You are using an older browser version. Please use a supported version for the best MSN experience.

Fox stock falls as investors weigh $3 billion price for football

Bloomberg logoBloomberg 1/31/2018 Scott Soshnick, Lucas Shaw and Gerry Smith

Video by Wochit Business

21st Century Fox shares fell as investors weighed the $3 billion-plus price tag on the company’s accord to carry “Thursday Night Football,” a deal that follows two years of shrinking ratings for NFL telecasts.

Fox cast a major vote of confidence in the NFL’s ability to draw viewers Wednesday with its unprecedented five-year contract for the rights to “Thursday Night Football,” grabbing a slate of games previously aired by CBS and NBC.

But investors focused on the expense, particularly with Fox selling profitable cable and film assets in a $52.4 billion deal with Walt Disney Co. When that deal is done, Rupert Murdoch’s Fox will largely be a broadcast company, counting more heavily than ever on sports programming for the Fox broadcast network and the Fox Sports 1 cable outlet.

Shares of Fox fell 3.9 percent to $36.97 at 12:13 p.m. in New York, the biggest intraday decline since Dec. 13. The agreement to sell assets to Disney helped boost the stock 23 percent last year.

The deal is a departure from the National Football League’s practice of awarding Thursday games one season at a time. Locking in a long-term partner helps the NFL ensure it has a steadfast ally while it works to retain viewers. TV ratings fell 9.7 percent in the past regular season after an 8 percent drop the prior year.

Eleven games each season will be aired on the Fox broadcast network, which has also struggled in the ratings. Despite its shrinking audience, the NFL still provides some of the most-watched programming on television and will help Fox build a stronger prime-time lineup to compete with CBS and NBC, which aired “Thursday Night Football” last season. TV viewership is down across the board, with younger audiences increasingly turning to Netflix or YouTube for entertainment.

“These opportunities come along very very infrequently,” Peter Rice, president of Fox’s TV networks, said on a conference call Wednesday. “You either have the rights to the most-watched content in media or you don’t. If you don’t take the opportunity to expand the partnership this won’t come up again for another five years.”

CBS and NBC both made bids to keep the Thursday telecasts, but came up short against the big increase Fox was willing to pay.

“We explored a responsible bid for Thursday Night Football, but in the end are very pleased to return to entertainment programming on television’s biggest night,” CBS said in a statement. “We look forward to continuing our terrific long-term partnership with the NFL on Sunday afternoons.”

NBC’s statement echoed that of CBS. “We made a competitive bid based on our two years of carrying TNF,” the network said. “We’ll now continue to focus on keeping NBC’s Sunday Night Football in its perch as prime-time’s No. 1 program, which has reached a record seven consecutive years.”

Fox’s Direction

The deal provides a sense of Fox’s strategic direction after the planned sale of assets to Disney. The Murdoch family, which runs the company, wants to prove to the market that it’s still very interested in sports, people familiar with the matter said.

Terms of the deal weren’t disclosed, though Reuters pegged the value at more than $3 billion, citing people familiar with the matter. CBS and NBC paid a combined $450 million for 10 games last season. The agreement also allows Fox to distribute its Thursday and Sunday games to subscribers over a wider array of digital platforms, including mobile phones for the first time.

“Fundamentally, Fox is built on football,” Rice said, noting that 25 years ago Fox struck a deal to broadcast NFL games, helping lift a fledgling broadcast channel “into the powerhouse it is today.”

The deal expires in 2022, in line with the NFL’s other TV deals. That means the next few years will be key for the league to stabilize ratings and prove its value.

The Fox deal includes games between weeks 4 through 15 on the NFL schedule and will be simulcast on NFL Network. The games will also be carried by a digital partner the league hasn’t yet picked. NFL Network will exclusively carry seven games next season so that it adheres to affiliate contracts. All of the games will be produced by Fox.

Digital Partners

The NFL has accepted bids from “digital partners” and saw “very healthy competition” among them for streaming rights, Commissioner Roger Goodell said on the conference call. The NFL will work with Fox to decide who wins the digital rights “in the next several weeks,” he said. 

TV executives, including Fox Chief Executive Officer James Murdoch, have blamed the Thursday game for declines in viewership over the past couple seasons, arguing the market has become saturated, with other matchups airing on Sunday and Monday. The cost of rights has risen even as the audience for football on TV has shrunk. 

Advertisers including Papa John’s International Inc. have also attributed the ratings slump to player protests during the national anthem, while others have pointed to head injuries, frequent commercial breaks, and outspoken quarterback Colin Kaepernick’s exclusion from the league.

Fox agreed last month to sell cable channels FX and National Geographic, its movie and TV studio and international assets to Disney. If that deal gets approved by regulators, the new Fox will be much smaller, with broadcast, news and sports channels. Inc. held the digital rights last season.

image beaconimage beaconimage beacon