21st Century Fox Predicts TV Ad Loads Will Shrink ‘Across the Board’

And 'everyone will go direct-to-consumer,' says Lachlan Murdoch

Lachlan Murdoch said his company is 'very confident about the sports business.'
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21st Century Fox seemed to make clear on Wednesday what it had hinted at during its upfront event in May: on the television side, its sports and news offerings are of greater importance to the company than its broadcast network is.

Speaking at the Goldman Sachs 26th Annual Communacopia Conference in New York, 21st Century Fox executive chairman Lachlan Murdoch said that one of his company’s top priorities is to “focus on our five core television brands.” He went on to list those brands: National Geographic, FX, Fox Sports, Fox News and Asian-based Star TV. But missing from the list was Fox, the company’s broadcast network.

UPDATE: However, the statement didn’t signal a sudden change in corporate policy, as a 21st Century spokesperson later confirmed that Fox remains one of the company’s core television brands.

Still, it’s evident that sports and news are becoming increasingly more valuable elements of the company’s portfolio. Murdoch noted later in the discussion that 21st Century Fox has strong sports and news offerings, which are now the only genre of programming that viewers watch live. Meanwhile, the company’s domestic entertainment advertising, which excludes sports and news, represents only 9 percent of group revenue, which Murdoch called “a relatively small amount of global revenue.”

During Fox’s upfront in May, the company put Fox Sports center stage, and didn’t shift to its entertainment programming until later in the event. As new ad sales chief Joe Marchese explained to Adweek in June, “You take what Fox Sports did last year and add the Big 10 to it [this fall]—there’s a lot of people who know what the Ohio State-Michigan [football] game means—and say, great: you have this unparalleled scale, especially of live and concurrent viewers.”

Given the company’s strong ratings for last fall’s World Series and February’s Super Bowl, “we feel very confident about the sports business,” said Murdoch, who noted that all of the company’s sports channels and regional sports networks are included in every deal it has made with digital MVPD providers like Hulu, YouTube TV and DirecTV Now.

Murdoch also predicted that ad loads will come down “across the board” in the industry to entice audiences who are increasingly accustomed to ad-free options from Netflix and HBO. The company is shaking up linear advertising by becoming the first broadcaster to roll out six-second ads, which it sells in conjunction with a more traditional buy. That is “a tremendous opportunity,” said Murdoch.

Going into the fall, scatter remains “significantly above” upfront pricing, said Murdoch, who feels “very confident” about advertising trends, with one exception: the “soft” local advertising market, which he attributes to the struggle of retail stores in markets across the country.

Given that more than 50 percent of Fox’s audience is not watching its shows on linear TV, the company is also working on several digital advertising innovations. “The more we can engage with those viewers,” said Murdoch, “we can absolutely drive that digital revenue even further.”

Fox is “eight times better on monetizing digital viewers” when it can add data to the mix, said Murdoch. “If you can segment very deeply, that’s very valuable to agencies and clients.”

One digital success for the company has been the high-engagement ads on its Fox Now app, in which consumers can choose to engage with one ad for 30 seconds in order to watch the next 30 minutes of programming ad-free. “Once you get that viewer engaged, they often spend longer than 30 seconds” on the ad, sometimes as much as two or three minutes, said Murdoch.

In other news, while Fox isn’t as far along on creating OTT offerings as some of its rivals, that will soon change. “Make no mistake, everyone will go direct-to-consumer … in the short-to-medium term,” he said. The challenge is to do so without damaging “the current, profitable ecosystem” that is cable and satellite TV.

Murdoch, whose company is a co-owner of Hulu, said the streaming service’s live TV offering, which has been in beta since Hulu unveiled it in May, is expected to officially launch in the next month.

The company’s networks are available on Hulu and all of the other live TV streaming bundles, and it receives higher per-subscriber fees on them than it does on any of its agreements with traditional MVPDs. “There’s no instance where we’re not doing better” with digital subscribers, he said.