During his Tuesday session at Business Insider’s annual IGNITION conference, 21st Century Fox CEO James Murdoch sat down with Business Insider Editor-in-Chief Henry Blodget to discuss a variety of business and industry topics. The conversation covered new OTT entrants, football ratings, the cost of sports rights, theatrical windows, virtual reality and FOX News.
New OTT entrants
James discussed the exciting activity in the over-the-top market, with new entrant DIRECTV NOW and, soon, Hulu overcoming a challenging hurdle by hitting the right price points. He noted the superior customer experience in the streaming environment, as well as the benefits in the form of better data, the opportunity to innovate advertising and the chance to improve ad targeting.
“Streaming distribution, be it direct-to-consumer by us or through third-party streaming platforms and IP-delivered platforms, is actually something that’s better business than the one that we’ve had in the past,” he said.
The increased downstream competition is also great for content creators like 21CF, and the company now has to “make sure that we’re investing in things that are distinctive, things that are unique, things that are really engaging audiences and things that fundamentally mean something for our customers.”
When asked about the scrutiny of falling NFL ratings this season, James pointed out that ratings declines have come in different degrees and have varied by network. FOX, for example, recently enjoyed a record Thanksgiving Day game, which drew 35.1 million viewers.
“I think a lot of it has to do with the fact that people are able to keep up with what’s going on with their favorite teams in other ways,” James told Henry. He added that this doesn’t mean fans won’t tune in to watch their teams live or watch a big matchup – there are just other ways to keep up with the score.
Rising video consumption
James went on to “dispute the notion that television needs to be saved” and that video consumption on the whole is rising.
“We’re seeing a huge empowerment of customers by having greater connectivity and greater display technology available to them everywhere they are, and that’s enabling a lot more consumption.”
The business rules of the past are changing, and that has implications for how 21CF runs its businesses. “We always say in our business that we have to come to work with a real appetite for change – not just an ability to react to it but to bring new things.”
James pointed to STAR India’s mobile video product hotstar as an example of bringing new things to the market.
“We had well over 100 million downloads in a year and we’re doing 4 billion minutes viewed a month, and it’s very exciting,” he said. “It’s a big digital platform that’s emerged in less than a year-and-a-half.”
The costs of sports rights
The costs of sports rights need to be managed, James said during the portion of his conversation with Henry about that topic.
“I don’t think there’s anything that’s necessarily must-have,” James said. “It’s a question of value and how you think about the business that you can build around it.”
The inflation of sports rights costs is something 21CF is mindful of, he added, and the business doesn’t hesitate to pass on rights that it deems too pricey.
“Our goal is to ensure that we’re investing the right amount there and making sure we can get a fair price from distributors.”
While theatrical windows are valuable and though customers enjoy the big-screen experience, change is afoot, according to James.
“The way we look at the entertainment business is that everything is ones and zeros at the end of the day,” he said. “You have ubiquitous connectivity everywhere. You don’t really have limitations in terms of the physics of distribution, so what you have to do is adapt your business rules.”
James said the business is having discussions internally and with others about this topic. “We think that things are changing.”
The emergence of virtual reality means that entertainment can become indistinguishable from reality, and that poses some questions for storytellers: How do you tell stories in VR? How do you direct a viewer’s attention? What’s the function of narrative in this medium?
“What we’re trying to do is partner with storytellers to say, ‘Here’s a new canvas for you. Let’s start to experiment more’,” James said.
He referred to “The Martian VR Experience” and 21CF’s investment in VR storytelling company Within as examples of how the company is investing in VR.
“We have to understand that we’re still in the very early days. This is like having sound for the first time, and people don’t really know exactly how to use it. It will take some time to get there.”
When asked about the voice of FOX News, James distinguished between the network’s news reporting and gathering and its opinion shows. He also highlighted the diversity of voices on the cable news network.
“I think if you look at 21st Century Fox broadly, between FOX News and National Geographic and the FOX network and FX and STAR in India and the Sky businesses, it’s an enormous diversity without one controlling set of opinions,” James said. “It really is about empowering people to tell the stories that they’re passionate about and attracting the best storytellers and the best journalists to come and do the best work of their lives.”