News Corp ( NWS ) 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.
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.