all of that capital back to shareholders through our buyback. Any litigation has no impact on that at all. Steve?

[Steve Tomsic, CFO at Fox Corporation]

Thanks, Lachlan. Phil, just to go back on legal costs. Legal costs over the last two or three quarters have been elevated. Obviously, we've been deep in the depositions and pretrial preparation for Dominion. I'd expect that to subside over the next couple of quarters. Then to just pick up on Lachlan's point. Listen, the leverage is. The debt, we have $7.2 billion. We've got a maturity in January, which we'll make a call on as to whether to repay or refinance. The leverage feels about right where we are at the moment, and our cash position is strong.

[Steve Tomsic, CFO at Fox Corporation]

We would anticipate whatever happens with future litigation, we can continue to go with our buyback pacing as it has been over the last couple of years now or few years now, as well as leaving us flexibility to invest in the business or take advantage of any inorganic opportunities. We'll be balanced about it, as we've been saying since the formation of the company.

[Gabrielle Brown, Chief Investor Relations Officer at Fox Corporation]

Operator, next question, please.

[Operator]

That will come to the line of John Hodulik with UBS.

[John Hodulik, Telecom and Cable Analyst at UBS]

Great. Thanks, guys. Maybe getting back to the sports theme, where viewership remains strong, I'd say across the board. I mean, first of all, how would you gauge the success of the USFL? Second, you know, anything you could tell us about your appetite for additional sports rights, especially to fill in the summer months? How does the sort of relative weighting on sports versus entertainment programming position you guys, given the, what could be a protracted writers' strike? Thanks.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

Thanks, John. look, USFL, where, you know, it's still just the start of the second season. you know, we're very pleased with it. We're pleased with both its ratings or the quality of the games, its performance on television and ratings and also frankly, its performance on the ground with ticket sales and engagement with football fans. early days, but we, you know, we couldn't be more happy with how it's tracking to date. In terms of additional sports rights, you know, we look across our, you know, portfolio of sports rights. We're constantly managing them.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

You know, we look at sports rights as they come up, and we also look at them as they get renewed, just to make sure that they are, you know, efficient for us and that, and that we're, you know, we're paying a, you know, responsible and appropriate amount for those rights. You know, we're constantly adjusting, but we do it with, I think a real commitment to discipline in terms of what rights we would acquire or dispose of. So it's a moving. It's always a moving feast, but I wouldn't expect anything dramatic at all in that area. What was the last question?

[John Hodulik, Telecom and Cable Analyst at UBS]

Writers' strike.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

Oh, the writers' strike. No, thank you. on the writers' strike, look, I think, you know, for us, we, you know, we are, you know, well-positioned, for the writers' strike. We think that, with our Strategic priorities and sort of strength in sports, but also in news. These are two areas that are not affected by the writers' strike, and the audience will pivot on when they're watching television to those categories. In entertainment, you have to remember as well, we only program two hours of entertainment a night. That's a mixture of both scripted and unscripted content. We feel very, you know, well-positioned there with that not to be affected by the writers' strike really at all.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

There'll be some scheduling changes, with some of these descriptive content, but it's not something that'll have a significant financial impact on us.

[Gabrielle Brown, Chief Investor Relations Officer at Fox Corporation]

Operator, we have time for one more question.

[Operator]

That last question will come from the line of Jessica Reif Ehrlich with Bank of America.

[Jessica Reif Ehrlich, Managing Director at Bank of America]

Oh, thanks. I just wanted to maybe follow up on Lachlan's last point that you're not overly dependent on, I mean, given you're live and unscripted, you're not overly dependent on the writers for, you know, for entertainment. Given that, like, can you talk about your outlook for the upfronts also given macro? I mean, you seem to be in a very different position than most people, but the market is, as most people say, choppy. Also, given the decline in the paid TV universe, can you just talk about how you see Fox News and sports transitioning over time?

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

Great. Hi, Jessica. Thank you very much. Look, I agree with you on the writers strike. I think for us, our focus on sort of live news, live sports, and frankly, the network, you know, a healthy balance of scripted and unscripted content on the network puts us in a tremendous position. I think the timing of the strike, obviously with the upfronts next week, you know, creates some, what's the word I'm... Hesitancy. It's hard to present an exact schedule, right? If you're only in entertainment. It's not if you're in news and sport. I think it positions us, you know, very well in the upfront.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

That's of course, as I mentioned before, not including the strength of Tubi going to this upfront as well. Tubi will certainly be front and center in all of our upfront presentations, but also in our negotiations going forward. We feel, you know, very well positioned. It's early with the upfront. These negotiations will take time, but I think we're in as best position as we could, you know, possibly hope for. In terms of the, you know, so the cable universe and what we plan to do with news and sport, you know, going forward in terms of any sort of a direct to consumer or alternative kind of distribution strategy.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

You know, as I think we've said before, you know, we're ready to go. We have the technology in place. I think we have the, you know, the teams and the people in place to go D2C when we deem that necessary or prudent. But, you know, for the moment, we continue to drive industry-leading pricing out of the MVPD and vMVPD universes. Steve mentioned this before. It's not theoretical. Our pricing has now been set in contracts, you know, going forward.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

You know, we have a third of our distribution deals by sort of volume this year, this fiscal year, and another third the next fiscal year, and we're very pleased with where we sit and where we've established a market price for our brands. Just speaking of the brands, you know, when you have the best sports business brand and the best news business and brand, these are products that ultimately, right, will be part of any scaled platform, you know, regardless of what technology is used to deliver that content and that platform. We see D2C in the future, and it will, it will come eventually as just one component of a broader distribution strategy.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

It's certainly across any of those platforms or technologies. It's hard to see not having our sports and our news on those platforms. We feel pretty well positioned, Jessica.

[Gabrielle Brown, Chief Investor Relations Officer at Fox Corporation]

At this point, we are out of time, but if you have any further questions, please give me or Dan Carey a call. Thank you once again for joining today's call.

[Lachlan Murdoch, Executive Chair and CEO at Fox Corporation]

Thank you.

[Operator]

Ladies and gentlemen, that does conclude your conference call for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.

Participants

Executives

• Gabrielle Brown, Chief Investor Relations Officer
• Lachlan Murdoch, Executive Chair and CEO
• Steve Tomsic, CFO

Analysts

• Ben Swinburne, Head of U.S. Media Research at Morgan Stanley
• Jessica Reif Ehrlich, Managing Director at Bank of America
• John Hodulik, Telecom and Cable Analyst at UBS
• Phil Cusick, Managing Director at JPMorgan
• Robert Fishman, Senior Research Analyst at MoffettNathanson