Capex keeps the lid on Fox earnings
The company's revenues rose by more than $US1 billion, or 18 per cent, to $US7.06 billion - largely driven by its pay television businesses in the US, and the consolidation of Sky Deutschland in Europe, but operating expenses increased $US932 million over the same period.
This meant operating income from continuing operations for the Fox business rose just 1.8 per cent to $US1.62 billion.
"In our first quarter as 21st Century Fox, we delivered strong revenue increases across all of our businesses as well as growth in [operating income before depreciation and amortisation] even as we made significant investment in our channels business, and faced a difficult film comparison and currency headwinds," Mr Murdoch said.
"The investment we are making, including the launch of FXX and Fox Sports 1, will drive future sustained growth," he said.
Fox Sports 1 was launched as a rival to Walt Disney's ESPN in August, and FXX, a youth-oriented channel, launched in September.
Mr Murdoch split Fox from News Corp's media business in June to free the film and television broadcast business from News Corp's low-growth media assets that have been further weighed down by the phone hacking scandal in the UK.
The media group has retained the News Corp name.
Profit from continuing operations at Fox fell to $US768 million, from $US2.25 billion. The previous first-quarter earnings included a $US1.37 billion gain from the sale of its NDS business.
Fox's film business was also cycling a big performance from the previous first quarter with this year's hits, The Wolverine and The Heat, failing to match the previous year's blockbuster Ice Age: Continental Drift. Earnings from the US pay television (cable) business declined slightly to $US990 million, with a 22 per cent increase in costs wiping out its revenue growth.
Fox said two-thirds of the expense increase was attributable to the new channel launches and new acquisitions.
Morningstar analyst Michael Corty said the decline in the cable business was not surprising given the launch of the new sports channel. "Overall, I thought the results were solid," he said.
Frequently Asked Questions about this Article…
21st Century Fox reported better-than-expected revenue growth of 18%, reaching $US7.06 billion. However, earnings were below market estimates due to increased investment in its US pay television business.
21st Century Fox's earnings were below market estimates due to increased investment in its US pay television business, which led to higher operating expenses.
The earnings fell short because of significant investments in the US pay television business, including the launch of new channels like FXX and Fox Sports 1, which increased operating expenses.
The revenue growth for 21st Century Fox was largely driven by its US pay television businesses and the consolidation of Sky Deutschland in Europe.
The launch of new channels such as FXX and Fox Sports 1 contributed to a 22% increase in costs, which affected the earnings from the US pay television business despite revenue growth.
The launch of new channels like FXX and Fox Sports 1 significantly increased 21st Century Fox's expenses, contributing to a 22% rise in costs for its US pay television business.
The film business faced a tough comparison with the previous year's blockbuster, Ice Age: Continental Drift. This year's hits, The Wolverine and The Heat, did not match that performance, impacting earnings.
21st Century Fox's film business earnings were impacted by a tough comparison to the previous year's blockbuster, Ice Age: Continental Drift, with this year's hits, The Wolverine and The Heat, not matching that performance.
The consolidation of Sky Deutschland in Europe was a significant factor in the $US1 billion revenue increase, contributing to the overall 18% growth.
The split from News Corp allowed 21st Century Fox to focus on its film and television broadcast business, freeing it from News Corp's low-growth media assets.
Rupert Murdoch split 21st Century Fox from News Corp's media business to focus on film and television broadcasting, freeing it from low-growth media assets and issues like the UK phone hacking scandal.
The decline in profit from continuing operations at Fox was due to the absence of a $1.37 billion gain from the sale of its NDS business, which was included in the previous year's earnings.
Challenges included increased operating expenses due to new channel launches, a difficult film comparison, and currency headwinds, which affected overall earnings despite revenue growth.
Currency headwinds posed a challenge for 21st Century Fox, impacting its overall financial performance despite strong revenue increases.
Rupert Murdoch expressed optimism, stating that the investments in new channels like FXX and Fox Sports 1 are expected to drive future sustained growth for the company.
21st Century Fox plans to drive future sustained growth through investments in new channel launches, such as FXX and Fox Sports 1, which are expected to enhance its market position.
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