Providing insight into the company’s 2015 and 2016 guidance, 21st Century Fox president and COO Chase Carey said that the company’s projected earnings will have a hockey stick curve largely due to domestic and international new channel initiatives, particularly Fox Sports 1, FXX and Star Sports, which require investments in 2015, then turnaround to be a tailwind to growth in 2016.
In an indication of just how much the company’s bosses are betting on local sporting leagues, Carey said that the new Kabaddi league that is being broadcast on the Star Network opened to a great success with an audience 10 times the recent FIFA World Cup.
Talking about the international channels, the company’s second-in-command stated that the FIC continues to perform well notwithstanding the currency issue.
He also said that Star India finished the year with highest ever share of the market at over 20 per cent driven by Hindi entertainment and regional-language portfolio.
21st Century Fox’s expenses for the new channels will decelerate in fiscal 2016 since the company’s new stepped-up US rights deals will be in their second year and there will be lower right costs for Star Sports due to fewer marquee cricket events, the company’s senior EVP and CFO John Nallen has said.
Nallen also stated that the overall growth in fiscal 2015 will be driven by the company’s cable segment, which he said is predicted to post high-single to low double-digit EBITDA growth in fiscal 2015, led by contributions at the regional sports networks (RSNs), Fox News and Fox International Channels (FIC).
This growth rate takes into account that cable segment expenses will increase in fiscal 2015 which will be slightly higher than the 17 per cent the company reported in fiscal 2014, said Nallen during an earnings call after the declaration of fourth-quarter results.
These planned expense step-ups are led by our new sports channels and, most notably, from increased event costs at the unusually heavy cricket calendar Star Sports in India, and the full year effect of consolidating the YES network, Nallen added.
He also said that the media conglomerate’s growth in fiscal 2015 will be impacted by the continuation of several strategic initiatives including the continued planned investments in new sports and entertainment networks in the US and internationally, particularly in India. 21st Century Fox said foreign exchange rate fluctuations, primarily in India and Latin America, had an impact on the Cable Network Programming performance. Reported annual OIBDA at the company’s international cable channels’ declined by one per cent from the corresponding period of the prior year as strong local currency growth at FIC and the Star entertainment channels was more than offset by investments in the Star Sports channels and a 12 per cent adverse impact from the strengthened US dollar.
Cable Network Programming quarterly segment OIBDA increased by 11 per cent to $1.20 billion, driven by a 13 per cent revenue increase led by continued affiliate revenue growth. The revenue improvement was partially offset by a 14 per cent increase in expenses, approximately a third of which reflects the planned investments related to the launches of new channels, including Fox Sports 1, Star Sports and FXX, and the consolidation of the Yes Network. Segment OIBDA growth was also adversely impacted by three per cent from foreign exchange rate fluctuations, primarily in Latin America and India.