Twenty-First Century Fox has reported revenues of $8.06 billion for the quarter ended 31 December 2014, which included $631 million of net revenues from the Direct Broadcast Satellite Television (DBS) businesses, Sky Italia and Sky Deutschland AG (Sky Deutschland), which were sold in November 2014 to BSkyB and subsequently re-named Sky.
Excluding the net revenues from the DBS businesses in the current year and prior year quarters, adjusted revenues increased to $7.42 billion, a $695 million or 10% increase over the $6.73 billion of adjusted revenue in the prior year quarter. This primarily reflects double-digit increases at the Cable Network Programming segment from higher affiliate and advertising revenues, and at the Filmed Entertainment segment led by higher theatrical revenues.
Cable Network Programming
The division’s quarterly segment OIBDA increased $121 million or 12 per cent to $1.16 billion, driven by a 14 per cent revenue increase on strong affiliate and ad revenue growth. The revenue improvement was partially offset by a 16% increase in segment expenses, approximately half of which reflected the combined impact of the planned investments in the new sports channels, Fox Sports 1 and Star Sports, coupled with the consolidation of the Yankees Entertainment and Sports Network (the Yes Network).
The expense growth at the new sports channels was led by increased rights fees related to the inaugural broadcast of Major League Baseball Divisional and League Championship playoff games at Fox Sports 1. Segment OIBDA growth was adversely impacted by over $65 million or approximately six per cent from foreign exchange rate fluctuations, primarily in Latin America.
Domestic affiliate revenue grew by 19 per cent reflecting the combination of sustained growth at the regional sports networks (RSNs), FX Networks and Fox News Channel, increased contribution from Fox Sports 1, as well as the consolidation of the YES Network. Reported international affiliate revenue increased 7% driven by strong local currency growth at the Fox International Channels (FIC) and Star channels which was partially offset by a 14% adverse impact from the strengthened US dollar.
Domestic ad revenue grew by 11 per cent in the quarter over the prior year period driven by solid growth at the FX Networks and Fox News Channel and increased contributions from Fox Sports 1. Reported international advertising revenue increased 5% due to strong local currency growth at the Star and Fic channels which was partially offset by a negative five per cent impact from foreign exchange rate fluctuations.
OIBDA from the domestic channels increased 13% from the corresponding period in the prior year, reflecting OIBDA growth at the Fox News Channel, FX Networks and the RSNs, as well as the impact of the consolidation of the YES Network. This quarterly domestic growth was partially offset by lower contributions from Fox Sports 1 due to the increased programming costs related to the inaugural broadcast of Major League Baseball playoffs. Reported quarterly OIBDA at the company’s international cable channels increased eight per cent from the corresponding period of the prior year as strong local currency growth at the Star general entertainment networks and Fic were partially offset by the timing of the continued investment in Star Sports and by the adverse impact from the strengthened US dollar.
The company’s chairman, CEO Rupert Murdoch said, “We delivered solid quarterly results despite continuing currency headwinds and ratings challenges at the FOX broadcast network. Our growth was led by sustained affiliate revenue growth in our channels business. I am also very proud of the creative successes that we have achieved at Twentieth Century Fox, which set a global box- office record in 2014 and leads the industry with 24 Academy Award nominations, including Best Picture nominations for ‘Birdman’ and ‘The Grand Budapest Hotel’, as well as at our television production studios, which have produced the Emmy and Golden Globe winning ‘Fargo’, the critically acclaimed ‘American Horror Story’ and the promising new series ‘Empire’.
“In addition to the operational success achieved this past quarter, we also executed two significant strategic transactions, the combination of our European satellite television holdings, creating Europe’s leading pay television business, and the formation of the Endemol Shine Group joint venture. These transactions further enhance our ability to drive long-term value for all of our shareholders.”
This segment generated quarterly segment OIBDA of $290 million, a $72 million or 33% increase over the $218 million reported in the prior year quarter. The increase in segment OIBDA was driven by lower programming costs at the Fox Broadcast Network from the cancellation of ‘X-Factor’, the absence of ‘Glee’ in the current year quarter and the shift of the Major League Baseball League Championship Series to Fox Sports 1, all of which were partially offset by higher rights fees related to the new National Football League contract. Quarterly segment revenues were consistent with those from the corresponding period in the prior year as strong retransmission consent revenue growth was counterbalanced by a 3% decline in advertising revenues. This ad revenue decline reflects the impact from lower general entertainment ratings at the Fox Broadcast Network, which was partially offset by increased political advertising revenue growth at the local television stations.
This segment generated quarterly segment OIBDA of $336 million which was consistent with that reported in the same period a year-ago, as increased contributions from the film studio, led by a strong theatrical slate was offset by lower contributions from the television production businesses driven by fewer series deliveries, including the absence of ‘How I Met Your Mother’, ‘White Collar’ and ‘Glee’. Total segment revenues increased by $276 million or by 11 per cent led by the performance of several successful worldwide theatrical releases including ‘The Maze Runner’ and ‘Gone Girl’, which have grossed over $340 million and over $365 million in worldwide box office to date, respectively.
As a result of these and other successful releases in the year the studio has broken the all-time global box-office industry record, having generated more than $5.5 billion in 2014. In addition, its films received an industry-leading 24 Academy Award nominations.