Twenty-First Century Fox Inc (NASDAQ:FOX)’s international TV networks, which include STAR and Fox Sports Latin America, reported a 41% year-on-year increase in affiliate fees. The company also expects Fox Sports 1, its new global premium sports channel, to take on Disney’s ESPN and boost its international revenue when it launches later this month.
Twenty-First Century Fox Inc (NASDAQ:FOX)’s TV segment, which includes the Fox broadcast network, fared much worse than its cable operations, reporting a 9% drop in operating income and 7% decline in revenue, dragged down by declining ratings from its aging American Idol franchise.
Twenty-First Century Fox Inc (NASDAQ:FOX)’s Filmed Entertainment division reported a 3% increase in revenue, but operating income declined 16%. Although Fox’s split from News Corp looks promising, the company will have to rearrange its businesses a bit before it can hold its own against Time Warner Inc (NYSE:TWX) and Disney.
Pushing print media aside
Just as News Corp separated its print media business from its media one, Time Warner is spinning off Time Inc. magazine into a separate, publicly traded company by 2014. Time Warner had previously negotiated with publishing giant Meredith Corporation to jointly create a new magazine company, but those talks eventually ended.
Time Inc., which houses its namesake magazine, Sports Illustrated, People, Fortune, Life, and Entertainment Weekly, is still the company’s worst-performing division, reporting a 3% year-on-year decline in revenue due to a 7% slide in subscription revenue and 5% drop in advertising revenue. However, operating income rose 26% to $124 million due to reduced expenses during the quarter.
The eventual spin off will be similar to Time Warner’s separation from AOL and Time Warner Cable in 2009, and the strategy is more of the same — to slim down the business to its best performing segments in an effort to pursue stronger top and bottom line growth across the board.
A Foolish final thought
With a forward P/E of 15, Time Warner Inc (NYSE:TWX) is still cheaper than Disney and Fox, which respectively trade at 17 and 20 times forward earnings. In addition, Time Warner’s TV and film franchises, which include Game of Thrones, The Hobbit, and the upcoming DC comics films, should remain strong over the next few years. Its broadcast rights to NBA and NCAA games should also help it remain competitive with Disney’s ESPN and Twenty-First Century Fox Inc (NASDAQ:FOX)’s Fox Sports 1, albeit only in the domestic market.
In conclusion, Time Warner’s recent success is a textbook example of what a company can do when it realizes that bigger is not always better. Today’s Time Warner is a far cry from the monstrous conglomerate that tried to take over the entire industry a decade ago, and it is now growing at a much faster rate as a result.
The article This Media Company Is Leaner and Meaner Than Ever originally appeared on Fool.com and is written by Leo Sun.
Leo Sun owns shares of Walt Disney. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Leo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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