Fox Earnings: Broadcast Segment Reaps the Benefits of Recent Affiliate Renewals

Fox FOXA posted a strong end to fiscal 2023 as revenue met and adjusted EBITDA beat FactSet consensus projections. The broadcast segment posted impressive affiliate fee growth once again as Fox continues to succeed in swimming against the cord-cutting wave. The direct response ad market at Fox News remains plagued by elevated supply across the market, compounding the lack of political ad spending versus a year ago. We are maintaining our fair value estimate of $43.

Revenue was flat versus a year ago at $3.0 billion, with the cable segment down 3% to $1.4 billion and broadcast up 4% to $1.6 billion. The firm’s adjusted EBITDA margin dropped by 120 basis points to 24.4%, partially due to the mix shift toward lower-margin broadcast.

Broadcast affiliate fee expanded by 9% for the second straight quarter as renewals drove the retransmission and reverse compensation growth. Fox is in year two of its multiyear renewal cycle, implying further growth over the near term. Broadcast ad revenue fell slightly by 1% to $688 million as the lack of political spending more than offset the Tubi growth. The Fast platform continues to post impressive growth as ad revenue jumped 47% driven by 65% increase in total viewing time. Combined by strong viewing growth at Roku Channel and Pluto, Fast platforms appear to be gaining share as all three services continue to drive viewer engagement by adding both new and library content on a regular cadence.

Cable affiliate fee revenue fell 3% to $1.4 billion. Affiliate fee revenue declined 2% to $1.0 billion as subscriber losses of 8% more than offset the fee increases. Management continues to adopt a positive outlook for overall affiliate fee growth even with the ongoing subscriber declines. Cable advertising revenue dropped 11% as the headwinds continued for Fox News, as the continued oversupply in the spot market led to weaker pricing. Fox News will benefit from the start of the 2024 presidential election cycle in the second half of 2023.