21st Century Fox 3Q14 Earnings Call notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

I want to address three perceived industry problems

“A number of people claim that these three issues portend new challenges for our business – that television advertising is shifting to new digital platforms; that ratings reflect a decline in the viewership of our product and that new over-the-top digital platforms will undermine traditional business models.’

Advertising is weak because of the economy

“My first observation is that these concerns are overblown, particularly in the short term. The television ad market is a mixed story, but the issue is primarily the economy. Pricing has actually held up pretty well, but volume is a bit softer than expected due to a lack of confidence, leading businesses to buy short term or keep the money in their pocket.”

Ratings are down because people are watching content elsewhere. The traditional bundle has legs

“On the ratings front, network ratings are down, but the issue generally is not popularity of content, particularly hit content. The issue is that an increasing amount of viewership is occurring in ways and places not reflected in traditional network ratings. And as it relates to new digital platforms, the traditional bundle, while mature, continues to have real legs.”

We recognize that the traditional bundle is fraying at the edges

“However, we also recognize that traditional bundle is fraying at the edge due to both millennials with different lifestyles and economic pressures in tough times. ‘

People are focused on box office, but there’s been big growth in home entertainment

“I mean, certainly internationally, you continue to see growth, and even domestically. I think the place – I mean, there’s been a lot written about box office this year. But I think if you look at sort of the demand in digital, I mean, probably one of the more exciting arenas for us in the film business in the U.S. has been the really pretty dynamic growth in the digital and home entertainment space.”

The digital shift is marginal, more about economy

“at this point, it is by – from all the people we talk to, whether it’s advertisers, clients and the like, it’s a pretty modest shift. And what you get back is – much more of the issue is confidence in the short-term economy and how they feel about it. We do hope the holidays, new budgets in January will put some money back in the advertising system.”

Automobile advertisers’ sales have been great but they’re keeping the money in their pockets

“The auto category, probably today is one of those that has probably been a bit of a disappointment. Auto sales have been great and yet it seems to be a place where the auto advertisers are – certainly, year-on-year, the category is down and they’re keeping – it seems like they’re keeping more of the money in their pocket.”