Fox executive to Netflix's Hastings: Linear TV is far from dead

A Fox executive this week said traditional linear television like broadcast and cable services still have a lot of life left in them, downplaying comments made by the head of a streaming company who proffered the end of linear television was near.

During an appearance at an investor conference on Thursday, Fox Corporation Chief Financial Officer Steve Tomsic was asked to weigh in on comments made earlier this summer by Netflix Chief Executive Officer Reed Hastings, who predicted the meteoric rise in streaming services would eventually lead to the death of broadcast and cable television within the next 5 to 10 years.

"Reed also said, a couple of years ago, that the only thing streaming delivers to sports is buffering, right?" Tomsic quipped at the BofA Securities 2022 Media, Communications and Entertainment Conference, paraphrasing comments Hastings made during an interview in 2017 in which he downplayed the value of sports on the internet.

Tomsic said the demand for live sports and news will be just as high 10 years from now as it is today, and broadcast and cable services still offer the best way for consumers to consume that content on their television sets.

Fox Corporation has some of the highest-rated live content on the market. The Fox News Channel has for years earned the top spot among cable news channels; on broadcast, Fox's rights to National Football League and Major League Baseball are among the most-watched programs on free-to-access television. Tomsic said both products have improved the value of Fox's bundle of channels that is sold to distributors through cable, satellite and emerging virtual multichannel video programming distributors (vMVPDs) like YouTube TV and DirecTV Stream.

"The essence of Fox is really around live sports, live news and the adjacency that we built around those businesses," Tomsic said.

In the domestic media space, Fox is something of an outlier: Of the "Big Four" networks, it is the only one that does not currently have its own subscription-based, direct-to-consumer streaming service. Instead, most of Fox's prime-time, scripted shows are licensed to Hulu, a service owned by the Walt Disney Company and Comcast. (Fox divested its stake in Hulu to Disney as part of a broader asset sale in 2017.)

A handful of reality-based shows produced by Fox, including "The Masked Singer" and "TMZ Hip-Hop," stream on the company's free, ad-supported service Tubi, which Fox acquired in 2020 for $440 million.

On Thursday, Tomsic said the company's strategy with Tubi was to let it exist as "the broadcast entertainment network of the streaming world," rather than a streaming product that was intended to "protect any legacy entertainment networks."

"We can really let Tubi be an independent insurgent that is chasing every [advertisement] dollar, because for us, it truly is incremental to us, as opposed to being substitutional between different parts of the portfolio," Tomsec affirmed.

For Fox, those advertisement dollars are really starting to add up: Last year, the media research firm MoffettNathanson said Fox could see a nice return on its investment in Tubi, with the company predicted to rake in around $1 billion in advertisement revenue from that service alone by next year. Tomsic himself once predicted a future where Tubi's advertisement revenue surpasses that of Fox's flagship broadcast network.

During a quarterly earnings call last month, Fox executives acknowledged an unsettling trend within the media industry where companies have started pulling back on ad spending due to economic concerns. But Fox Corporation Chief Executive Officer Lachlan Murdoch said those trends weren't being experienced at Fox. The company reported $1.05 billion in ad revenue last quarter, a 7% increase compared to last year.

Earlier this week, the company was celebrating more good news on the ad revenue front: Nearly all of its inventory for next year's Super Bowl game is sold out, according to a report by entertainment trade publication Variety.

"It speaks to the demand for marquee events," Mark Evans, an executive in charge of ad sales at Fox Sports, reportedly told Variety.