10 key comments from 21CF’s fiscal Q3 2016 earnings call: Hulu’s reimagined TV experience, rebundling, stacking and more

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Last week, 21st Century Fox announced its fiscal Q3 2016 financial results. Afterward, the company held an earnings call featuring Executive Chairman Lachlan Murdoch, CEO James Murdoch and CFO John Nallen. The call was an opportunity for 21CF to discuss the role it is playing in reimagining how consumers experience television, as well as opportunities to make its content more widely available. It was also a chance to confirm its plans to participate in a new live and on-demand video service from Hulu.

Here are some of the key comments from Lachlan and James on the call:

Lachlan Murdoch

On streaming and ads: “The market has recognized the power of premium programming to win the attention of consumers. While the value of our broad reach for brand marketers is clear, we continue to move toward a more efficient and effective targeted model that is enabled by streaming distribution.”

On 21CF’s future: “…it is clear that in a world where more people are accessing more screens across multiple technologies and platforms, the demand for [premium] content will continue to grow. It’s why we are excited to be offering our portfolio of brands to new consumer-driven platforms like Hulu and Sling, and it’s why we believe we are well positioned at this dynamic time in our industry.”

On rebundling: “We prefer to call them a core bundle as opposed to a skinny bundle because it’s really the core brands that will be represented in the bundle.”

James Murdoch

On Hulu’s new service and reimagining the television experience: “This week, we can confirm as well that we’re working with Hulu to participate in a reimagined digital video service later this year that combines a current and live affiliate distribution model with an expansive and attractive SVOD window. We think this breaking down of licensing windows into a simpler and more straightforward set of rules is going to be very attractive for customers, and therefore for downstream video retailers as well.

We want to make our programming more available, not less, and we want to be able to innovate in the way we can monetize that programming on digital platforms. This precedential move with Hulu means we can now license similar consumer services and products to new entrants or established MVPDs, encouraging and enabling innovation downstream, creating a distribution infrastructure that allows us to monetize more effectively, and all the while grow our direct-to-consumer capability.”

On in-season stacking: “We’re very focused on having full-season stacks for current seasons and then having a more seamless handoff between that and the later SVOD window. So simplifying those rights and those windows is something we’re focused on, really in an effort to eliminate what can appear to customers as really arbitrary holdbacks driven by business rules that they don’t care about. And our focus is on: How do you make a better customer experience? We think the in-season stack is a key part of that.”

On the appeal of advertising in a streaming environment: “We believe that the pricing in a streaming advertising basis can be much, much better than network pricing given our ability to target, our ability to have lower ad loads, our ability to put new kinds of ad products like engagement units and so forth, into the marketplace. So we think from an advertising perspective, it can be a superior business.”

On audiences and measurement: “…ultimately, we have to think of it less as the sort of slice-and-dice different commercial windows and more about a total audience across all of these platforms, which sometimes is current programming, sometimes it’s month-old programming — and we continue to add cumulative audience and engagement over time in ways that is really exciting in terms of the overall audience growth and overall inventory growth…

When we look at total ratings being down for any given network, X percent, actually the total multi-platform audience is holding steady to up when we put it together. So I think we’re moving away from saying, ‘OK, look, let’s get people to go from plus-three to plus-seven,’ and we’re really talking about total audience – plus-30, plus-60, whatever…

As I said, I think on these calls before, all viewers are alive, so all of the viewing should be counted as live viewing, and it’s a question of establishing the currency that people can buy easily and get their head around, and that’s a negotiation that you have. But certainly, there’s an appetite to really follow where the viewers and where the engagement is, and that is multi-platform, and it is across a longer period of time.”

On STAR India’s mobile streaming service: “In the Hotstar side in digital, with 60 million-plus downloads of the app and increasing consumption of pretty substantial length, these aren’t really short-form videos. People are watching soaps, they’re watching dramas, they’re watching sports. We think it’s a very, very exciting new platform for us.”

On lessons from Hulu’s ad-free option: “…I’d say the biggest lesson we’ve learned [with] the Hulu ad-free option [is] where customers can opt in to pay a premium to buy out essentially their own time, to buy their own engagement, many have chosen to do so, but certainly not all of them. So customers are smart, and they understand the value equation here. So we think some will pay a premium in that environment to have no ad load. Some will value the lower ad loads that exist on Hulu today, for example, than in the broadcast environment. And I think in a streaming environment, the real opportunity here is to have better pricing and more targeting across the piece, which allows us to continue to reduce the ad load as more video shifts and more consumption shifts to the IP streaming platforms.”

On programmatic ad selling: “I think programmatic is a really big word. It means a lot of different things to a lot of people. Is most of the buying and selling of advertising from just an inventory management and pricing point of view going to be done by machines in the future? Yes. But that’s not a comment on pricing. That’s a simple question around efficiency and process.”

The earnings call is archived and available for playback.