21st Century Fox’s broadcasting network witnessed double-digit drop in key demo ratings as well as total viewers in calendar year 2015. This can be attributed to the absence of Super Bowl, which aided the 2014 viewership. Fox will air Super Bowl 51 in 2017 and that will surely lift its overall revenues and ratings next year. Television ratings primarily impact the advertising revenues for a media company. Even if we exclude the impact of 2014 Super Bowl, Fox has still posted advertising losses at its broadcasting segment in the past few quarters. This can be attributed to lower viewership at its television shows as more people embrace digital video platforms, thereby impacting the ratings on traditional television.
Also, the broadcasting advertising trends are uneven, as they are driven by various events such as political campaigns and sports. In 2015, U.S. broadcast ad spending declined 3% while it was up 13% in Q4, reflecting strong scatter market. Q4 numbers are impressive and this will likely bode well for the broadcasting networks in upcoming earnings. 2016 will also bode well for broadcasting networks due to the Olympics and the Presidential election. These events will likely accelerate television ad spending and Fox, along with other broadcasting networks, will benefit from the trend as well.
Fox’s advertising revenues have been hovering around $5 billion in the last few years. The network’s advertising is impacted by lower ratings, which were down 15% in key demographics and down 12% in total viewership for calendar year 2015. We estimate the broadcasting revenues will have declined around 3% for the calendar year 2015. Despite the ratings pressure, we expect Fox’s advertising to grow in low-single-digits in the coming years. Below we discuss why.
Fox will also benefit from low upfront sales for the current television season. The network had more units to sell in the scatter market, which is seeing solid growth in pricing, as is evident from the ad spending uptick of 13% in Q4. Also, Fox being one of the Big 4 broadcasting networks will absorb a significant chunk of political ad spending amid the Presidential election this year.
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