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21st Century Fox’s Filmed Entertainment Business

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Performance in fiscal 2015

21st Century Fox’s (FOXA) Filmed Entertainment segment produces and distributes live-action and animated movies and television series. This segment primarily derives revenues from the distribution of films in the US and internationally. During fiscal 2015, the Filmed Entertainment segment released 25 movies in the US. 

As the graph below indicates, 21st Century Fox’s Filmed Entertainment segment had fiscal 2015 revenues of $9.5 billion, 33% of the company’s total revenues of ~$29 billion. The revenues for this segment declined by 2% from fiscal 2014. The segment’s operating income before depreciation and amortization, or OIBDA, for fiscal fiscal 2015 was $1.4 billion, an increase of 6% over the OIBDA in fiscal 2014.

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The slight decline in revenues was a result of lower network syndication revenues. Network syndication revenues are those earned by the Filmed Entertainment segment from licensing of its movies to different networks. Foreign exchange fluctuations also had an impact on the fiscal 2015 revenues in this segment.

21st Century Fox entered into a joint venture with Apollo Management in December 2014 to create a global content provider that would consist of the Shine Group, Endemol, and CORE Media. Prior to that, the Shine Group was a consolidated subsidiary of 21st Century Fox, whose stake in the Shine Group had a carrying value of $830 million. After this transaction, the Shine Group ceased to be a subsidiary of 21st Century Fox.

Fiscal 2016 outlook

21st Century Fox’s Filmed Entertainment segment is going to release 23 films over the next fiscal year. The company expects EBITDA (earnings before interest, taxes, depreciation, and amortization) to be $200 million below the fiscal 2015 EBITDA due to foreign exchange fluctuations and the release and prerelease costs associated with these movies.

The company expects the benefit of these movie releases to come through in fiscal 2017. The timing of its theatrical releases strongly impacts the Filmed Entertainment segment’s revenues. Another factor that can affect Filmed Entertainment’s revenues is the scheduling of movie releases from other studios.

If the movies from other studios such as Sony Entertainment (SNE), Time Warner’s (TWX) Warner Bros, and The Walt Disney Company’s (DIS) The Walt Disney Studios do well, this could affect the revenues of 21st Century Fox’s Filmed Entertainment segment.

You can get diversified exposure to The Walt Disney Company by investing in the iShares Russell 1000 Growth Index ETF (IWF), which holds 1.68% of its holdings in the company’s stock.

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