News Corp (NWSA) is making waves in the sports entertainment industry. Starting in August, Fox Sports 1 will be available to over 90 million pay TV members. Rupert Murdoch is following NBC and CBS Sports’s attempts to chip away at ESPN’s dominant market share.
However, don’t anticipate Fox Sports 1 to become the new ESPN anytime soon. The new national cable sports network is facing challenges such as securing sporting events that will draw in viewers while convincing advertisers to spend money on their network.
Fox Sports 1, which is replacing Speed, is hoping to increase subscriber fees. Speed was collecting 31 cents per month per subscriber and Fox Sports 1 is striving to reach $1 per month per subscriber. However, this is small potatoes compared to the $5.13 that ESPN receives per subscriber.
In terms of content, Fox Sports 1 does have a strong hand to play. The network has signed contacts with the MLB, NCAA football, NCAA basketball, World Cup soccer (2018 & 2022), and the UFC. News Corp also has rights to the PAC-12 and Big 12 Conferences and owns 20 regional sports networks. Two other big contributors to the sports network’s portfolio will be a 49% ownership of the YES Network and “Fox Football Daily”, which will feature Terry Bradshaw.
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Fox Sports 1 could help boost News Corps top line over the next few years if they can successful grow the network into a multibillion dollar asset. The network is starting off on strong footing with great distribution contracts, especially World Cup rights. There is also a lot of potential for original programs such as “Fox Football Daily” and “Rush Hour” to compete with similar shows on ESPN.
News Corp has also improved financially from 2011 to 2012. The company has seen a boost in “quality” (Gross Profit/Assets) from .192 to .228. Although the price to book ratio is a bit high at 2.5, New Corp does have a very strong return on investment of 8.46, which is well above the industry average of 6.65. This strong investment return combined with the potential for strong top line growth, driven by Fox Sports 1, could create some great value for investors and help the stock appreciate over the next few years.
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Written by Nick Sausa