21st Century Fox is preparing for a world where all TV shows and films are consumed online, and success hinges on delivering the best viewing experiences as well as the best content, the media and entertainment group’s co-COO James Murdoch told attendees during his keynote interview at this year’s APOS.

“Eventually, all audio-visual entertainment will be streamed… because it can be a much better experience, as long as the infrastructure is there to deliver that,” Murdoch said. 

“That infrastructure will take time but it will come. We can see the trajectory of the business very, very clearly.”

While 21CF remains open to large-scale deals, following last year’s audacious bid for rival media titan Time Warner, Murdoch cited plans to improve the ad experience – with less intrusive and hopefully higher-value advertising – as one indicator of the way forward, after acquiring ad tech company True[X] earlier this year.

“Things like that are very interesting to us,” he told attendees at APOS. “We see investing in ourselves, in our products, and creating better, more differentiated products for our customers, as the best way that we are going to grow.”

Increased viewing

People with more control over their viewing tend to watch more programming they prefer, prompting 21CF to seek closer relationships with other companies in the value chain while bringing its own production and channel businesses closer together, in a bid to increase its influence in what Murdoch anticipates will be a key battleground for audiences and revenue.

“That’s why we produce so much original programming, because we really believe in that vertical integration,” he explained. “It gives us the flexibility to create products for customers that are going to be better.”

The approach also applies to 21CF’s own distribution assets, combining its pay-TV platforms in Germany, Italy and the UK at the end of last year to create a European platform with almost 20 million subs, focused on differentiated content and multiscreen delivery.

The company also owns a 30% stake in Indian DTH operator, Tata Sky, competing in a market with a long runway for growth, in subs numbers as well as Arpu.  

“We’re growing faster on a net adds basis than anyone,” Murdoch said. “We’ve taken the Sky philosophy around quality of service, clarity of brand, the premium nature of what we do. We’ve really invested heavily in HD. I think it will be a very valuable business.” 

21CF’s biggest Asian business, broadcast network Star India, is also primed for growth, recently building out the regional portfolio by buying Telugu broadcaster Maa TV, while making longer-term bets: on OTT – via a new mobile broadband service Hotstar – and with a major investment in sports, to complement an already profitable business in entertainment.

Star India’s sports arm should turn profitable within five years, while Star India as a whole could become a billion-dollar Ebitda business within ten. 

“The opportunity is just staggering,” Murdoch said. “We are seeing an enormous response from customers when we innovate and put great stuff on screens.”

Brands, Value, Scale

At the same time, 21CF is also ramping up investments in local content and multiscreen services via its Fox International Channels operation, which recently announced plans to develop premium Asian content across theatrical and pay-TV windows, as well as new OTT partnerships with Astro in Malaysia, Avex in Japan, Cignal in the Philippines and Tencent in China.

Future rewards in a fast-changing distribution landscape are anchored to perceived customer value, underpinned by scale and well defined brands, Murdoch argued.

 “The middle ground really suffers, they’re not investing enough in programming, they’re not quite big enough, and even if you stick them together, you still have the same problems,” he said.

“We are not a big M&A machine right now, we are returning a lot of capital to shareholders,” Murdoch added. 

“But we also want to be opportunistic when things emerge that can increase our capability and the velocity of what we’re trying to accomplish.”