MUMBAI: Rupert Murdoch's 21st Century Fox is relying heavily on its subsidiary Star to lead its international growth.
Explaining how Star’s growing entertainment ad revenues makes it a key player in the company’s plans to focus internationally, 21st Century Fox chief financial officer (CFO) John Nallen said, “One of the top priorities, uniquely for us is international. We've got a particular focus on growth outside the US. We continue to harness the assets we have in Star, FIC (Fox International Channels) and in Sky but we continue to be opportunistic to the extent we can outside the US.”
As was reported earlier by Indiantelevision.com, this falls in line with a recent Morgan Stanley report that valued Star TV at $11.2 billion, where $300 million is the network's gross revenue from entertainment business as of June 2015.
Given the growth rate, Nallen anticipates that number to reach $500 million by 2018. “We feel confident about the $500 million target for 2018,” he said.
It may be recalled that earlier this year, 21st Century Fox CEO James Murdoch had said that Star India is likely to earn operating income of $1 billion by 2020.
The growth, according to him, is coming from two factors - entertainment and sports. “The first is the continued growth of the entertainment business, which is the hallmark of the Star business. We get 23-24 per cent market share every night. It's a market that is growing. In the last six months TV ad market grew 21 per cent, we over-indexed because of our strength,” said Nallen.
While entertainment continues to be a source of revenue for Star, its sports section is doing equally well. Seeing the prospects the company had earlier made its biggest sports investment by launching six sports channels with Star, which paid off for the network as “an enormous viewing success.”
Nallen, who was speaking on the company’s business strategy for the next couple of years, at an industry summit, also pointed out on the company’s strong focus on expanding its international reach and growth through Star TV. “Top opportunity continues to be international, led by Star, which clearly is going to lead a lot of our international growth,” he said.
Calling its Indian subsidiary - Star India, an undervalued asset, Nallen pointed out the growth statistic predicted from Star, which rides on the network’s continued success rate in the entertainment section, unlike the parent company’s recent experience of the same in the US.
“Our ad growth in the US is coming from news and sports, and not from entertainment. If you take our total revenue, roughly 30 per cent of it comes from advertising. Two thirds of that advertising total comes from news, sports and international. The place that we are focusing on and the place people feel more vulnerable is entertainment advertising in the US. That’s the rest of the one third left,” Nallen said.
Additionally, Nallen also clarified that Fox has no plans of further incremental investment in Star this year. "Not much more investment (in Star). This year we grew the investment because we extended one of the sports franchises that we started, the local Kabaddi sport that has turned into a phenomenon in India. There is not a massive new incremental investment that we need for Star," Nallen informed.
