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Newly independent Fox Corp. looks to sports to drive upfront ad sales growth

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Newly independent Fox Corp. looks to sports to drive upfront ad sales growth

A mix of marquee sports rights and changes to the TV marketplace should position the newly streamlined Fox Corp. to take "a disproportionate share of the growth" in upfront ad-sales negotiations for the coming TV season, said Fox CFO Steven Tomsic.

Speaking at an industry conference June 4, Tomsic said the shift of more entertainment programming to non-ad-supported formats, including subscription streaming packages, will tighten competition for ad-placement with its live sports programming. This programming includes Super Bowl LIV in 2020, expanded NFL coverage, World Wrestling Entertainment Inc.'s "Smackdown Live!" and hit competition series "The Masked Singer." Fox Corp. launched as a news- and sports-focused media company following Walt Disney Co.'s March purchase of myriad 21st Century Fox Inc. entertainment assets.

During the upfront season underway now, media companies are trying to sell schedules to agencies and ad clients ahead of the 2019-2020 TV season. That compares to the scatter market, when advertisers purchase inventory closer to air date. Tomsic said scatter market pricing is coming in at 30% above last year's upfront pricing levels. He declined to project pricing increases or specific gains during the current upfront negotiations.

Fox's nontraditional ad deals could grow in the future as leading cable network FOX News Channel (US) becomes part of the OpenAP — the television industry's platform for cross-publisher audience targeting and independent measurement — in the "coming months." Tomsic said about 10% of Fox Corp.'s ad revenues now emanate from nontraditional deals, including audience targeting that goes beyond traditional gender and age metrics.

While Fox is experimenting with ad formats, particularly for digital or streaming content, the CFO said the company has no plans to change the overall number of advertisements or ad loads on its networks at the moment. Some rival networks have opted to lower ad loads in recent years as more consumers seek out viewing options with fewer interruptions.

Addressing Fox Corp.'s new partnership with The Stars Group Inc., which will mark its entry into the nascent U.S. sport-betting market, Tomsic said it will take about a year to set up the new business but the investment should pay dividends down the road. He noted that even free-to-play games could lengthen the amount of time that Fox viewers watch specific sports contests on its linear and digital platforms, which could lift ad rates.

Longer term, as more states adopt laws legalizing sports betting, Fox Corp. can assess how successful the early sports betting businesses are and potentially take up to a 50% stake in some of them. Tomsic said if its internal projections about sports wagering in the U.S. come anywhere close to the reality as the market matures, "we think this is a really exciting opportunity for us."