21st Century Fox, with an eye toward completing the sale of certain assets to the Walt Disney Co. in the first half of the year, reported strong increases at its cable networks in fiscal Q2, while rising sports programming costs erased gains at its television unit.
Fox agreed to sell cable networks FX, FXX, National Geographic, its movie and TV studio production units, 22 regional sports networks and other assets to Disney for $71.3 billion, a deal that is expected to close in the first half of the calendar year.
For fiscal Q2, cable networks revenue was up 4% to $4.5 billion while segment operating income before depreciation and amortization (OIBDA) increased 7% to $1.45 billion. Fueling most of those gains were string increases in domestic affiliate fees (up 8% in the period) and ad revenue (up 6%), mainly at its Fox News and regional sports networks.
At its television unit, a 15% increase in ad revenue and a 21% rise in affiliate fees -- mostly through retransmission consent increases -- wasn’t enough to cancel out a 24% increase in programming expenses, mainly from increased sports programming costs.
Overall, revenue was up 6% to $8.5 billion and total segment OIBDA was up 9% to $1.6 billion in the period.
“These results reflect our continued commitment to excellence in all aspects of our business,” said Fox executive chairmen Rupert and Lachlan Murdoch in a press release, adding that there has been “significant progress” in closing the Disney transaction. “...Our achievements, including the value we have delivered for shareholders, are a credit to all our talented colleagues. Thanks to their hard work, we have created durable businesses for the long term, and strong momentum as we near the creation of Fox Corporation and the combination with Disney.”
Fox has been beefing up its sports rights portfolio in anticipation of the closing of the Disney deal, which will create a remaining entity focused on live sports and news. Earlier this year Fox agreed to pay $3 billion over five years for rights to NFL Thursday Night Football and nearly $1 billion over five years for WWE’s SmackDown, beginning in the fall.
Net income at the programming giant was bolstered by the sale of its U.K. satellite operation Sky plc to Comcast. Net income for the period was $10.83 billion ($5.81 per share) compared to $1.84 billion ($0.99 per share) in the prior year.