With the TV business struggling, streaming looks pretty good to new 21st Century Fox CEO James Murdoch.
“Just to be clear, I really believe that this streaming environment really is a better business for us given the amount of control we have, the ease of discoverability for customers, the better customer experience and the opportunity to innovate in advertising,” said Murdoch speaking Wednesday morning to the Goldman Sachs 24th Annual Communacopia Conference.
With ratings down at the Fox broadcast network and viewership down overall on cable, 21st Century Fox is counting on digital advertising to make up for projected declines in traditional ad revenue.
“It’s been a big focus for us because what we’re seeing declines in linear viewing,” Murdoch said. Some of the viewing decline is because the programming isn’t attractive enough.
“The first order of business is to make sure the shows are great and that we’re stuff out there that people really want and it can be competitive,” he said. But the second order of business he said it to better monetize non-live viewing.
With a show like Fox’s hit Empire, people are still tuning in to catch up before the start of the new season. “Way more than half the viewing of an episode is going to be time shifted past that three day window,” he said. “We think we should be able to monetize that audience even better than we can monetize the live window.”
Murdoch says that some of Fox’s digital advertising products are already showing encouraging results. One allows viewers to engage with one ad and skip the rest of the commercials in a show. “That’s very valuable to marketers,” he said.
“Our ability to monetize Hulu inventory where a lot of the time shifted inventory is, is getting better every day," he said. “That’s been a technical challenge but also a people challenge as we’ve invested in growing that capability in our own advertising business as well as acquiring some key technical assets,” he added.
Digital video advertising has the ability to combine the targeting and accountability of online advertising with the advantages of TV in terms of being immersive and engaging. “I think the marketing community, certainly some of our biggest clients, both agency buyers as well as some of the bigger marketeers are really recognizing that today and I think we’re seeing a much deeper engagement in how to make television advertising better,” he said. Murdoch also addressed TV’s cord-cutting issue.
He noted that globally, pay TV is showing good growth. And in the U.S., except for FX and Fox News Channel, the company’s networks are relatively new and still adding billable subscribers.
Murdoch said he sees the pay TV market in the U.S. taking a new turn.
“The real story here is we will see, and we’re starting to see it already, a kind of rebundling, where customers might say they want to have more choice, they want to have a streaming service for $10 or $15 depending on which one it is, and they may want to have something from their MVPDs that’s a little less everything in it,” he said. “I don’t think it’s a zero sum game between the $90-100 bundle and then a $10 skinny bundle with broadcast basic. I think we’re going to see a lot of different packaging options emerge and I think it’s going to be harder to distinguish, or its going to be less clear-cut, what’s really an over the top SVOD service or a virtual MVPD and what’s a traditional retailed MVPD package because there’s going to be a lot more choice in the marketplace.”
He said 21st Century Fox’s priority is getting its networks the broadest possible distribution, regardless of whether a customer is buying a fat or skinny bundle or going over-the top.
“I think even within the MVPD universe there’s a huge amount of room to grow consumption. Certainly as we see better product enter the market, like the X1 product and things like that, we see better consumption there and we’re able to work more closely with our distribution partners around things like advertising innovation, things like discoverable programming,” he said.
But the number broadband only homes could also grow from 10 million now to 20 million over the next 4 to 5 years. “Those households are buying television in new ways. And the question for us is how do we make sure we’re getting our brands in the right ways to those households as well,” he said.