13 key quotes from 21CF’s fiscal Q2 2017 earnings call: Power of live sports, meteoric growth at hotstar, the video revolution


Yesterday, 21st Century Fox announced its fiscal Q2 2017 financial results. Afterward, the company held an earnings call featuring Executive Chairman Lachlan Murdoch, CEO James Murdoch and CFO John Nallen. It was an opportunity for 21CF to discuss a wide range of topics, including the power of its live sports programming, the agreement to acquire Sky, FOX News’ post-election strength and more.

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

On a record quarter: “Total segment EBITDA for the second quarter was $1.99 billion, a record for any quarter, and a 15 percent increase from the prior year, reflecting double-digit growth at our television and film segments, and continued good growth at our cable segment.” – John

On Super Bowl LI on FOX: “This single game is a great example of the strength of live sport, increasingly delivered across multiple platforms; the power of our core brands aligned with our ability to cross-promote them; and the continued volume broadcast television delivers through the world’s leading marketers. And [on Sunday], the Super Bowl powered Fox’s first $0.5 billion revenue day.” – Lachlan

On the power of sports: “Yesterday, it looks like Super Bowl LI had more than 170 million total viewers. So the power of sports really can’t be overstated. In the U.S., 88 of the top 100 most viewed telecasts on television last year were live sports.” – James

On 21CF’s long-term strategy: “Core to our over-arching long-term strategy is our steady focus on building the value of our video brands. That means partnering with the best creators and investing in the highest-quality storytelling, the best journalism and premium sports rights to ensure our video experiences are vital for any consumer offering, established or emerging.” – Lachlan

On the opportunity of the video revolution: “The underlying revolution – ubiquitous high-speed connectivity, a continued proliferation of end-user connected displays and the potential for unfettered assets to creative assets in the cloud for customers globally – presents an opportunity for accelerated growth for new and existing video platforms. We believe this is only just the beginning, and the combination of strengths required to operate a high-volume content business and a vast international video platform business is precisely the combination of strengths that we’re developing. In short, if content is indeed king, then using it to build a platform that is an expression of those underlying trends presents one of the most promising opportunities for our company in decades. So far, we’ve made great strides to this end.” – James

On the dividends of 21CF’s strategy: “Testament to the progress we have made is our ability to again buck the broader industry trend of multichannel subscriber declines. In fact, this last quarter, we grew our cumulative domestic subscribers by 1.5 percent over last year’s level on the back of subscriber additions at our younger channels, including FXX, the FOX Business Network, the National Geographic channels, and FOX Sports 1. Our momentum underscores the strength of our brands across categories and genre, be it sports, news or entertainment, both scripted and non-scripted. The investments we have made to bolster our leadership in these areas are paying dividends.” – Lachlan

On streaming programming at hotstar and Sky: “The hotstar platform in India, barely two years old, continues to grow quickly. In December of 2015, we saw about 16.5 million monthly active users. In this last December, that number was over 50 million. In terms of engagement, minutes of viewing in the December quarter grew year-on-year from 3.9 billion minutes of watch time to 17 billion minutes. Across Europe, Sky delivered online and over-the-top services to over 13 million customers, and streamed almost 20 billion minutes in the [quarter ending December].” – James

On the agreement to acquire the remaining 61 percent of Sky: “A combination of our two companies will give us leading direct to consumer capabilities and technologies, while enhancing our sports and entertainment scale. The Sky transaction will also deliver more balanced revenue streams and geographic spread… As the founding shareholder of Sky, we are proud to have participated in its growth and development. Its transformation over the past 25 years into Europe’s leading entertainment business has been extraordinary. We believe this transaction is the highest and most effective use of our capital, to deliver shareholder value and returns over the long term.” – Lachlan

On improving access to authenticated MVPD apps: “The authenticated apps really have a potential to reach an enormous audience. The 90 million or so MVPD households out there under our agreements have access to these apps. What we need to do is ease and simplify the authentication pathways. We need to create single logins across multiple brands, which will really make it easy and [provide] a great experience for customers, and we think we can generate some real audience there.” – James

On the continued strength of FOX News: “FOX News finished 2016 as the most watched cable network and achieved its highest-rated year in history. Post-election, FOX News is continuing to beat CNN and MSNBC combined. Adding to this strength is year-over-year growth in the important 7 p.m. and 9 p.m. times, following recent programming changes. All of this underscores the underlying strength of the FOX News brand, the enduring power of its positioning and the continued loyalty of its viewers.” – Lachlan

On Hulu’s appeal in a growing marketplace: “We think that proliferation of downstream competition is really healthy for content creators and for brands like ours that are robust, differentiated, and can really deliver content that works for customers… [We] believe that it can reverse some of these overall declines in subscriber trends in the total MVPD universe and have that go forward. And then with Hulu in particular… I think live viewing [and] bundling the SVOD services with originals, a library and past seasons in with what is the current MVPD window, I think it’s a very compelling offering that makes it simple for customers, that makes it exciting, and I think gives it a real unique angle on the marketplace.” – James

On Hulu’s opportunity to influence the ecosystem: “Hulu will be part of our ecosystem of these new DMVPDs, but one of the reasons Hulu’s embarking on the strategy is also to influence that ecosystem, and what the core bundle looks like. While we expect it to be very successful in its own right, it’s already been successful in terms of having some influence in terms of how these packages of core channels are being put together.” – Lachlan

On ad innovation on streaming platforms: “We’re already seeing non-linear advertising growth at a very good clip in the U.S. and internationally, and that’s because from a data perspective, and then from a monetization perspective flowing from that, with innovative, new ad products and different loads, you can have a much better experience… We’re very focused on having a large volume of content available on those apps, and we’re going to iterate in terms of how the advertising and monetization works. It’s already going pretty well with the existing apps, and we think we’re going to be able to enhance that experience and enhance our capabilities over the next number of months and through the rest of the year. It will be a big focus for us.” – James