Dominion Voting Systems’ lawsuit shows Fox Corporation (FOXA) is in a terrible place.
Fox is trying to keep two dying businesses alive long enough to create a moneymaking replacement. The dying businesses are cable and broadcast television. The moneymaking replacement could be a Free-Ad-Supported Television (FAST) streaming service.
Dominion’s lawsuit exposes how terrible the cable TV business is today. To explain, Dominion lawyers uncovered internal correspondence that shows Fox News personalities systematically lied about an important story to preserve their shrinking audience.
Dominion Lawsuit Shows Cable TV News is Dying
For example, Fox News host Howard Kurtz admits management ordered him not to discuss the lawsuit on air, The Washington Post reports. Dominion Voting Sued Fox News for defamation because it reported dubious claims about rigged voting machines as news.
Dramatically, Dominion’s court filings include emails in which Fox News personalities and executives admit the rigged voting machines claims were bullshit. Yet some Fox hosts were afraid to say the truth on air out of fear of hurting the channel’s ratings.
“Please get her fired,” Tucker Carlson wrote to Sean Hannity. “Serious. What the fuck? I’m actually shocked. It needs to stop immediately, like tonight. It’s measurably hurting the company. The stock price is down. Not a joke.”
Carlson, one of Fox’s top stars, was afraid White House Correspondent Jacqui Heinrich could drive viewers away by debunking President Donald J. Trump Senior’s (R-Florida) vote fraud claims. To elaborate, Carlson fears the loss of rabid Trump fans could drive down Fox News’ ratings and ability to make money.
What Tucker Carlson is Really Afraid of
So what is Tucker Carlson afraid of? Why is the most popular man in cable news afraid of losing a few viewers? The answer is simple: Fox News’ dreadful ratings.
In January 2023, Fox News’ prime-time shows averaged 1.945 million viewers, Forbes reports. Hence, the “number one cable news channel’s” average viewership is less than one half of one percent of the US population.
To explain, WorldOMeter estimates the US population was 336.218 million in February 2023. I calculate 0.5% of 336.218 million is 1.68 million. Those ratings are falling, Forbes estimates Fox News ratings fell by 13% between January 2022 and January 2023.
Tucker Carlson Tonight’s ratings are a little better but still terrible. Carlson’s show averaged 3.473 million viewers during the week of 6 February 2023, Forbes reports. Tucker Carlson Tonight was the highest rated cable but its viewership is less than 1% of the US population. I calculate 1% of the US population is 3.36218 million.
Carlson’s ratings are falling. Tucker Carlson Tonight fell to number two in the ratings behind Fox News’ The Five in January 2023, Deadline reports. Tucker knows he is replaceable.
Fox News’ Ratings are Tiny
Fox News’ ratings are tiny and Carlson knows it. Carlson knows any ratings drop can cost Fox Corp advertising and cable TV carriage fee revenues. Any serious drop can lead to budget cuts at Fox News, beginning with Tucker Carlson’s $35 million salary.
Notably, Fox News’ competitor CNN is making massive staff cuts, The Washington Post reports. CNN’s ratings are terrible. It attracted 513,000 total viewers on 23 February 2023, Mediaite reports.
Carlson fears Fox News will follow CNN into a ratings death spiral that will destroy the network. Tucker suspects correctly that any serious ratings drop will kill his job. Hence, Tucker fears offending any viewer no matter how loony.
The Fox Corporation is in Trouble
Fox News is not the only Fox Corporation (FOX) subsidiary with low ratings. For example, 9-1-1 the highest rated scripted sow on Fox’s broadcast network averaged 4.815 million viewers in the 2022 to 2023 season, TV Series Finale reports.
Moreover, 9-1-1’s viewership fell by 5.48% from the 2021 to 2022 season. Fox’s second highest rated scripted show 9-1-1 Lone Star fares worse. Its ratings fell by 21.36% between 2021-2022 and 2023.
Fox’s ratings in the vital 18-to-49 demographic are far worse. No Fox broadcast show attracted over one million 18-to-49 age viewers in a nation of 336.218 million people, TV Series Finale calculates. Furthermore, 9-1-1’s 18-to-48 viewership feel by 14.47% between 2021-2022 and 2022-2023.
The 18-to-49 demographic is vital because advertisers pay more for those viewers. Yet Fox Broadcast is not attracting them.
Hence, two of Fox Corporation’s primary businesses are dying fast.
Can Tubi Save Fox Corporation?
The Fox Corporation (FOXA) has one fast-growing business: Tubi. To elaborate, Tubi is a free-ad-supported television (FAST) streaming service.
A FAST is a non-subscription streaming service that offers an enormous amount of free programming. Instead of charging a subscription, FAST shows advertising in the programming.
Viewers like FASTs because they offer many programming choices at no cost. For example, Tubi claims to offer over 50,000 programs.
Fox claims Tubi had 64 million monthly active viewers in February 2023, Fierce Video reports. Tubi’s monthly active user numbers grew by three million in the last quarter of 2022. In contrast, Statista estimates the most popular FAST, Paramount’s Pluto, had 72 million monthly active users in the third quarter of 2023.
In 2022, Tubi’s total viewing time grew by 44% from 2021, Fierce Video claims. Tubi viewers streamed over five billion hours of TV in 2022.
Importantly, Fox claims the average Tubi viewer’s median age is 39. Moreover, Fox boasts that 36% of Tubi viewers are between 18 and 34. If Fox is correct, Tubi is attracting the viewers advertisers want: the coveted 18-to-49 demographic.
Hence, Tubi’s audience extends beyond Fox’s aging (and dying) white base. For example, Fox claims Tubi’s African-American and LGBT audiences grew by over 50% in 2022.
Importantly, Fox estimates Tubi’s reach is growing. The number of viewers Tubi reaches grew by 33% between 2021 and 2022, Fox claims.
Why Tubi could save Fox Corp
If I was an advertiser, I would prefer a growing FAST that reaches 64 million viewers all over the world to a “news channel” that reaches 1.945 million viewers in prime time. Or a broadcast network that reaches a little over 1% of the US population.
The average Fox Broadcast viewer was 56.2 years old in 2022, Variety reports. Washington Post reporter Jeremy Barr estimated the average Fox News viewer’s age was 68 in May 2021. Hence, the average Fox News’ viewer’s age is 19 years over what advertisers want (18-to-49).
In contrast, Fox claims the typical Tubi viewer’s age is 39, what the advertisers are seeking. Appealingly, those viewers seem more receptive to advertising. Interestingly, Fox claims 10% of Tubi viewers claim they “like to look at the ads.”
Fox hopes to grow Tubi’s audience by adding live sports and original programs. However, Tubi faces some problems.
In particular, Fox no longer owns a studio and a library of programming. Rupert P. Murdoch sold Fox’s studio 21st Century, or 20th Century Fox, and its movie and TV library to Disney (DIS) in 2019. Thus, Murdoch sold Disney some potentially valuable FAST programming including The Simpsons, the X-Men, Wolverine, Deadpool, Buffy the Vampire Slayer, Planet of the Apes, Alien, and The X-Files.
Can Tubi Compete with Paramount?
Consequently, Tubi will have to pay Disney (NYSE: DIS) for 20th Century Fox programs such as Angel and M*A*S*H. Moreover, Disney could restrict those shows to its FAST, or sell them to a competitor such as Pluto.
Meanwhile, Pluto has access to Paramount’s vast programming library, which includes all the Star Trek series, many CBS classic shows, including NCIS, CSI, Blue Bloods, Mission: Impossible, The Andy Griffith Show, and Gunsmoke, and Yellowstone. I think Paramount could easily develop new shows for Pluto from those properties. For example, a Blue Bloods or NCIS spinoff, or a new version of JAG, Gunsmoke or Mission: Impossible.
Conversely, Fox will have to pay studios to develop new original programming for Tubi. That could get expensive fast as the streaming wars heat up. Notably, Warner Brothers Discovery (WBD) is suing Paramount for $500 million to get control of South Park.
Is Fox Corporation Making Money?
The Fox Corporation (FOX) makes money. Fox reported $4.605 billion in quarterly revenues, $1.077 billion in quarterly gross profit, and a $424 million quarterly operating income on 31 December 2022.
Fox is a growing company. For example, its revenues grew by 3.69% in the quarter on 31 December 2022, Stockrow estimates. Fox’s quarterly revenues grew from $4.441 billion on 31 December 2021.
Similarly, Fox’s quarterly gross profit grew from $774 million on 31 December 2021. Plus, the Quarterly operating income grew from $213 million on 31 December 2021.
Fox Burns Cash
Conversely, Fox Corp (NASDAQ: FOX) burns cash. For example, Fox reported a -$531 million “quarterly operating cash flow” on 31 December 2022.
The quarterly operating cash flow grew from -$685 million on 31 December 2021 and fell from $1.607 billion on 31 March 2022. Conversely, the quarterly ending cash flow was -$892 million on 31 December 2022. The quarterly ending cash flow grew from -$1.156 billion on 31 December 2021.
However, Fox can retain some cash. Its cash and short-term investments fell from $4.255 billion on 31 December 2021 to $4.058 billion on 31 December 2022.
Plus, Fox is paying off debts. The total debt fell from $7.954 billion on 31 December 2021 to $7.208 billion on 31 December 2022. Fox reported a quarterly financing cash flow of -$258 million on 21 December 2022.
Mr. Market Overvalues Fox Corp (FOX)
I think Mr. Market overvalued Fox Corp (FOX) at $34.80 on 1 March 2023.
I think Fox is not worth $34.80 because it had only $23.126 billion in total assets on 31 December 2023. The total assets grew from $22.878 billion on 31 December 2022.
Plus, I cannot see three of Fox’s principal assets, Fox News, its TV stations and the broadcast network growing. Instead, the audience for all three will shrink and drag down Tubi. Unless, Fox makes dramatic budget cuts to its cable and broadcast operations.
Additionally, I think Fox’s 25₵ semi-annual dividend is in danger. Fox has scheduled four 25₵ dividends between 30 August 2023 and 28 February 2025. Hence, it offers a forward dividend of 50₵ and a forward dividend yield of 1.44% on 1 March 2023.
I consider Fox Corporation (FOXA) a lousy stock you need to avoid because its business is shrinking and dying. My advice stay away from Fox until the Murdoch family can jettison Fox News, the Broadcast network, and the TV stations. I think Tubi is the only part of Fox Corp that has a future.
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