The existential risk for US linear television networks is cord-cutting by cable TV companies. For Fox, add to that the challenge of cheque-cutting.
On Tuesday, Fox abruptly settled a defamation lawsuit in Delaware state court brought by Dominion Voting Systems. It had alleged that the Murdoch-controlled Fox News television station had wrongly implicated the company in a baseless conspiracy about stealing the 2020 presidential election.
The price tag of $787.5mn was far less than the $1.6bn that Dominion had sought in damages. But it is still a huge figure for a business that, while financially resilient, faces sharp shifts in how video content is consumed.
When the Murdochs sold their film studio to Disney for $71bn in 2019, the choice to focus on live sports and news proved prescient. Disney, Netflix and peers fought an expensive content spending war.
Advertising revenue held up through the pandemic. Plus the so-called affiliate fees that Fox News charges pay-TV providers, more than $2 per subscriber, are among the highest in the industry. Disney’s ESPN leads the way charging around $8. Meanwhile, cord-cutting has accelerated with subscriber losses reaching high-single digit percentages per quarter.
Fox has an enterprise value of around $20bn. In its fiscal year to last June Fox generated $1.5bn in free cash flow. Between its latest cash balance of $4bn and any insurance, it can afford to pay this settlement.
Dominion’s private equity owners decided that in the new, high interest rate era receiving nearly $800mn today versus an uncertain figure years from now is a worthwhile trade. Discounting $1.6bn back at 15 per cent for five years gets you to around $800mn.
Murdoch had recently sought to reunite his print business, News Corp, with Fox, a combination that News shareholders quickly scuttled. They feared, in part, funding Fox’s litigation costs and potential settlements. And Fox is not done in court. Another voting machine company, Smartmatic, has its own defamation lawsuit pending.
It may be that the 2024 election cycle could again prop up Fox profits. But its financial margin for error is clearly narrowing.
Our popular newsletter for premium subscribers is published twice weekly. On Wednesday we analyse a hot topic from a world financial centre. On Friday we dissect the week’s big themes. Please sign up here.
Stay connected with us on social media platform for instant update click here to join our Twitter, & Facebook
We are now on Telegram. Click here to join our channel (@TechiUpdate) and stay updated with the latest Technology headlines.
For all the latest Art-Culture News Click Here
