FOXA - Twenty-First Century Fox Inc

[Spekulatius]

Am I the only one concerned about Lachlan Murdoch as CEO? He has a track record of failure. Rupert is 88 and had some health problems last year....what happens when the "adult supervision" is gone?

 

https://www.reuters.com/article/us-twentyfirstcenturyfox-appointment-lac/prodigal-son-returns-lachlan-murdoch-back-in-news-corp-idUSBREA2Q08P20140327

Yes Rupert passing on the baton could be an issue. There is currently a good writup in VIC available, which also compares this to CBS. I looked at CBS and passed on it, because of the issues with the owner and Viacom as well as capitalizing programming, leading to FCF being smaller than earnings. FOX does not have either issue. I think FCF is 9-10% ( back if the napkin calc, so I could be off a bit) and this business is growing. Next year is election year, so it should be good for TV, especially Fox News.

 

Small starter position as I want to learn more and get a better feel. I dumped some more cyclical stocks yesterday and rather recycle this into Stock/business like FOX.

[KJP]

 

FCF is 9-10% ( back if the napkin calc, so I could be off a bit) and this business is growing. Next year is election year, so it should be good for TV, especially Fox News.

 

That depends on how you define "growing."  I believe their "volume" defined as subs to MVPDs that pay Fox to rebroadcast their channels is declining, but they believe they can more than make up for that through increased or alternative pricing, e.g., high per-sub retrans fees (or fixed fees from certain Fox affiliates), higher reverse retrans, etc.  Tobacco companies have shown you can have great shareholder returns despite declining volume, but it's not easy. 

 

They're also quite open about building the Fox broadcast channel on live sports.  That has worked for them for decades, but will it continue to work if other players start to bid up those same rights?  Put another way, if the internet continues to erode the Fox network's historical competitive advantage in distribution, will Fox be able to extract any value from sports, or will a larger and larger share of their value accrue to the leagues?  Or is this all overblown, because the vast majority of the value in Fox is in the cable channels, in which Fox is a content producer, rather than a distributor/aggregator like the Fox broadcast channel?

 

 

[ander]

Am I the only one concerned about Lachlan Murdoch as CEO? He has a track record of failure. Rupert is 88 and had some health problems last year....what happens when the "adult supervision" is gone?

 

https://www.reuters.com/article/us-twentyfirstcenturyfox-appointment-lac/prodigal-son-returns-lachlan-murdoch-back-in-news-corp-idUSBREA2Q08P20140327

Yes Rupert passing on the baton could be an issue. There is currently a good writup in VIC available, which also compares this to CBS. I looked at CBS and passed on it, because of the issues with the owner and Viacom as well as capitalizing programming, leading to FCF being smaller than earnings. FOX does not have either issue. I think FCF is 9-10% ( back if the napkin calc, so I could be off a bit) and this business is growing. Next year is election year, so it should be good for TV, especially Fox News.

 

Small starter position as I want to learn more and get a better feel. I dumped some more cyclical stocks yesterday and rather recycle this into Stock/business like FOX.

 

Spek - I would just be mindful that if FOX decides to ramp up their OTT (DTC) offerings that they will likely have an increase in capitalized programming spend affecting FCF. That doesn't bother me much on CBS and won't affect my view on FOXA either but just something to be mindful of.

[Spekulatius]

 

FCF is 9-10% ( back if the napkin calc, so I could be off a bit) and this business is growing. Next year is election year, so it should be good for TV, especially Fox News.

 

That depends on how you define "growing."  I believe their "volume" defined as subs to MVPDs that pay Fox to rebroadcast their channels is declining, but they believe they can more than make up for that through increased or alternative pricing, e.g., high per-sub retrans fees (or fixed fees from certain Fox affiliates), higher reverse retrans, etc.  Tobacco companies have shown you can have great shareholder returns despite declining volume, but it's not easy. 

 

They're also quite open about building the Fox broadcast channel on live sports.  That has worked for them for decades, but will it continue to work if other players start to bid up those same rights?  Put another way, if the internet continues to erode the Fox network's historical competitive advantage in distribution, will Fox be able to extract any value from sports, or will a larger and larger share of their value accrue to the leagues?  Or is this all overblown, because the vast majority of the value in Fox is in the cable channels, in which Fox is a content producer, rather than a distributor/aggregator like the Fox broadcast channel?

 

I believe the vast majority of FOX value is with the news channel. They basically own the right wing angle  on this. The NFL ticket is up in 2022, I believe, so they is something to watch out for.

[Okonomen]

Seems like the Murdochs (both founder and son/CEO) are also directors (chair and co chair) with substantial investments in News Corp, the old Fox home. Doesnt this create some sort of conflict of interest with fox shareholders? I assume News Corp must be at least a distant competitor? Also think its not in the interest of fox shareholders that the company ceo is co chair in another big news company not just due to conflicts of interest but also just thinking time/ressources

[Foreign Tuffett]

So Rupert Murdoch buys 600,000 shares between June 5th and June 7th. He then immediately sells them with the following comment: "The subject shares have been purchased in error, which purchase has been deemed inadvertent and the subject shares were promptly sold. Any short swing profit resulting from the erroneous purchase and subsequent sale will be returned to the Issuer."

 

https://www.sec.gov/Archives/edgar/data/1024835/000120919119036013/xslF345X03/doc4.xml

 

Yesterday, this was filed:

 

https://www.sec.gov/Archives/edgar/data/1754301/000119312519172488/d764331d8k.htm

 

Someone correct me if I'm misinterpreting this, but it looks like Rupert, feeling bullish, inadvertently violated an arcane provision of a "Rights Agreement" when he bought more Class A shares. Now it's been amended to allow him to do so. It's going to be interesting to see if he buys more shares in the open market in the near future.

[walkie518]

looks like he bought them back?

 

buying FOX rather than FOXA should give investors of non-voting some pause? 

 

I have no idea why FOX does not trades for a premium to FOXA? Aren't votes worth something?

 

tax assets are pretty material ... does anyone have a sense as to why the market is so negative on this stock?  OTT attrition reported from cablecos?

[Spekulatius]

FOX selling off 5% today after an earnings report that looks decent. I added a few shares, what is the reason for the selloff? I like their business focus on live entertainment (Fox news, Fox sports) and the valuation seems undemanding:

https://investor.foxcorporation.com/static-files/fe618a7b-29e3-4ac7-8048-4cad987d7b45

[walkie518]

FOX selling off 5% today after an earnings report that looks decent. I added a few shares, what is the reason for the selloff? I like their business focus on live entertainment (Fox news, Fox sports) and the valuation seems undemanding:

https://investor.foxcorporation.com/static-files/fe618a7b-29e3-4ac7-8048-4cad987d7b45

perhaps the market doesn't like the consumer credit deal? maybe this is m&a drift despite supposed synergies?

 

 

[Spekulatius]

FOX selling off 5% today after an earnings report that looks decent. I added a few shares, what is the reason for the selloff? I like their business focus on live entertainment (Fox news, Fox sports) and the valuation seems undemanding:

https://investor.foxcorporation.com/static-files/fe618a7b-29e3-4ac7-8048-4cad987d7b45

perhaps the market doesn't like the consumer credit deal? maybe this is m&a drift despite supposed synergies?

 

It’s possible, although the deal quite small. They also seem like they want to rebuild their content production (after they sold of their film Studio to Disney) even though before they have claimed they are happy to be just part owner of the content that it created specifically for their channel. I think the Market sense style drift.

 

The downdraft in the stock occurred after the earnings release, not after the news release of the acquisition (which was a bit before). I sense a negative brokerage report or something like this.

[Okonomen]

I have been a shareholder for some months now. Really like the moaty nature of the brand, the resilience against cord cutting and the attractive price. I remember reading from the transcript at the investor day that mgmt. was very keen on staying within their circle of competence. Lachlan specifically mentioned the "circle of competence". Therefore it baffles me that they suddenly buy Credible Labs, albeit small still completely non-core. That worries me as Lachlan has a lot to prove and doesn't have the best reputation

 

I think the 5% decline has more to do with an analyst at Rosenblatt Securities releasing a somewhat bearish thesis focusing on cord cutting, increasing SG&A cost after spinoff and the looming NFL renewal

 

Anyone who knows 1) how probable is an NFL renewal for Fox and 2) what will the P/L effect be if no renewal?

 

I guess a renewal could also be at a much higher cost which would also hurt

 

[Spekulatius]

I have been a shareholder for some months now. Really like the moaty nature of the brand, the resilience against cord cutting and the attractive price. I remember reading from the transcript at the investor day that mgmt. was very keen on staying within their circle of competence. Lachlan specifically mentioned the "circle of competence". Therefore it baffles me that they suddenly buy Credible Labs, albeit small still completely non-core. That worries me as Lachlan has a lot to prove and doesn't have the best reputation

 

I think the 5% decline has more to do with an analyst at Rosenblatt Securities releasing a somewhat bearish thesis focusing on cord cutting, increasing SG&A cost after spinoff and the looming NFL renewal

 

Anyone who knows 1) how probable is an NFL renewal for Fox and 2) what will the P/L effect be if no renewal?

 

I guess a renewal could also be at a much higher cost which would also hurt

 

I believe that 75% of the EBITDA comes from Fox News (Morningstar?, forgot the source), so that gives us an idea how much an NFL deal could impact earnings, as it only would impact Fox sports. I am sure they would find mitigating factors. Fox is less affected by cord cutting, they lost 1% of their subscribers YoY (I think this was mentioned in the CC), which less than peers (3% loss average).

 

I agree on Lachlan being a concern.

[Nomad]

Lachlan specifically mentioned the "circle of competence". Therefore it baffles me that they suddenly buy Credible Labs, albeit small still completely non-core. That worries me as Lachlan has a lot to prove and doesn't have the best reputation

 

His first major capital allocation decision has been bizarre, to say the least. What am I missing here? I've wracked my brain trying to figure out what the strategic rationale for the acquisition is but have yet to come up with any good answers. I completely agree with the others in this thread who see management as the primary risk here.

[Okonomen]

Nevertheless the Murdochs are very well aligned with us. I think the Bento acq was okay and synergetic with the broadcasting which has a lot of potential. But if they do a few more buys like Credible I’m out

[walkie518]

Lachlan specifically mentioned the "circle of competence". Therefore it baffles me that they suddenly buy Credible Labs, albeit small still completely non-core. That worries me as Lachlan has a lot to prove and doesn't have the best reputation

 

His first major capital allocation decision has been bizarre, to say the least. What am I missing here? I've wracked my brain trying to figure out what the strategic rationale for the acquisition is but have yet to come up with any good answers. I completely agree with the others in this thread who see management as the primary risk here.

 

This might be a stretch, but Credbile does credit checks.  I would think that this kind of a business, provided that the data remains private, could be used to target ads better/cheaper/more effectively?  This could be an interesting angle for the upcoming elections?

[Okonomen]

Yeah sounds like a stretch. I hope to see some non core divestment soon. Dont like when pure plays starts to go weirdo shopping. 5% of ROKU, 5% of Stars Group. Now 100% of Credible Labs. No idea why. Just sell it already and convince investors that you do what you preach. Wouldnt be surprised if I one day felt forced to sell my shares due to this Lachlan being no way near the level of his dad

[walkie518]

Yeah sounds like a stretch. I hope to see some non core divestment soon. Dont like when pure plays starts to go weirdo shopping. 5% of ROKU, 5% of Stars Group. Now 100% of Credible Labs. No idea why. Just sell it already and convince investors that you do what you preach. Wouldnt be surprised if I one day felt forced to sell my shares due to this Lachlan being no way near the level of his dad

 

Stars will weave into the sports play.

 

Roku was a good investment per the chart, though I don't know much on the company or its future nor do I own the device.  Those I know who have it like it however...

 

Credible labs was a $400m investment.  If it doesn't half as well as Roku, we won't be so critical.

 

Then again, there might be reason to give FOX / Lachlan the benefit of the doubt that he is taking guidance from his father.  He doesn't need to work, ever.  Why is he doing this?  I would speculate that the scoreboard matters as does his father's approval (don't mean to sound lame?).

 

Stars could be an amazing investment 10 years from now, this is a similar thesis behind Perelman's investment in SGMS (though that has yet to fire). 

 

The buyback could be pretty material ... my initial figures indicated that despite this noise, FOXA is pretty cheap (and cheaper now)

[Nomad]

What do you all think about the commitments and contingencies listed in the 10-K? Looks like they're on the hook for $4.9b within a year and $14.8b within two to three years.

 

The NFL contract expires in 2022 and MLB is set to roll off in 2028.

[walkie518]

What do you all think about the commitments and contingencies listed in the 10-K? Looks like they're on the hook for $4.9b within a year and $14.8b within two to three years.

 

The NFL contract expires in 2022 and MLB is set to roll off in 2028.

 

Fox news and business are not going anywhere, but Fox Sports is an important piece of the puzzle.  They need the content. 

 

I believe the baseball rights are until 2028 but football is 2022. 

 

Can Amazon, ESPN, or NBC buy programming rights away from Fox? 

 

Certainly this is a risk if Fox pays less, but disruption to the consumer of content means the advertising will be worth less to advertising partners, and there will be other negative effects if the content moved to Amazon for example. 

 

Ultimately, while painful in the visibility of the future of the business, if Fox were to lose NFL programming rights, for example, I think they find another way to deploy the capital.

 

[Okonomen]

Good points.

 

By the way, I heard someone talk about Rupert Murdoch being very conservative but that his two sons are not. Could this be a potential problem now that Lachlan is running the show? If he suddenly style drifts the channels to capture non-republicans etc I think this can destroy a lot of brand value for their core viewer

[Spekulatius]

Good points.

 

By the way, I heard someone talk about Rupert Murdoch being very conservative but that his two sons are not. Could this be a potential problem now that Lachlan is running the show? If he suddenly style drifts the channels to capture non-republicans etc I think this can destroy a lot of brand value for their core viewer

 

Style drift in content would be easy to see. So far no dice, based on what I can tell. They basically have a lock on conservative viewers in their channels, it would be stupid to impair this. It’s a business, straight and simple. My concerns are mornin terms of conservative with respect to capital allocation.

 

I like the business, not the content  :o. Their focus on live events, lock on conservative viewers, tax deferr

Ende, high cash conversion ration (due to little capitalization of content) and the extra goodies in assets that may be monetizable. Also 2020 should be a monster year in terms of political advertising due to the election cycle. I think it is one of the best position cable channels out there.

[cmlber]

lock on conservative viewers,

 

What odds do you put on Trump Network launching in 2021 or 2025?  And might that steal many conservative viewers? 

[Okonomen]

lock on conservative viewers,

 

What odds do you put on Trump Network launching in 2021 or 2025?  And might that steal many conservative viewers?

 

Doesnt sound like a big threat. Sounds like very unprofessional amateurs - https://www.theguardian.com/tv-and-radio/2019/jun/15/oan-oann-fox-news-donald-trump

 

But would also like to hear someone elses thoughts about this

[Okonomen]

Another point could be that the "trump network" which is also called AON afaik will probably not be as succesful after the horrible trump era. I doubt that a potential new republican president in a few years - if not the democrats win - are as crazy, abd then the AON appeal would fall I guess

[Spekulatius]

lock on conservative viewers,

 

What odds do you put on Trump Network launching in 2021 or 2025?  And might that steal many conservative viewers?

 

Who knows what Trump will do. Anyways, has he had any success outside real estate so far? Then, he will be 77 in 2021. Maybe he starts another airline  ;D.