Will Fox News Be A Victim Of The Shift To OTT?

To those of us who cover the television industry, the President’s frequent allusions to the “ratings” of various cable news programs sounds like a throwback to an earlier era, as if he were discussing 8-tracks or cassettes. 

And though ratings continue to be quite pertinent to many segments of the industry, the cable news networks may soon not be. Because in an industry that’s rapidly moving to a new OTT-based ecosystem, “cable” news networks are in danger of being left out.

The audiences that fuel the ratings the cable news networks rely on come courtesy of traditional pay TV bundles, and that’s an area of the business that is about to see a rapid decline.

True abandonment of traditional pay TV has been slow to happen because of inertia and because the alternatives were not all that attractive. 

That’s changed now as we’re full on into the “Flixcopalypse”, with eight mutlibillion dollar subscription services (Netflix, Amazon, Hulu, Apple, Disney, HBO, Peacock and whatever VCBS rolls out.) Combine those with the FASTs (Tubi, Pluto, Xumo et al) and the need for hundreds of traditional broadcast and cable channels quickly evaporates.

This viewing shift  is also seeing a parallel cultural shift as events like “Hamilton on TV” are happening on streaming service rather than traditional TV channels. That’s a shift we’re likely to soon see more of, and it’s giving the move to OTT greater velocity.

Then there’s the pandemic, which left everyone at home with plenty of time on their hands to check out the new Flixes and FASTs. It also brought massive unemployment, which means that a $100/month cable bill is going to feel like a real luxury for millions of Americans.

Which brings us to news and the big three cable news networks, CNN, Fox and MSNBC, all of which will need to find a home in this evolving universe. 

CNN and MSNBC are lucky in that their parents companies, AT&T and Comcast, respectively, both own Flixes (HBO Max and Peacock) that could easily become their new home. 

Comcast, which also owns CNBC and NBC News, could conceivably make news a major focus of the Peacock app and/or spin off a news-only version of Peacock.

On the flip side, Fox News’s parent company doesn’t have any sort of Flix-like OTT presence that could absorb them, though the service does have its own $5.99/month OTT app—FoxNation—which, as per Parks, had around 200,000 to 300,000 subscribers as of June 2020. 

Return Of Broadcast News

There’s one more wrinkle to all this: the broadcast networks, ABC and CBS in particular, are reinvigorating their own news services for online audiences. ABC News is now available via Disney’s Hulu service and CBS has its own CBSN app that offers both national and local streams and could easily become a part of whatever VCBS is planning to do to expand CBS All Access.

While the network news shows are often ignored by the media cool kids, they still have a huge ratings advantage versus cable.

Like seriously huge.

To wit, the ABC evening news with David Muir averaged 10.5 million viewers for the week of April 27th, and (this is key) 2.1 million of them were ages 25-54. By contrast, Tucker Carlson’s popular Fox News show averaged 4.56 million viewers in that same period, or just 43% of ABC’s audience, while Anderson Cooper on CNN averaged 2.09 million viewers, or just 20% of ABC’s total audience.

Life In The New TV Ecosystem

Any of the news services that are included within larger Flixes are in prime position in the new TV universe because they’re not just relying on news programming to pull in subscribers. Hulu has a vast library, award-winning original series, and if it also happens to have ABC News, that’s a built-in base of 32 million subscribers the news service can appeal to.

Which leaves Fox.

While the paltry number of subscribers to FoxNation has more to do with the fact that the app is marketed as an add-on to watching Fox News on cable, not a replacement, the network will still be a tough sell on OTT, given that their focus is only news and news-related stories. 

They are further handicapped by the advanced age of their audience: the average Fox News viewer is over 65 and thus less likely to download and use an OTT app. Maintaining a news-only app doesn’t give them an opportunity to grow their audience among younger viewers either. (Compare that to ABC News, which can promote its programming to Hulu’s vast Millennial audience.)

Shrinking Pay TV Means Shrinking Carriage Fees

Many of you no doubt are familiar with the advertiser boycott of Tucker Carlson’s Fox News show, which saw brands like Disney pulling out. While that does hurt Fox’s bottom line some, they are able to recoup the losses by charging the MVPDs higher carriage fees given the size and loyalty of Carlson’s audience. (e.g., they can argue that X number of subscribers will drop the service if they can’t watch Tucker Carlson, so pay up.)

That’s a solid plan in 2020, but if cord-cutting really picks up, for the reasons noted earlier (more Flixes, more unemployment), then the MVPDs won’t be able to continue paying such high carriage fees. Here again, AT&T can make up the lost revenue by running CNN on ad-supported HBO Max and via the fact that it is a distributor as well as a programmer and can distribute CNN over AT&T mobile devices, reaping revenue from advertising there as well.

That’s not an option that is open to Fox News, which relies heavily on its carriage fees, and why Fox may wind up as a fringe player as the TV ecosystem changes.

Or Not

Fox does have some options, however.

They can make FoxNation a free ad-supported app like CBSN and work with Sinclair, whose owners hold similar political views, to provide local news to supplement the national news on the app. (Local news is hot right now.) The trick here would be finding the right advertisers.

They can also seek distribution via Tubi, the FAST they recently acquired. Tubi reaches around 25 million monthly active users who tune in for the wide variety of programming available on the app. This could benefit Fox News too, in that it could help them reach a younger audience among viewers who tune in to Tubi for the entertainment programming.

What Now?

While the industry is certainly changing rapidly, “rapidly” in TV is usually measured in years, not months. The next year or two will be critical to the development of the new OTT-based TV ecosystem and the state of the economy, post-pandemic, will play a huge role in how that plays out too.

While Fox News’s prospects may look less than rosy right now, so much can change in that time period, so it would be premature to write their obituary before we see how everything from the pandemic to the economy to the switch to OTT plays out.

That said, it’s not a position we would want to be in.