BTIG Downgrades Twenty-First Century Fox Amid Broader Media Concern

BTIG’s Richard Greenfield downgraded the rating on Twenty-First Century Fox Inc (NASDAQ: FOXA) from Buy to Neutral.

Shrinking Bundles

Greenfield believes that multichannel video bundles would inevitably shrink going forward. While FOX broadcast network was likely to be included in a large majority of the skinnier bundles, Greenfield cautioned that there were too many cable networks “with most overearning relative to their actual value to consumers today.”

In addition, Greenfield believes that none of the larger traditional media companies are prepared for direct-to-consumer, and mentioned that the basic cable networks would be unwilling to “leave the safety and over-earning benefit of the multichannel video bundle.”

Time Warner Merger

The analyst pointed out that a merger with Time Warner Inc (NYSE: TWX) would prove beneficial for both companies and “better position the combined entity to build their own SVOD competitor.”

However, Greenfield also noted that there did not appear to be any “sense of urgency” from either company to complete the merger.

Other Issues

Among the other issues impacting Twenty-First Century Fox is the need to recognize that consumer behavior is shifting away from live television and to being less engaged with ad during commercial breaks. TV ads need to change accordingly to engage the viewer creatively, which in turn would benefit the company’s live sports content, which Greenfield says is its “most valuable content.”

Greenfield also believes that media executives need to stop buying back their stock and that the company needs to come up with a mobile strategy.