Ben Swinburne: Good morning. Lachlan, obviously, big news in the news, sports joint ventures. I’d love to get your thoughts, really around that product and opportunity in kind of two areas. First is, what is the opportunity that you guys see in the United States for a product like that? Obviously, we’re all focused on the cord cutter sort of TAM, but how many people do you think are interested in a product like this? And then do you see any risk to particularly Fox News, this is the first time you guys have offered a product with just Fox broadcast. So how’d you balance that when you thought about putting this business together? Thanks so much.
Lachlan Murdoch: Hey, thank you very much, Ben, and good morning. So the opportunity is huge. And that’s really because this sports focused platform is focused entirely on cord — not cord cutters, but cord nevers. So if you look at the American market, roughly, say, 125 million households in America, and roughly half of those are not within the traditional bundled cable ecosystem. And so the target for this product, which is going to be, I think, incredibly innovative when you see it roll out is really that universe of, call it, 60 million odd households that currently don’t participate in the bundled cable and pay television ecosystem. So we think it’s a tremendous opportunity. We’ve been working on it for; I think it’s been reported this morning fairly accurately for several months now.
I’ve been lucky enough to — I have seen some of the prototypes for this service. And again, it will be unique. And I think very innovative when you see it rollout. In terms of the risks, and particularly for Fox News, I think the risks are very low, and that’s because of the focus of the sports product being on the cord nevers. Fox News continues to be the top rating cable network. And our distributors, our partners, really value that channel and that brand as it really drives tremendous viewership and audience and engagement for them and we think we’ll continue to do so within the traditional cable and pay television bundle. Thank you, Ben.
Gabrielle Brown: Operator, next question, please.
Operator: We go to Robert Fishman with MoffettNathanson. Please go ahead.
Robert Fishman: Good morning, everyone. Sticking with the sports news, so we’ve long discussed with you the benefits of Fox to a sports led skinny bundle. So I’m just wondering, any additional background you can share on what pushed this deal forward now, including maybe any flexibility you built into your recent affiliate fee renewals? And then on a related note, should we expect to see any changes in your approach to negotiate future sports rights and any comments you want to share about the Netflix, WWE deal that might impact these negotiations going forward. Thank you.
Lachlan Murdoch: Well, let me start back to front, Robert. So there’s no impact on the Netflix, WWE deal at all. So I don’t think that plays a factor in this. And in fact, in how we approach our portfolio of sports rights, we will be aggressively competing in the sports market for sports rights that nothing has changed there. The primary business and value in Fox Sports is competing both for every subscriber in the traditional cable — Pay TV bundle and advertiser viewer and ultimately advertiser. So sports remains a competitive business, which, we — frankly, we thrive in, and we don’t see any difference to that. What led to this? Now, I think we’ve answered many questions on these quarterly calls over many years about that when we are ready to launch a streaming service such as this, and we will do it.
And we’ve been monitoring the space, obviously, for years, past few years in particular. And as we developed with our partners the concept around very unique and innovative products, we felt now was the right time to launch such a product really into a new market, right? It’s a new market where there’s no product serving the sports fans that are not within the cable or TV bundle. So it accesses — for us, it accesses a whole new market and really drives tremendous amount of new reach that we weren’t servicing before.
Gabrielle Brown: Operator, next question, please.
Operator: Next is John Hodulik with UBS. Please go ahead.
John Hodulik: Great. Thank you. First, just quickly on the sports TV, just any cash contribution or can you size any cash contribution required from Fox? And then turning to advertising, obviously, a number of things affecting the numbers this quarter. You guys have some positive color as we look into next quarter. Just any color, one, I’d say, on the TV side, what you’re seeing at this point in terms of political, and then with the improvement in the ratings and the year-over-year, the gap that you’re seeing closing, can we assume that the 23% on the cable outside is sort of the worst number and any color on the sort of slope of the improvement we should see as we head through the year? Thanks.
Lachlan Murdoch: I’ve lost track forgive me. Okay, so [indiscernible] advertising and cable —
Gabrielle Brown: Cable advertising.
Lachlan Murdoch: Cable advertising.
John Hodulik: Gabrielle, you got it.
Lachlan Murdoch: After this, we won’t need any more questions. We’ll cover the whole gamut. Thanks, John. On the cash side, I’ll let Steve fill in. But it’s some — obviously this business has both the marketing and other costs associated with running the business in the partnership. But there’s also the revenue that we garner through affiliate fees for our networks that come out as the business grows. But I’ll let Steve on the details.
Steve Tomsic: Yes. So John, I think it’s a touch early for us to be giving some forecasts around sort of the contribution or deficit from the JV, but sort of as we look at it, it’ll be accretive to us from a net-net perspective when you take into account the affiliate fees that we’ll collect as revenue versus whatever funding we need to make to the JV. We think from a net-net to Fox perspective, it’ll be accretive pretty quickly.
Lachlan Murdoch: And then, on advertising, I think the advertising outlook is, as I — as mentioned with news, but you could apply this term to the overall market. It’s nuanced as we look at it. If I start with sports, we had a very solid regular NFL season from an advertising perspective, and I think a stronger NFL post-season, which we were very pleased by, but also that was a smaller revenue line. But we had a fantastic College Football season, really, I think the story of this past autumn was really the strength of College Football, and particularly as advertisers, you sort of founded and appreciated the quality of the audience watching College Football. Coming up, if we look forward, obviously we have the DAYTONA 500 and then the start of the regular Major League Baseball season in March.
And there’s a lot of positive momentum with advertisers with those. Fox News, you have positive trends of VR pricing. Direct response pricing is still down, but as you start to lap the comparisons from last year, it’s certainly improving quite a lot. We have an impact from preemptions with election and unfortunately with war coverage. So the preemptions are affecting and ratings are continuing to improve. So we’re happy with where we are at Fox News as all those trends are improving steadily. Local stations is probably the most mixed. But you have a bad comparison, particularly in the current pacings with Super Bowl comps this time last year. It’s probably about $50 million in Super Bowl revenue, just in the station group this time last year.
So the comparisons are quite tough as we go forward, but we remain confident that we’ll see a record political cycle. This is slightly ameliorated, I think in the current quarter with the lack of a competitive primary competition, but we’re already seeing business in the first half of next year start to flow in from a political perspective. And it’s — obviously, it’s sort of natural because our stations, we have large number of stations in key political markets like Georgia and Michigan, Pennsylvania, Arizona and Wisconsin. So we’re very confident in a very strong political cycle once that really starts to flow. And then finally with Tubi. Tubi’s TBT is continued to grow, I think at 62%, 63%. And obviously with the TBT growth, the revenue is following, the revenue growth is slightly less or somewhat less than it was last year.
But in the sort of streaming environment, we’re very happy with its growth. So that’s — on advertising, scattered pricing is all up above upfront pricing, so that’s positive. And then finally, on the cable affiliate subscribers and fees, we are in an environment where I think we called out it’s roughly 8% cable erosion, and yet our cable affiliate fees have grown in this quarter. So I think that really shows the strength of our brands and our programming in the cable universe. So we’re very pleased with that. Thanks, John.
Gabrielle Brown: Next question, please, operator.
Operator: It is from Jessica Reif Ehrlich with Bank of America Securities. Please go ahead.
Jessica Reif Ehrlich: Thank you. Back to the sports platform, Lachlan, you seem really confident that it won’t affect the Pay TV bundle, which is, I just want to get some color on that, given that sports has been really the glue that’s kept it together. So why do you feel so confident that it will not impact that? And then what is the openness to ad partners, and will this have a separate advertising organization? How will the ads work in your content?
Lachlan Murdoch: So, hi, Jessica, by the way, so the — first on how it affects the overall Pay TV bundle, again, the key market, the market that we will be driving towards is the market that sits outside the sports fan who sits currently outside of the traditional Pay TV bundle today, and there’s tens of millions of them. So we are very confident that this is a large market and a large opportunity that we can address without undermining the traditional bundle. We — obviously, we’ve been working on this for several months. We’ve done lots of sensitivity analysis, and we would not be launching this product if we thought it was going to significantly affect our Pay TV affiliate partners, and that’s very important to us. We remain, I think, the biggest supporters of the traditional Pay TV bundle.
