Excerpts from James Murdoch's appearance this week at the UBS
Global Media and Communications Conference in NY:
Q: On Fox Sports side, obviously, some big changes and
some investments. What's the long-term vision for Fox Sports? I mean, as we
sort of look at the rest of the decade, the Big 10 I think is the last sort of big piece that comes up and seems to
slot right in for various reasons, but there's no other major sports renewals until next decade. So, at this
point, is this just sort of operate what you have well and wait for the next
round of big stuff to come up next decade or is there more to it than that?
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James: Well, we like what we have. I think we have a
great lineup between the broadcast, the regional networks, and the National
Sports Network. So, we're very excited about it. And I think those rights are
only just starting to kick in now. So,
we haven't even aired most of the things that we have lined up. So, we have
–obviously, this year we had the new
baseball contract. We have a new NASCAR contract and we've got golf coming
through. We've got the World Cup coming through. We've got quite the new MLS
contract.
So, there's a lot – I'm
really excited about what we have for the National Sports Network. So, I don't
think it's a question of kind of doing what we can and then waiting for the
next set of rights. We have a great set of rights. We think it's incredible,
and we think it's going to be able to drive a lot of growth for Fox Sports 1
and to achieve our plans there. So,
we're really excited about Fox Sports 1.
I think the challenge with
these things is that it takes a few years and we've asked everyone's patience
to say, look, give us a few years, this is a brand new business for us. The
challenge there is not just the live programming and how you deal with y our
events, but it's also how you sort of create habits and how you create habits
among customers to come and watch the shoulder programming or the sports news
and things like that. And that's something that obviously, ESPN has a huge head
start in creating that habit for its customers. So, that's going to take us a
little bit of time but I think we're carving something out that's distinctive
and the product looks pretty good and it's pretty much on track for where we
think it needs to be there or thereabout.
With respect to the
regional networks, we're hugely excited about the RSNs. We think they 're
great. I think it's important to remember that not each RSN is the same. People
talk about the RSN category in sort of one breath, but actually there's a lot
of difference in terms of quality of teams, the durability of teams, teams'
connections with their audience and their communities in some places, how the distribution
landscape lines up in the market. So we think the RSNs are very exciting, and
we think the combination of the RSNs with the National Sports Network as an
offering for customers, is very great.
So, we think the sports
business has a lot of room to grow. Here in the U.S. and around the world where
we're investing in sports everywhere from cricket and kabaddi in India to
obviously, soccer, football, and motor sports in Europe, it's something that we
continue to believe in. It's something that's so distinctive for customers,
it's something that maintains its unique appeal from a live viewership
perspective, for marketers and everything. You can create a real sense of event
around your programming.
So, we'll continue to
invest in sports and now we have new tools to do it with the National Sports
Network.
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Q: Any concerns on execution on the RSN side? We get
that question a lot whether it's the concern the teams always want more and
they 're willing to consider alternative distributions and the pay TV companies
are trying to figure out a way to pay less and including launching things like
skinny packages that don't include RSNs. Any execution issues around RSNs in
the next few y ears that are important to note?
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James: Look,
I think there are – I think you have –because of what's going on when we
started with when we talk about the digital market, there's these barriers to
entry coming down, new entrants, new competition, a real pressure to invest or
a real – a number of new buyers for programming emerging now and over time.
What you're really seeing here and the RSN argument with MVPDs is one of these,
is really just a commercial argument about margins. You really have a
downstream, retail business that has made incredibly high margins for a very,
very long period of time. And what we're having is a conversation about what a
fair price for what we offer their customers is.
So, they can talk about
it, and they 'll say, well, we're putting in a surcharge for RSNs because RSNs
are outrageous. Well, if you're in Detroit and you just love the Red Wings,
that's what you're buying from your cable operator, right? That's a part of the
overall offering, and I think it's tough for them to sort of suggest that
that's something that doesn't matter for their customers. I think it does. They
don't put in surcharges for billions of dollars of buy backs and 40-plus
percent EBITDA margins and all those things. I don't see surcharges for that.
So, what you're seeing
here is a simple commercial argument and really a margin shift downstream to
upstream over a medium to long period of time. It's happening today, and it's
going to continue to happen for those companies that are investing on screen
and creating products that are really great for their customers. I think we'll
be able to see great demand for what we do.
There's always execution
risk. And as a manager, you focus on that
all the time. But I think it's a question of shaping our portfolio of RSNs so
that we have strength in the right places and with the right kind of products.
It's being sensitive to the differences between different markets, making sure
we' re not leaving an RSN with a single team sort of stranded somewhere.
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