Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

The Death Spiral

Is the Fox Corporation Making Money?

Examining Fox Corporation (NASDAQ: FOX) is a good way to evaluate the future of television. To explain, Fox sold its movie and TV studio 21st Century Fox to the Walt Disney Corporation (NYSE: DIS) last year.

Consequently, the Fox Corporation comprises Fox News, the Fox Broadcast Networks, Fox Sports, and the Fox TV Stations. I think Fox is taking a huge risk because it concentrates on traditional broadcast and cable TV media.

Interestingly, the Fox Corporation is one of the few media brands without a streaming video service. In contrast, Disney owns Hulu, Disney+, and ESPN+. Meanwhile, CBS/Viacom has CBS All Access and Comcasts’s (NASDAQ: CMCSA) NBC Universal offers peacock.

How Many Viewers does the Fox Corporation Have?

Fox still manages to attract large numbers of viewers. The Live+7 Nielsen ratings estimate Fox News averaged 2.57 million viewers a night in December 2019, Deadline reports.

That number is dismal because Worldometer estimated the US population at 331.003 million in January 2020. Thus, Fox News’ average viewership is less than 1% of the population of the United States. Consequently, I think the media exaggerates Fox News’ influence.

Meanwhile, the highest-rated Fox Network series; 9-1-1 Lone Star received 7.64 million viewers in January 2020, TVSeriesFinale estimates. Thus, the best show on the Fox broadcast network is seen by a little over 2% of America’s population. Dramatically, Fox cancelled all four of its new scripted shows during the present TV season.

Furthermore, the average daily broadcast ratings for the Fox Network were 4.35 million; in a nation of 331.003 million people, Deadline estimates. Thus, I estimate the Fox Network’s nightly viewership at less than 1.5% of the U.S. population.

Fox will Perish as its Viewers die

Given these numbers, I think neither Fox News, nor the Fox Network has enough viewers to survive. Consequently, I think both networks will perish during the next decade.

Notably, Deadline estimates the Fox Network had 800,000 viewers in the 18-to-49-year-old demographic on 27 January 2020. Meanwhile, Fox’s highest rated show 9-1-1 Lonestar had just 1.69 million 18 to 49-year-old viewers in January 2020, TVSeriesFinale estimates.

I estimate less than 1% of Americans between 18 and 49 years of age are watching the Fox Broadcast Network. To clarify, MarketingCharts estimates there are 138.2 million Americans between 18 and 49 years of age. Given those numbers I have to wonder why any advertiser trying to reach that demographic would buy ad time on Fox broadcast.

I cannot see how Fox can survive with so few younger viewers. My prediction is that Fox’s viewership and ad revenue will shrink as older viewers die off.

For instance, 4,802 Baby Boomers; Americans born between 1946 and 1964 die every day, The Baby Boomer Death Clock estimates. Thus, Fox’s audience is literally dying before our eyes.

Is the Fox Corporation Making Money?

Strangely, the Fox Corporation is making money. Fox Corporation (NASDAQ: FOX) reported a $1.199 billion gross profit for the quarter ending on 30 September 2019.

Interestingly, Fox Corporation reported revenues $2.667 billion that grew at a rate of 4.96% in the same quarter, Stockrow reveals. Thus, Fox’s money making potential is growing.

Additionally, Fox’s quarterly gross profits rose from $1.358 billion on 30 June 2019 but fell from $2.818 billion on 31 December 2018. I think the profit shows Fox’s advertising revenue falls and rises over time. For instance, Fox reported quarterly revenues of $3.583 billion on 31 December 2018.

Furthermore, the Fox Corporation reported an operating income of $797 million and a new common net income of $513 million for the quarter ending on 30 September 2019. Thus, the Fox Corporation makes a little money from its business.

Can Fox News make money from Trump?

One reason Fox could attract advertising revenue is Fox News’ association with President Donald J. Trump (R-Florida) and the Republican Party.

To clarify, I think advertisers could purchase political influence rather than advertising. The hope is to win points with Republican politicians; such as U.S. Senate Majority Leader Mitch McConnell (R-Kentucky), by keeping Fox News’ political propaganda on the air.

Interestingly, some observers think similar political propaganda helped Boris Johnson’s Conservatives win the last British general election. Left-wing publications such as Counterpunch theorize the media helped Johnson by demonizing Labour leader Jeremy Corbyn.

Similarly, some observers think media outlets such as Fox News could help Trump win reelection in the 2020 Presidential election. Some candidates believe such claims and are purchasing air time.

As a result the Fox Corporation could make a lot of money from this because candidates are already spending a fortune on the election. In fact, former New York Mayor Michael Bloomberg (?-New York) spent $209.3 million purchasing broadcast TV time in January 2020, Bloomberg estimates.

How Much Cash is Fox Corporation Generating?

The Fox Corporation reported a $202 million cash flow and a $3.34 billion ending cash flow on 30 September 2019. Thus, the Fox Corporation generates lots of cash.

Consequently, the Fox Corporation had $3.34 billion in cash and short-term investments on 30 September 2019. Thus, I consider the Fox Corporation a cash-rich investment.

Therefore, many people will wonder if Fox Corporation (NASDAQ: FOX) is a value investment. Fox is cheap because Mr. Market paid $36.33 or its shares on 31 January 2020.

I do not think Fox Corporation is a value investment because of its viewership is shrinking. Fox cannot be a value because its business could soon disappear. Thus, Fox Corporation has no margin of safety.

The Origins of Fox Corporation

Fox originated in 1915 as the Fox Film Corporation. In detail, a movie distributor turned producer William Fox moved to Los Angeles and organized the Fox Film Corporation.

Fox lost control of his company during the Great Depression in 1930. In 1933, the Fox Film Corporation merged with Twentieth Century Pictures and 20th Century Fox was born.

During the 1930s, 1940s, and 1950s, 20th Century Fox became one of Hollywood’s great studios under the leadership of Darryl F. Zanuck. Zanuck served as 20th Fox’s head of production from 1935 to 1956 and 1961 to 1971.

In the 1940s, 20th Century Fox pioneered realism and socially relevant dramas in American film, with movies such as The Grapes of Wrath and Gentleman’s Agreement. During the 1950s, 20th Century Fox competed with television by introducing the big-screen projection process they called CinemaScope.

In the early 1960s, 20th Century Fox collapsed almost collapsed because of the expensive epic Cleopatra. Darryl F. Zanuck and his son Robert Zanuck saved the study with such hits as The Sound of Music, Patton, M*A*S*H, Butch Cassidy and the Sundance Kind, and The Planet of the Apes.

Fox Broadcasting and Murdoch

During the 1970s, 20th Century Fox released one of the most successful and influential movies ever made; Star Wars. In 1985, Australian newspaper tycoon Rupert P. Murdoch bought 20th Century Fox.

Murdoch founded the Fox Broadcasting Company to compete with America’s Big Three TV networks in 1986. At the time, critics mocked Fox for its second-rate programming and many UHF stations.

Fox began attracting attention in April 1987 with the controversial and popular sitcom Married…with Children. Married…with Children was the network’s first real hit. However, most of Fox’s programs failed to find an audience.

During the 1990s, Fox became a major player in television with such influential series as The Simpsons, Cops, America’s Most Wanted, and The X-Files. The animated Simpsons is the longest running scripted show in American TV history.

Cops and America’s Most Wanted launched the reality TV craze. The X-Files brought horror, science fiction, and conspiracy theory drama to prime time. Other groundbreaking shows include the sketch comedy series In Living Color and the explosive drama 24.

In October 1996, Murdoch launched Fox News as a conservative alternative to mainstream news outlets such as CNN. In January 2020 Mediaite claimed Fox News has been the most-watched U.S. cable news network for 18 years.

The Fox Corporation  

In March 2019, the Walt Disney Company (NYSE: DIS) bought 21st Century Fox’s film and TV studios for $71.3 billion. However, Murdoch Fox News, Fox Sports, and the Broadcast Networks and reorganized them as Fox Corporation.

The Fox Corporation’s (NASDAQ: FOX) value as a stock debatable because we have little data about its history as a broadcaster. However, FOX paid a 23₵ dividend on 3 September 2019.

In conclusion, I advise investors to stay away from Fox Corporation because I do not think it can survive as a broadcaster.  Instead, I think Disney is the true entertainment value because of its position in streaming video. Fox has no future because of its bet on broadcast and cable.