News Corp's (NWSA) Fox Sports 1 a 'Worthy Adversary' to ESPN (DIS) - Needham & Company

March 6, 2013 10:57 AM EST Send to a Friend
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Price: $15.68 +1.49%

Rating Summary:
    18 Buy, 11 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 8 | Down: 12 | New: 23
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Needham & Company reiterated their Buy rating and $38 price target on News Corp. (NASDAQ: NWSA) following news the company's national sports network Fox Sports 1 will begin broadcasting on 8/17/13.

The analyst thinks Fox Sports 1 will get $0.60-$0.75/sub/month, which is up 100 percent from the rate they were getting before reprogramming Speed-TV into the new station. This, however, is a small fraction of ESPN's $6/sub/month.

"Virtually every TV content creator will spend 10-30% more on original content this year to upgrade its original-content slate, analyst Laura Martin notes. "In many cases, where a channel is broken, companies have discarded old channels and brought in an entirely new idea. Discovery's (NASDAQ: DISCA) rebranding of Discovery Health into Oprah’s OWN network and Discovery Kids into HUB are two good examples. We think FOX's transformation of Speed-TV into Fox Sports 1 is consistent with this ongoing theme of upgrading underperforming channels. By implication, content costs across the TV dial are rising as competition for audiences becomes more intense. When national sports rights come up for renegotiation in the future, prices should be higher than in the past, although we note that most of the largest national sports are already tied up for decades into the future."

The most obvious potential loser from the Fox move is Disney's (NYSE: DIS) dominant national sports incumbent, ESPN, which should experience margin pressure, according to Martin.

"We note that Fox News entered the market late as the third news channel and yet 15 years later dominates the news genre," she mentions. "Fox will be a worthy adversary to ESPN's dominance in the sports space, in our view.

For an analyst ratings summary and ratings history on News Corp. click here. For more ratings news on News Corp. click here.

Shares of News Corp. closed at $30.19 yesterday.


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