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21st Century Fox’s Affiliate Fees and Advertising Revenue

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Affiliate fees

21st Century Fox (FOXA) announced in its earnings call for fiscal 2015 that it expects the Cable Network Programming segment to propel its growth in fiscal 2016. The company has an active portfolio of programming channels in its Cable Network Programming segment.

In fiscal 2016, it plans to balance the distribution of channels between the traditional markets of MVPDs (multichannel video programming distributors) such as Comcast (CMCSA) and over-the-top, or OTT, video-streaming services such as Netflix (NFLX) and Hulu.

Hulu, an OTT service, is jointly owned by 21st Century Fox, NBCUniversal, and The Walt Disney Company (DIS).

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As the above chart indicates, affiliate fees and advertising revenues were significant at 36% and 26%, respectively, of the company’s total revenues of ~$29 billion in fiscal 2015. Considering the trend of declining pay-TV subscribers for cable businesses in the US, the company still expects its paid subscribers to grow both in the US and internationally. This would mean an increase in affiliate fees for the company.

The company expects around 66% of revenues in the Cable Network Programming segment to be generated by affiliate fees in fiscal 2016. Around 80% of these affiliate fee revenues would come from existing affiliate agreements. The company expects its affiliate fee revenues in this segment to increase in the low double-digit range.

Advertising revenues

21st Century Fox expects its advertising revenues in the US for its Cable Network Programming segment to be in the mid to high single digits in fiscal 2016. The company expects considerable advertising revenues in the US to come from Fox Sports 1 and 2 (FS1 and FS2) and Fox News. It expects substantial advertising revenues from Fox News because of the coverage of the US presidential elections next year. It expects its international advertising revenues to be in the mid teens range, primarily driven by the STAR group of channels in India (EPI).

You can get diversified exposure to 21st Century Fox by investing in the SPDR S&P 500 ETF (SPY), which has 0.28% of its holdings in the company’s stock.

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