Executive Summary / Key Takeaways

• Fox Corporation demonstrates robust financial performance, driven by its focused strategy on live news and sports content, complemented by the accelerating growth of its Tubi AVOD service.
• Recent results, including a record-breaking Super Bowl broadcast and strong political advertising, highlight the power of Fox's core assets in attracting large audiences and commanding premium advertising rates.
• The company is strategically expanding its digital footprint with the successful Tubi platform and the upcoming launch of Fox One, a direct-to-consumer service specifically targeting the cordless market, while remaining committed to the traditional cable bundle.
• A strong balance sheet supports significant capital return to shareholders through share repurchases and dividends, alongside opportunistic investments in core and adjacent businesses like the valuable FanDuel option.
• While facing industry headwinds like cord-cutting and legal challenges, Fox's differentiated content, operational discipline, and strategic digital initiatives position it to compete effectively against larger, more diversified media conglomerates.

The Enduring Power of Live: Fox's Strategic Foundation

In a rapidly evolving media landscape, Fox Corporation has strategically sharpened its focus on the enduring value of live news and sports programming since its formation in 2019. This deliberate pivot, following the divestiture of certain entertainment assets, positioned Fox to capitalize on content verticals that consistently command large, engaged audiences and remain critical to the traditional television bundle, even as consumer habits shift. The company operates primarily through two reportable segments: Cable Network Programming, home to powerhouses like FOX News and FS1, and Television, encompassing the FOX broadcast network, local stations, and the burgeoning Tubi streaming service.

This focused strategy stands in contrast to the broader entertainment portfolios of competitors like Walt Disney Co (DIS) or the integrated telecommunications and media model of Comcast Corporation (CMCSA). While these peers leverage vast content libraries and bundled services, Fox's strength lies in its ability to deliver must-watch live events and timely news coverage that drives consistent viewership and advertiser demand. This niche focus, however, also presents competitive dynamics; while Fox excels in its core areas, it faces challenges in matching the scale and technological integration of larger players across a wider range of content types. Warner Bros Discovery Inc (WBD) also competes across broadcasting and streaming, while News Corporation (NWSA), a corporate sibling, focuses more heavily on news and publishing.

Fox's competitive positioning is underpinned by its strong brand recognition in news and sports and its operational capabilities, including its production facilities. The FOX News brand consistently leads in cable news ratings and audience share, demonstrating significant pricing power in the advertising market. Similarly, FOX Sports holds a leading position in live sports event viewership, accumulating billions of viewing hours annually, significantly outpacing its closest competitor. This ability to attract and retain large live audiences provides a crucial advantage in an advertising market increasingly seeking guaranteed reach and engagement.

Digital Expansion and Technological Adaptation

Recognizing the shift in consumer behavior, Fox has strategically invested in digital platforms, most notably through the acquisition of Tubi in 2020. Tubi, an advertising-supported video-on-demand (AVOD) service, represents a key technological differentiator for Fox. Its platform provides a large library of content and leverages advanced targeting capabilities, making it particularly attractive to advertisers seeking to reach specific demographics. Tubi's success is highlighted by its remarkably high concentration of cordless viewers—over 65% of its audience falls into the cord-cutter or cord-never categories, a significantly higher percentage than many competitors in the streaming space, including other AVOD or advertising-supported SVOD services. This audience profile is highly valuable to advertisers who struggle to reach these viewers through traditional linear channels.

Tubi's operational performance reflects its growing traction, with revenue growth accelerating to 35% year-on-year in the third quarter of fiscal year 2025. This growth is fueled by increasing total view time on the platform and improved advertising fill rates, allowing the company to maintain healthy pricing. Tubi is on track to exceed $1 billion in revenue this fiscal year and is progressing towards profitability in the near to medium term, supported by continued investment.

Building on its digital momentum, Fox is set to launch a new wholly-owned direct-to-consumer streaming service, named Fox One, before the fall football season. This platform is designed to aggregate Fox's core news, sports, and entertainment content, specifically targeting the cordless market. Management intends to price Fox One in line with wholesale rates, emphasizing that the service is not meant to cannibalize traditional cable subscribers. The company plans to partner with other distributors and services to broaden Fox One's reach within its target demographic. This initiative represents a strategic adaptation to the evolving distribution landscape, aiming to capture audiences outside the traditional bundle with a focused, digital-first offering, while incurring relatively low incremental content costs as it will package existing rights.

Financial Strength and Performance Drivers

Fox's financial results for the three and nine months ended March 31, 2025, underscore the effectiveness of its strategy, particularly in capitalizing on major events. Total revenues increased significantly, driven by strong performance across both the Cable Network Programming and Television segments. Affiliate fee revenue saw growth due to higher average rates per subscriber and increased fees from affiliated stations, partially offsetting the impact of declining subscriber numbers across the industry. Encouragingly, the rate of subscriber declines has shown recent moderation.

Advertising revenue provided a substantial boost, particularly in the third quarter, benefiting from the broadcast of Super Bowl LIX, which generated approximately $700 million in advertising revenue after agency commissions. For the nine-month period, advertising growth was also significantly influenced by the 2024 presidential and congressional election cycle, which drove record political advertising revenue for the company, benefiting local television stations and Tubi. Continued digital growth at Tubi and strong ratings and pricing at FOX News further contributed to advertising revenue increases.

Operating expenses rose, primarily due to higher sports programming rights amortization and production costs associated with major events like the Super Bowl and college football, as well as increased digital content and marketing costs for Tubi and newsgathering costs related to the election cycle. Despite these increased investments, the company generated strong Segment EBITDA, the key metric used by management to evaluate performance. Cable Network Programming Segment EBITDA increased, driven by revenue growth outpacing expense increases. The Television segment, while seeing a decrease in Segment EBITDA in the third quarter due to the significant costs associated with the Super Bowl broadcast, showed a substantial increase for the nine-month period, reflecting the overall strength across its advertising and affiliate revenue streams.

The company maintains a strong balance sheet with a healthy cash position and manageable debt levels. This financial strength supports robust free cash flow generation, which, while seasonal due to sports rights payments, reached a record quarterly high in the third quarter of fiscal 2025.

Fox has actively returned capital to shareholders, repurchasing a significant amount of stock under its $7 billion authorization and paying semi-annual dividends.

The company remains committed to completing its current buyback program.

Risks and Outlook

Despite its strengths, Fox faces pertinent risks. Defamation and disparagement claims, including ongoing litigation related to the 2020 election, pose potential financial liabilities, although the company is vigorously defending against these claims. Privacy-related lawsuits concerning Tubi's data practices also present ongoing legal challenges. Industry-wide cord-cutting continues to impact traditional affiliate revenue streams, although recent trends show a moderating rate of decline, and the company's strategy aims to address this through digital expansion. Regulatory risks, particularly concerning FCC rules and policies, could also affect operations.

Looking ahead, management anticipates continued tailwinds from advertising, particularly at FOX News and Tubi, and ongoing growth in affiliate revenue driven by pricing gains. Fiscal year 2026 will see the absence of the significant political advertising revenue and the Super Bowl broadcast from fiscal 2025, which will impact year-on-year comparisons. However, the lack of the Super Bowl's associated costs (which typically exceed advertising revenue in the broadcast year) is expected to be a net benefit from an advertising revenue vs. rights cost perspective in FY26. The launch of Fox One before the fall football season will introduce new investment costs but is strategically aimed at capturing a valuable cordless audience segment. Analysts project strong EPS growth for Fox in fiscal year 2025, significantly outpacing the industry average, reflecting the positive impact of the current cycle and underlying business momentum.

Conclusion

Fox Corporation's focused strategy on live news and sports, coupled with its expanding digital presence through Tubi and the upcoming Fox One, provides a compelling investment narrative in a dynamic media environment. The company's ability to leverage major events and political cycles for significant advertising revenue, combined with steady affiliate fee growth driven by pricing power, underscores the value of its core assets. While navigating industry challenges like cord-cutting and legal risks, Fox's strong financial position, commitment to capital return, and strategic investments in digital platforms position it to maintain its competitive standing and pursue long-term value creation. The successful execution of the Fox One launch and continued growth trajectory of Tubi will be key indicators to watch as the company continues to adapt and thrive.