Fox Corp. CFO Steven Tomsic said ESPN is “a great product” with strong potential in streaming, but the long-established brand is also just “a sliver of sports.”
The exec was asked during an appearance at the UBS Global Media and Communications Conference about ESPN’s forthcoming direct-to-consumer launch and the implications for Fox.
“We did a calculus of all the sort of distribution modes that could possibly emerge,” Tomsic said. “With sports in this country, they’re so fragmented. So, for the true sports fan — look, ESPN’s a great service. And I’m sure when they launch the ESPN flagship [in streaming], I’m sure it will be a great product. But it’s a sliver of sports. If you’re a sports fan and you want to watch the NFL in a given week, you go to Amazon for Thursdays, you go to us on Sunday, you’ve got CBS on Sunday, you’ve got NBC Sunday night and you’ve got ESPN on Monday.” Given the potency of the NFL, Tomsic continued, that level of fragmentation means that “no one sports service is going to satisfy” a fan.
There has recently been momentum for bundling in the streaming sector, not just vertically within companies but horizontally. Verizon this morning announced a bundle of Netflix and Max. Apple and Paramount have reportedly held talks about a bundle. As to a bundle scenario, Tomic said, “If you can conjure a way to bring all of those sports services together … it kind of looks like a digital MVPD” like YouTube TV or Hulu + Live TV. “And it’s probably going to be at a similar price point,” in the $65-to-$73-a-month range. “We’re obviously following it.”
By contrast with its media peers, Fox has long taken a conservative approach to subscription streaming and relied on the tried-and-true (albeit shrinking) pay-TV bundle. Its main presence in streaming is through free, ad-supported platform Tubi, which the company acquired in 2020. Contemplating a more streaming-centric marketplace than exists today, Tomsic hypothesized, “We have the rights capability, both on the sports side and on the news side, to be able to deliver our services DTC. We have a pretty extensive technology build. … We have all the building blocks for us to get a DTC, if and when that becomes appropriate. But for now, we still think the right strategy is where we’re at.”
Tomsic was asked about the M&A market, which has started to heat up recently after a long cool-down due to macroeconomic and regulatory conditions. Since Disney’s $71.3 billion acquisition of most of 21st Century Fox created a more streamlined Fox Corp. in 2019, questions have percolated about the future configuration of the company. (Not addressed onstage at UBS, though it will be a defining factor in shaping the future of Fox, is the future role of 92-year-old Rupert Murdoch, who recently stepped down as chairman of Fox and News Corp.)
“The way we approach M&A is not from a defensive perspective,” Tomsic said. “We narrowed down the company, and we’ve got a really, really focused company. We don’t need scale for scale’s sake. In fact, the evolution of the Disney transaction was to deliver scale where scale was required for Disney and its SVOD strategy and deliver focus where we could be leaders in news and sports. … If you look historically at our capital deployment and where we’ve gone with that, I think there’s been $4.9 billion in buybacks since the spin and we’ve done, in round numbers $1.5 billion in M&A. We want to grow the company. If you had said to me five years ago that those would be the numbers where that would be the split, I would have expected the opposite. But we’re super-disciplined. We look at everything.”
Opportunities that help “our core verticals” of news and sports remain in the mix, Tomsic said. “Our M&A filter is very broad, but our bar is very high.”