Fox Corp.’s decision to pass on the bidding for rights for Thursday Night Football, coupled with the increasing prospects of its streaming service Tubi, could mean a big growth spurt for the programmer, according to a MoffettNathanson report.
In a research note, MoffettNathanson media analyst Robert Fishman wrote that by not participating in the recent Thursday Night Football rights auction, where Amazon agreed to pay about $1 billion annually for exclusive rights, Fox can focus on its existing Sunday NFL package and steer some of that money toward obtaining additional sports rights. In addition, Fox’s streaming service Tubi, purchased in 2020 for about $440 million, is poised to substantially increase its revenue output.
In the report, Fishman, who reiterated his "Buy" rating and $50 price target on the stock, estimated that Tubi could substantially increase its advertising revenue, adding that the AVOD service expects to boost ad sales from about $150 million in fiscal 2020 to about $380 million in fiscal 2021. As the service increases its ad load -- currently at the low-end among its peers -- advertising revenue could balloon to nearly $650 million in fiscal 2022, reaching $1 billion by fiscal 2023 and $1.7 billion by fiscal 2025.
Fox last released Tubi subscriber numbers in September, when it said the service had 33 million monthly active users (MAUs) who consumed 230 million hours of content each month. But Fishman wrote he expects most of Tubi’s ad revenue to be non-cannibalizing to the other Fox networks, adding that the streamer has said that about 80% of its viewers can’t be reached by the top 25 cable networks.
With its Sunday NFC package in hand, Fox should maintain its strong position to monetize key sports rights,” Fishman wrote. He added that Fox and Disney (which participated in the NFL rights auction through its ESPN and ABC units) will likely maintain some exclusivity to its linear TV channels. Tubi is expected to stream condensed game reruns and various on demand components of league content, but not to the extent of ViacomCBS and NBCUniversal, which have said they would simulcast some games on their respective streaming services. For Fox, that differential could translate to higher retrans and pay TV channel fees, Fishman wrote.
“We expect distributors will start to be more aggressive with ViacomCBS and NBCU networks (and their non-owned and operated affiliates) as they plan to simulcast their own NFL packages on their OTT services,” Fishman wrote. "While there is the risk that this will lead to more cord-cutting and higher consumer pricing to offset the rising cost of sports rights, we think Fox should be in a position of relative strength to capture an increasing share of retrans and affiliate dollars in upcoming MVPD renewals.”
