What's going on?
21st Century Fox, the media giant that owns television stations, production studios and satellite TV operators, did a bit better last quarter than investors expected… but the spotlight is on recent news that the company might sell a big chunk of itself to Disney!
What does this mean?
Fox managed to grow its revenue by almost 10% versus a year ago, despite the tough environment for media companies (viewers are, for example, increasingly deserting cable television for streaming services like Netflix). The stock jumped a little over 1% immediately following its earnings release.
On Friday, CNBC reported that Fox had discussed selling some of its major businesses, including its movie studio, several of its TV stations and Sky, its international cable business, to Disney. The sale would have left Fox focused largely on live sports and news. It looks as though the discussions with Disney didn’t go anywhere; regardless, they suggest that Fox’s main shareholder, the Murdoch family, is prepared to sell a big chunk of Fox’s operations.
Why should I care?
For the market: Investors like the idea of a slimmer Fox.
Fox’s stock price jumped about 10% following the Disney news, even before Wednesday’s positive results. Investors were seemingly heartened to hear that Fox’s various business lines remain attractive to a strategic buyer like Disney – and they seem to like the idea of cashing in on that before the media landscape changes for good…
The bigger picture: The Murdochs’ willingness to sell is the latest sign that media is a tough business.
Investors were genuinely surprised to learn that the Murdoch family would sell any of its media empire. The implicit takeaway is that traditional media (e.g. cable companies like Sky and networks such as FX) is not as good an investment as it used to be. The emergence of new competition like Netflix, as well as Facebook, YouTube and others, may be weighing on the Murdochs’ minds.