Accuracy in Media

Last month Fox News celebrated its tenth consecutive year as the number one cable news channel. Now comes a report that shows just how that ratings success has translated into huge financial gains for the channel’s owner, News Corp.

Multichannel News took a look at Fox News and found that not only has their average primetime audience increased 78% in the last 10 years, but they are fast becoming a financial juggernaut in the cable industry with subscriber fees rivaling that of the entertainment channels.

Whatever the reasons for its audience alchemy, FNC’s Nielsen success has translated to significant  financial gains with both advertising and affiliate fees. In a research report, Morgan Stanley analyst Benjamin Swinburne estimates FNC’s fair-market value at $12.4 billion, which makes it News Corp.’s top asset. He forecasts total revenue at $1.6 billion this year, with EBITDA of $975 million.

Miller Tabak analyst David Joyce estimated that FNC will generate $802 million of its $1.87 billion in 2012 revenue, a 12% advance overall, from advertising. He puts FNC’s operating income at $714 million for the year, a 38% margin.

According to SNL Kagan estimates, FNC will ring up $852.1 million in ad sales in 2012, versus $683 million for CNN/Headline News and $271.8 million for MSNBC.

Current estimates are that Fox News receives 82 cents per subscriber from cable and satellite systems, which compares to 50 cents at CNN and 19 cents at MSNBC.  While it’s far ahead of its rivals, Fox is flexing its ratings muscle and is reportedly seeking a rate increase to as much as $1.25 per subscriber, which, if achieved, would make their earnings explode, as well as setting a new standard for the value of cable news. Rates in this area would put it on par with cable entertainment channels, which are considered more valuable than news channels.

Even more remarkable is that in less than 16 years, Fox has not only managed to become News Corp’s number one asset, as noted above by a Morgan Stanley analyst, but its estimated worth represents 25% of the entire company’s market capitalization.

Industry observers say that short of Fox’s major personalities retiring or leaving the network, or the competition coming up with top-drawer personalities of their own, it will be hard to dislodge Fox from their perch in the foreseeable future.

For MSNBC and CNN it has been a decade of futility as they have tried to catch Fox, and for the near future their prospects don’t look much brighter.

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