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Are Sony and Foxproof Streaming Businesses to Avoid?

Fox stock remains the most valuable media stock in 2022. Sony Pictures posted strong quarterly earnings.

No time for streaming. First, SVOD (Subscriber Video On Demand) hit the wall, scrambling commercial-free streamers like Netflix and Disney to introduce ad-supported options. And now that ad revenue is moving in the same direction as the economy (and in the opposite direction to inflation), people who don’t rely on traditional streaming services like Fox and Sony Pictures are laughing right up to the bank. I’m here.

Neither hasn’t experimented with the trendy direct-to-consumer system. Sony dipped its toes in streaming water with Crackle before finally selling it to Seoul Entertainment’s Chicken Soup. It previously owned a third of Hulu with partners and broadcasting rivals ABC (Disney) and NBC (NBCUniversal is owned by Comcast). Disney acquired a stake in Fox when it chose it for $71.3 billion in 2019 and now controls Hulu’s ownership.

These days, Fox’s streaming portfolio consists of its completely free FAST service, Tubi, and Fox News Channel’s companion platform, Fox Nation, which charges a subscription fee. Around the same time, Sony’s television and film division, Sony Pictures, is working as an arms dealer, so to speak, by creating content for other streamers, primarily his Netflix.

The move seems to be working for them. Sony Pictures’ operating profit for the April-to-June quarter was $394 million and revenue was $2.64 billion, the company reported Friday. Operating income was $232 million and revenue was $1.87 billion in the prior-year quarter. Covid was a big factor in the theater business at the time.

Box office returns have returned, but the quarter wasn’t all rosy for Sony in terms of the big picture beyond the movie segment. Sony Group Corporation is not affected by macroeconomic factors. The Japanese company has adjusted its 2022 financial guidance by listing all the same issues as everyone else. Its sister games and network services are a whole other story. The 30,000-foot-view issue explains his 2.5% drop in Sony stock (SONY on the NYSE) today.

Mark Wahlberg in “Father Stu,” Sony Pictures’ April 13, 2022 release.

Sony

Fox’s stock is down about twice as much as Sony’s troubles today, but that has nothing to do with earnings in the June quarter. Fox is reporting his own results on Aug. 10.

Fox is doing relatively well in 2022. As of this writing, Fox stock (FOX on NASDAQ) is down. However Year-to-date, 9%. Netflix is ​​down 62%. Disney is down 33%. Comcast is down 27%. Amazon is down 20%. Starz owner Lionsgate is down 48%. Warner Bros. Discovery is down 41%. Roku down 73%. Paramount Global is down 27%. AMC Networks is down 17% and Apple is down 11%.

It’s worth pointing out here that the Sony Group stock has fallen 33% this year. But then again, Sony, like his Amazon and Apple, is a retailer that dabbles in movies and TV. None of them are traditional media stocks.

In early May, researchers at MoffettNathanson named Fox as the sole “buyer” in the media sector. That’s still true today: In early May, Nathanson’s Fox price target was $50 a share for him. Today he’s at $46, a significant premium over Fox’s $30.90 that closed Friday.

A large part of Nathanson’s bullishness on Fox is the Murdoch-run company’s relatively small streaming footprint. Forecasts show Fox will have the lowest share of digital revenue in the media industry through at least 2025 (MoffettNathanson said in May that he estimated total revenue from Tubi, Fox Nation, Credible, and other digital advertising (estimated to be 21% of him). that might actually be a good thing. By effectively avoiding his massive SVOD, Fox has kept its investment in streaming relatively low and doesn’t have to (at least) survive predictable first few years of losses.

So Fox is lean and mean, and Mr. and Mrs. Murdoch look like media geniuses (again). Instead of participating in expensive streaming wars, Fox has spent money live on his sports and linear TV news. In other words, the future of media may lie in the past.

Just kidding, it’s a streaming rule. But probably not financially – and we’re very serious about it.

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