Rising Subscriber Fees Expected for News Corp’s Fox Sports
Trefis analysis of News Corp. Click to see full analysis.
News Corp (NASDAQ:NWS) owned Fox Sports is a premium sports network that operates as a combination of several regional sports networks. It primarily competes with Disney’s (NYSE:DIS) ESPN and CBS’ (NYSE:CBS) CBS Sports.
News Corp charges fees to its subscribers who receive Fox Sports programming through cable operators. We estimate that Fox Sports constitutes about 19% of the $17.78 Trefis price estimate for News Corp’s stock.
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Fox Sports Fee per Subscriber increased 43% in Four Years
We estimate that Fox Sports’ Fee per subscriber has grown from $1.45 in 2005 to about $2 in 2009, driven by the following two factors:
1) Fox Sports continues to be the second most popular sports channel in the US after ESPN.
2) Subscriber fee for ESPN has consistently been higher than that for Fox Sports. This has given sufficient room for Fox Sports to increase its pricing with every corresponding price increase made by ESPN.
Fox Sports Fee per Subscriber to rise to about $2.30
We expect Fox Sports subscriber fee to continue to grow at an annual rate of about 2% and reach about $2.30 by the end of Trefis forecast period. We expect this moderate growth to be driven by the following factors:
1) Fee per subscriber is negotiated as a multi-year contract with pre-specified annual increments. This makes price increases fairly predictable.
2) ESPN’s fee per subscriber was about $3.20 per month in 2009, about 53% higher than that for Fox Sports. This indicates ample room for Fox Sports to grow its subscriber fee.
However, we believe the growth will be moderate since Fox is yet to match ESPN’s breadth of programming. ESPN still covers most of the prime events that attract many sports enthusiasts to the network.
You can modify our forecast above to see how News Corp’s stock may be impacted if Fox Sports is able to match ESPN’s subscriber fee levels in the future.
For additional analysis and forecasts, here is our complete model for News Corp’s stock