News Corp (
) is getting ready to launch its nationwide sports network, Fox
Sports 1, which will be available to more than 90 million
subscribers in the U.S. According to SNL Kagan, Fox Sports 1 might
seek a subscription fee of $1 per subscriber, which is still
substantially lower than what ESPN earns. ESPN charges high
subscription fee because the network has plenty of significant
sports contracts, and therefore has high demand among sports fans.
It will be a while before Fox Sports 1 can match ESPN, but $1 per
subscriber might not be a bad start.
Fox Sports 1 will be replacing SPEED, which has more than 80
million subscribers and charges a fee of close to 30 cents per
subscriber. If Fox Sports 1 can successfully negotiate a fee of $1
per subscriber, it could generate additional 70 cents per
subscriber. This amounts to additional subscription fee of close to
$700 million. Additional revenue will come from advertisements
since sports programming typically commands higher ad prices.
Future subscription pricing growth could also be higher compared to
regular networks if Fox Sports 1 can establish a strong demand for
its programming, which has been the case with sports networks in
general. If successful, Fox Sports 1 has the potential to add
notable value to News Corp's stock.
See our complete analysis for News Corp
News Corp recently sold its stake in New Zealand's largest
pay-TV service provider, Sky Network Television ltd. Given that
News Corp is streamlining its businesses, we expect more focus on
its highly profitable media networks business. Selling stake in Sky
Network will free up capital that it can invest in sports
programming, which is going to be necessary in order to build a
successful national sports network. We also expect NBC to invest
heavily in sports programming.
Our price estimate for News Corp stands at $30
, roughly in line with the market price.
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