15 key quotes from 21CF’s fiscal Q1 2018 earnings call: DMVPD subscriber growth, embracing disruption, ambitions for Star India

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Yesterday, 21st Century Fox announced its fiscal Q1 2018 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 strong growth in DMVPD subscribers, embracing disruption in the industry, and growing aspirations for Star India.

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

On growth in DMVPD subscribers: “We maintained our aggregate domestic subscriber levels, offsetting declines in the traditional pay TV universe, with growing contribution from our growing channel and our new digital MVPD partners. The latter now approaches 3 million subscribers despite only limited marketing for their products so far.” – Lachlan

On the digital opportunity: “New digital platforms in partnership with us are leading the way and improving the customer experience and allowing us to make high-quality storytelling, sports and news programming more available, not less, which will drive further consumption of our content and more visibility into that consumption by our customers, strengthening our business.” – James

On the success of 21CF’s core strategies: “Overall, our performance underscores the success of our core strategies, including owning and investing in distinctive must-have brands and IP, distributed to global consumers every minute of every day. The power of these strong and unique brands supports our content, our advertising and, critically, our leading growth in affiliate fee revenue. [We are] continually expanding our deep and unique access to international markets through an unparalleled global footprint, with particular emphasis in one of the largest growth economies in the world, India; and challenging the status quo by consistently driving innovation across our businesses by leaning into new distribution models, new ad tech monetization capability and being a global leader in direct-consumer offerings.” – Lachlan

On nonlinear advertising growth: “Our commitment to deliver a less cluttered viewing experience does not necessarily come at the expense of lower advertising yields. Six-second spots during [NFL games], the launch of OpenAP, addressable ads, and on-demand and streaming on Hulu are all examples of innovation we have embraced in this space. In fact, [Fox Networks Group] digital revenue in aggregate is up 30 percent year-over-year, with revenue per stream on our apps up 50 percent at [FOX Broadcasting Company], 130 percent at FX and 300 percent at FOX Sports. Perhaps most encouragingly, as we predicted to you over one year ago, at our broadcast network entertainment business, the combination of ad-free premiums and nonlinear advertising sales now outpaces the linear revenue decline driven by customer’s preference for time-shifting their viewing.” – James

On 21CF’s embrace of disruption in the industry: “We embraced it and continued to see more and more exciting changes and resulting opportunities. We move early to jettison our same brands and went deep with investments into our rich, distinctive brands when many market pundits were skeptical of this approach. Because of these investments, our brands have been rewarded with full distribution on all traditional and newly launched platforms.” – Lachlan

On expected growth in VMVPD subs: “That’s all going to accelerate from here because really that’s prior to the marketing that we saw from YouTube, the upcoming kind of more aggressive marketing from Hulu, and we think others as well: DIRECTV NOW, Sling, fuboTV with its sports focus in a slightly different kind of package is growing well. So we feel really good about that. And I think it’s important…to reemphasize that the streaming MVPD, the VMVPD, if you will, is a really great platform for us. We think it’s incredible set of platforms were monetizing our programming and our investment and it’s a great user experience as well.” – James

On 21CF’s scale: “Now there is a lot of talk about the growing importance of scale in the media industry, and let me be very clear: Fox has the required scale to continue to both execute on our growth strategy and deliver increased returns to shareholders.” – Lachlan

On growing aspirations for Star India: “Star just recently took its final step in the realignment of its sports portfolio with the acquisition of those five-year rights of the Indian Premier League, the most attended and most watched cricket league in the world. Exclusive global rights across broadcasting and digital will be the key growth driver this business going forward. These rights cement our confidence in achieving our financial targets for Indian business and our aspiration for the business over the long-term continues to grow.” – James

On being an operator, not a collector of assets: “We’re not a collector, we’re an operator. And I think what we tried to do is grow the business that could have base that can have velocity that can deliver value over the long term. And as you know, we’ve taken a lot of steps to change our portfolio over the last number of years, simplifying our mix of assets, investing in these core brands, selling assets that weren’t going to change our lives… I think the point for us is, we’ve really simplified our operating model. We’ve got a great set of brands and a great set of assets that we really like, and as you can see from these quarterly results and from the last couple of quarters, I hope, a real trajectory of good performance in those. It’s never easy. We’re focused on operating these businesses as best we can with a really incredible management team in all of these businesses, and can we continue to be focused on that.” – James

On the advent of VMVDP products: “The inclusion or the advent of these VMVPD products have just been a real success in capturing subs, either from traditional or outside the system altogether. So the real growth that we achieved on the 11 percent was in rights step-ups across every one of our brands. And it goes back to the point that both James and Lachlan were making: We spent a long time investing in these brands and now we’re harvesting the value from them.” – John

On Hulu and other VMVPDs as pacesetters: “We feel good about Hulu Live. It’s growing well. It’s early days. We feel great about Hulu’s product and product road map. And I think what we’re going to see is Hulu and a number of these other VMVPDs continue to be real pacesetters in the marketplace, both from a customer experience perspective, content offering perspective and a volume perspective, offsetting a lot of the declines that we’ve seen over the last sort of while.” – James

On nonexclusive rights to content: “Our view is always to put the consumer first. We believe our rights should be on as many platforms as possible – ideally on a nonexclusive basis, to put the consumer first. And that includes platforms and apps that are branded with the home network that it was originally placed on. So it doesn’t make any sense for the consumer not to be able to reach FX content through an FX-branded app. And this is the core part of our strategy, so you’ll see us selling more of our content nonexclusively and across as many platforms as possible.” – Lachlan

On innovating ad products for customers and marketers: “We’re not waiting on [the industry’s progress] to innovate. I look at it and think, let’s not wait to try to move this kind of armada of companies to something; let’s actually go out there and iterate and find the ad products that are going to make sense for customers… How do we present solutions to our clients, the marketers who are trying reach our audiences?” – James

On Hotstar’s continued growth and opportunity: “The real exciting opportunity here is an environment where you have this incredible proliferation of video distribution on connected devices everywhere… The opportunity in an environment where content really is king is to use that to build platforms. We see Hotstar as a platform in that way. So we’re going to continue to iterate the product. We think there’s a lot to be done with it both from a monetization point of view as well as engagement point of view with customers. And we’ll see new features. The product is launched in the U.S. I’d encourage everybody to use it. There’s a lot of interesting features, a lot of social features, particularly around the way people watch sports together.” – James

On the proposed Sky acquisition: “We’re engaging with the U.K. regulators on our proposed Sky acquisition. We’re confident this transaction will accelerate the company’s operational and financial growth and we anticipate the transaction to close by the middle of 2018.” – James

The earnings call is archived and available for playback.