16 quotes from Lachlan Murdoch at Morgan Stanley Technology, Media & Telecom Conference: New Fox streaming app, Hulu, more

16 quotes from Lachlan Murdoch at Morgan Stanley Technology, Media & Telecom Conference: New Fox streaming app, Hulu, more

Industry

During his 40-minute conversation at the Morgan Stanley Technology, Media & Telecom Conference yesterday, 21st Century Fox Executive Chairman Lachlan Murdoch had the opportunity to talk about a wide range of topics, including the forthcoming single authenticated streaming app to give customers access to all of 21CF’s key U.S. television brands, Hulu’s forthcoming OTT service, the explosive growth of hotstar in India and more.

On launching one streaming app for all of 21CF’s core U.S. brands: “What [we’ll] be launching soon is a single authenticated application that our cable companies will be able to authenticate with your cable subscription… Now you might enter because you want to watch a National Geographic show, or you might enter because you want to watch FX, or you want to catch up on something that's on the [FOX] network. But once you enter once and you're authenticated by your cable provider once, you will be authenticated across all those channels and those experiences forever. And there's a very seamless transition [if] you're watching a show on any one of our networks.”

On the focus on five core brands: “[Probably] three or four years ago, we decided to really focus on our core television brands. In a world that's fragmenting as quickly as it is downstream at the distribution level, having the strongest brands and the strongest content possible is critically important. So, we've focused on the FOX brand, on the National Geographic brand, on FOX Sports, on FOX News and on FX as our core American brands. And we said we're not going to invest in ancillary brands that won't matter ultimately to the consumer and to our viewers.”

On pricing Hulu’s OTT service: “[With Hulu, we’ll] be launching in the next couple of months an over-the-top service that will be a core bundle of channels – and we don't call it a skinny bundle because nothing is left out that we don't believe the consumer really wants. So, how do you get the maximum amount of viewing – the brands, many of them have presented here yesterday and today, the core television brands that people want to watch and need to watch – for the lowest possible price? And the research that we've done ourselves at Fox, but also I know that Hulu has done, all comes around to roughly the $40 price point.”

On the benefits of the proposed Sky acquisition: “[Sky] is not a purely a distribution business. I think they spend about £1 billion a year in content production. And due to that investment, 50 percent of the viewership on the Sky platform is channels and content that they create and produce themselves. So, it's a tremendous creative company as much as it is a technology company. But on the technology side, they have 22 million direct-to-consumer relationships through their subscriptions and through their over-the-top streaming. So we see the acquisition of Sky as absolutely being something that both strengthens Sky and will strengthen our technology and creative platforms as well.”

On investing in 21CF’s core brands: “We are not trying to push channels on our distributors that they don't want… What we do is [say] ‘Here are our core brands. They're valuable to the customers. Your customers want them. And we invest in them significantly.’ And this past year we invested $200 million in new FX programming and new National Geographic programming, and that was really to solidify and stand up those brands for them to remain – to continue to remain as relevant as they are.”

On the importance of being part of Hulu’s new digital MVPD service: “We felt that being part of that service, and being part of the launch of that service, will actually help us influence what we think the future of television viewing should be. We don't think it should be a la carte, where you ask the consumer to pick a sushi menu of every single channel they want – which, by the way, by the end of the day, when you add up all the channels, will be more expensive, not less expensive. Being part of the development and the evolution of how television is watched, and what should be in that core bundle, and what price that core bundle should be, was very important to us. So, there's a strategic rationale beyond Hulu itself.”

On the consumer experience offered by digital MVPDs: “Why has Netflix been so successful over the last decade, and why is the traditional cable bundle – basic bundle – why is that declining? Well, it's not just because of the content that Netflix has on its program, because a lot of that content, or in fact a lot of better content, is also on cable. It's because of the consumer experience. It's because of the consumer interface. It's because of how they offer you, using their artificial intelligence, the shows that you want to watch next before you know you want to watch them. These are all factors and functions that are being built into the best of these new services.”

On why hotstar has seen remarkable popularity in India: “Hotstar is our over-the-top streaming service for STAR TV. India has a television household number of about 180 million television households. So, it's an incredible market. But those households are primarily one-television households. Households generally don't have two televisions, and they certainly don't have three. And so, what that means is, a robust and a respected over-the-top streaming service really becomes, very quickly, the second screen in the home. So, if your mother or your father, or your brother or sister, is watching the primary screen, your only choice to watch another show is through the streaming service today. [We’re at] over 130 million downloads for hotstar in the market. It was the fastest-downloaded app in the history of India.”

On the strength of FX: “I don't like talking about FX anymore, because it's actually doing so well that you don't want to jinx it. [FX Networks and FX Productions CEO] John Landgraf and his team have been on an incredible creative tear. The awards are less important than the ratings. Some people don't like when you say that, but they are. Ratings are important… It's a tremendous team that John Landgraf's put together. Again, the question for us internally has been: How do we continue to monetize that? How do we use the strength of that brand, FX, both here and internationally, and both in a linear format and digitally?”

On the success of Fox Television Group: “[Fox Television Group chairmen and CEOs] Gary Newman and Dana Walden have done an incredible job. I think today we have the top show on six different networks, which is a tremendous result. We'd like to have all the top shows on FOX, but we sell to third parties, so we have the top-rated show on six networks, which is a tremendous result for them.”

On the strength of the ad market: “The ad market's strong. [Our] scatter pricing is up double digits – healthy double-digits – to what we were in the upfront. So, we feel very good about advertising, particularly national advertising, both in broadcast and in cable.”

On 21CF’s strong position in an era of Peak TV: “[Are] there that many ideas for new shows and new scripts and new storylines that are out there? It's incredibly difficult to produce. And so, what that's meant is that the most valuable shows and the highest-quality content have become ever more valuable. Downstream, at the distribution level…high-quality content has become more in demand and more valuable. [We] feel that we're well-positioned, both in terms of our channel brands and in our content, to really profit in this environment effectively better than anyone else.”

On the health of the RSN business: “It provides tremendous amount of cash flow for all of our operations. And the costs in the business are relatively capped. I think 80 percent of our sports team renewals and sports rights are not up until after 2021. So, another 4-5 years. We have the vast bulk of our content at locked-in prices. So, we feel very confident both in [both] FOX Sports, the RSNs and the national channels.”

On improving theatrical windows to provide consumers what they want: “The theatrical windows are what they are for historical reasons, and they worked in a different time with different technology. They don't work anymore. As of today, when our films go into a theater, they're in a theater for a period of time – up to 88 days – and then they go dark and they're not anywhere until they enter a video-on-demand window. And it's in that dark window where you have a lot of piracy and other issues happen, where we're not providing our consumers with what they want… I should say, we feel very strongly that the exhibitor business is a business that should remain strong; that [when] we open ‘Avatar,’ it's going to be an experience that people will want to experience in a theater. And that's very important to us. So, we don't want to hurt or damage the distributors' business. Having said that, we can do a much better job for our consumers in making the windows more rational and more logical going forward.”

On a thoughtful film strategy: “In the film business, you obviously have your tentpole hits [like] ‘Logan,’ which is the new Wolverine movie that comes out this weekend and is one of those expensive blockbusters. But all the little singles and doubles you want to hit, you really have to strike the right way. You don't want to make a mid-market movie for $60 million or $70 million expecting a double or triple and get a single. So, you have to be very consistent and very careful with every single one of those films, both creatively and in how you market and distribute those films. So, we think [20th Century Fox Film Chairman and CEO] Stacy Snider is doing a great job there.”

On the strength of FOX News: “FOX News today continues to be the No. 1 channel on all of cable television – not the No. 1 news channel; the No. 1 channel. So, the results have been terrific. [They're] really a [result] of great producers, great journalists and great storytellers throughout the company.”