The chief financial executive at Fox Corporation this week expressed skepticism that putting premium sports on direct-to-consumer streaming strategies is a winning formula in the current video marketplace.
Speaking at the Bank of America Media, Communications & Entertainment Conference on Wednesday, Fox CFO Steve Tomsic said his company continues to believe the traditional cable bundle is the best way to get premium sports offerings in front of consumers in a way that drives value for media companies like his.
"Right here, right now, the most-effective way for a consumer to receive sports and news is still the bundle, and the most-effective way to monetize our content remains the bundle," Tomsic said.
His comments followed a moderator’s question in which Tomsic was asked to weigh in on an apparent plan by the Walt Disney Company to bring its multiplex cable sports network ESPN to streaming subscribers without a cable or satellite subscription.
At the moment, only a handful of premium ESPN sports and some niche competitions are available through ESPN+, a standalone streaming service Disney launched in 2018 with its sports media partner, Hearst Television. ESPN and Fox share certain sports telecast rights, which cover various games put on by the National Football League (NFL) and Major League Baseball (MLB). And, like Fox, most of ESPN's premium sports content is relegated to its broadcast and cable channels.
That will eventually change, with Iger confirming that it wasn't a "matter of if, but when" ESPN is offered directly to the consumer through streaming. Some reports indicate Disney is already developing that standalone ESPN app, and further confirmation that the app is coming over the next few years came just last week when a new carriage deal between Disney and Charter's Spectrum TV affirmed the forthcoming app will be available to Spectrum TV customers who have ESPN as part of their programming plan.
That's all good and well, Tomsic said on Wednesday, but it doesn't mean all media companies necessarily need to follow Disney's lead. For Fox, the traditional bundle still holds a tremendous amount of value, and the company is still prioritizing its traditional pay TV partners — and some streaming upstarts that clone the cable TV experience — over making hasty plans to launch over-the-top sports and news apps.
"The fact that our content is so coveted by those [cable, satellite and cable-like] distributors, as well as the end consumers, means that while others have bets each way, it's incumbent upon us to get a higher share of wallet from those distributors in order to justify the fact that we remain in that bundle," Tomsic said.
To translate, that means Fox wants to squeeze more value out of cable and satellite customers, even as subscribers increasingly move away from those products toward cheaper streaming services.
Tomsic affirmed that he and Fox see more customers leaving cable and satellite over time, but believes the Charter deal with Disney — which includes Charter paying wholesale prices to give its customers complementary access to the ad-supported tiers of Disney+ and ESPN+ — will "stem that tide of decline."
"I don't think we're holding out for it," Tomsic said. "Our expectation is that [cable subscribers] will continue to decline."
Tubi sees ad revenue growth
While its peers are continuing to build out their subscription-based streaming services, Fox remains focused on its free, ad-supported streaming service, Tubi, which recently logged 74 million monthly active users.
Tomsic referred to Tubi as a "juggernaut" that has brought in much-needed advertising revenue for the company since it was acquired by Fox three years ago.
"Nielsen does a ranking every month, and it's now level with HBO Max in terms of engagement," Tomsic said, referring to Warner Bros Discovery's streaming service that is now just called Max.
"It's only going to get bigger and stronger," Tomsic said. "Our monetization is running behind in terms of viewership...[but] the monetization will come."
Even if revenue expectations aren't up to expectations at Fox given Tubi's viewership, the streaming service is still helping to boost the company's top line.
In its most-recent financial earnings report, Fox said Tubi helped its broadcast television division earn $1.587 billion, a year-over increase of 4% and accounting for around one-third of Fox's overall top line for the quarter. Around $688 million of that Tubi and TV revenue came from advertising, the report showed.
Tomsic said Tubi played a starring role at the company's upfront presentation earlier this year, when broadcasters trout out their best shows, live content and Internet-based services to draw commitments from advertisers.
"We saw more money placed with Tubi than we've seen in prior years," Tomsic said, adding that revenue at the streaming service was up 33% over the past year, a figure that hasn't been previously reported (a press release distributed by Tubi earlier this month put its year-over revenue growth at 47%).
One reason why Tubi is resonating with advertisers has to do with the audience embracing it. Unlike traditional cable, Tomsic said Tubi is finding favor with younger, more-diverse streamers who gravitate naturally toward online services for their video needs, and who may not necessarily want — or feel the need — to pay for cable.
"When we present to advertisers, we're able to present a much-broader spectrum of consumers — going from sports and news [on broadcast and cable], which skews traditional, to Tubi, which is more contemporary," Tomsic said.
That allows Fox to offer a number of different options to satisfy an advertiser's needs — and it is one of the biggest reasons why Fox isn't investing in a subscription-based entertainment service.
"Tubi is an important asset in our portfolio," he continued, "and it's going to continue to grow to be even more important in our portfolio."
Tomsic said he was particularly excited about the recent hiring of Anjali Sud, the former CEO of Vimeo who now serves in the same role at Tubi.
"She's going to bring a fresh perspective, fresh ideas to be able to take that asset to the next level," Tomsic affirmed. "We're excited about what that asset can do, and we'll continue to invest in it over the next couple of years."