The killer app on digital is television, said James Murdoch, chief operating officer of 21st Century Fox.
Asked about Fox's digital strategy at the 42d annual UBS Media Conference on Tuesday, Murdoch said that by putting content on apps and other digital distribution platforms, it is able to innovate outside of the traditional distribution models.
That becomes important as more homes become broadband only. Murdoch cited research that showed that the number of broadband-only homes could grow from about 2 million currently to 10 million. He said he could see it reaching 20 million.
That would put Fox in the position of trying to decide whether it would be a better business by selling programming directly to customers as opposed to going through wholesalers. But Murdoch said, "I think we can do both."
Murdoch said that going direct allows faster innovation in terms of programming and creating advertising opportunities. He said that MVPDs have not innovated as fast, and that that can be "frustrating."
Murdoch noted that digital has meant changing business models including buying and selling all of the windowing rights to a property. He pointed to the sale of all rights for The Simpsons to FXX as an example of a deal that gave the acquirer the ability to be creative with the property. Viewers enjoyed being able to see all of the Simpsons episode as a marathon and the marathon boosted FXX's ratings. At the same time, the attention the Simpson's got on cable revitalized viewership of original episodes on Fox Broadcasting, he said.
Murdoch said that the television business is important to Fox. "Returns for great shows is going to continue to be strong," he said. But increasingly, studios are going to be selling more rights to the networks that commission the programing. Pricing for those rights is something that will have to be worked out, he said.
"Everyone wants to be in television production," Murdoch said, but there's going to be a separation in the business. "Some people are going to be more successful, some people will be less successful," he said. "We need to continue to invest and create that magnet for storytellers to allow them to do the best work they've ever done."
