Fox Boosts Local Language TV in Faster-Growing Foreign Markets

Monday, 18 Aug 2014 07:02 AM

 

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21st Century Fox Inc., Rupert Murdoch’s film and television company, is increasing production of local-language shows in foreign markets, part of an effort to boost international profit past $1 billion this fiscal year.

Fox International Channels, focused on programming outside the U.S., is expanding original production in Latin America and Asia, Hernan Lopez, president and chief executive officer of the division, said in an interview. The Colombian crime drama “Cumbia Ninja” made its debut in late 2013, while “Sitiados,” being shot in Chile, will premiere in 2015. In June, Fox’s National Geographic Channel announced an unscripted series with Turkish Airlines that will air in October.

“While over the past 15 years, U.S. premium channels have developed a unique kind of original content, that trend has not been fully exploited in local languages,” Lopez said.

International markets represent a big opportunity for media companies like Fox, which reaches at least 1.7 billion households outside the U.S. While pay-TV subscriptions have peaked in the U.S., they are growing in foreign markets. Advertising is expanding faster, too. Fox International Channels operates in Latin America, Europe and Asia.

The international channels, along with Fox News and regional sports, are expected to lead a high single-digit to low double-digit percentage rise in cable TV profit this year, Chief Financial Officer John Nallen said on Aug. 6. At an investor meeting a year ago, Fox projected more than $1 billion in profit for Fox International Channels, while cautioning changing currency rates could cut into that.

Foreign Intrigue

Murdoch this month dropped a $75 billion unsolicited takeover bid for Time Warner Inc. that would have increased Fox’s international holdings with businesses like HBO and Turner. The company generally looks to grow organically, Lopez said, while not ruling out acquisitions.

“If there is something really attractive then we will look at it,” Lopez said.

Fox isn’t the only media company targeting the faster- growing international markets.

In the second quarter, Time Warner boosted non-U.S. subscribers at HBO by about 15 percent from a year earlier. In June, the company’s Warner Bros. studio acquired the Eyeworks BV businesses outside the U.S., gaining international production capabilities, in a deal that accounted for most of the company’s $860 million in acquisitions so far this year.

Sony Corp. has expanded its local-language content, both scripted and unscripted. “Dragon’s Den,” known as “Shark Tank” in the U.S, is produced locally in more than 30 countries. In Russia, Sony produced local language versions of “Everybody Loves Raymond” and “Married With Children.”

180 Countries

Fox has more than 300 networks outside the U.S. Its channels carry shows such as the zombie drama “The Walking Dead,” the flagship program on AMC Networks Inc. and No. 1 show for U.S. viewers in the advertiser-favored 18- to 49-year-old age group.

The company plans to air the fifth season of “The Walking Dead” in 125 markets, starting the day after its U.S premiere in October.

The division has tested original shows in Latin America, where its Spanish-language Moviecity network outdraws HBO, according to DirecTV ratings data supplied by Fox, and plans to start selling premium sports and entertainment channels together to reduce subscriber turnover.

Colombian Drama

“Lynch,” a Colombian crime series, has been running for three years and draws audiences comparable to those in Latin America for well-known U.S. comedies such as “Modern Family.”

The new drama “Sitiados,” on Chile’s TVN, follows a Spanish woman who is widowed with her son in a mining settlement being threatened with destruction by the local tribe.

Fox is also set to begin operating on TV systems in Sweden this year, after signing agreements that will bring its FOX entertainment channel to about 52 percent of viewers. In markets where it already has a presence, Fox is in talks with cable and satellite services to offer more of its channels on those systems.

One challenge has been exchange rates.

In the fourth quarter ended June 30, Fox said, international profit fell slightly because of exchange rates, while earnings grew 12 percent in local currencies.

Last year, Chief Operating Officer Chase Carey said Fox International Channels would top $1 billion in profit in fiscal 2015 “in spite of a $100 million plus in headwinds due to the strengthening dollar.”

On an Aug. 6 call with analysts, Carey described Fox’s earnings outlook as a “hockey stick” due to domestic and international new-channel initiatives, which require investment in 2015. That will “turn around to be a tailwind to growth in 2016,” he said.

The combination of heavy spending and exchange rate losses, mainly from Latin America, would reduce projected 2015 profit growth by about 4 percent, Nallen said.

© Copyright 2014 Bloomberg News. All rights reserved.

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