Nov 4, 2015
Operator
Ladies and gentlemen, thank you for standing by. Welcome to the 21st Century Fox First Quarter 2016 Earnings Release Conference Call.
At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session.
Instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Mr. Reed Nolte, Executive Vice President, Investor Relations.
Please go ahead. Reed Nolte Thank you very much, Greg.
Hello, everyone, and welcome to our First Quarter Fiscal 2016 Earnings Conference Call. On the call today are Lachlan Murdoch, Executive Chairman; James Murdoch, Chief Executive Officer; and John Nallen, our Chief Financial Officer.
First, we will give some prepared remarks on the most recent quarter, and then we'll be happy to take questions from the investment community. This call may include certain forward-looking information with respect to 21st Century Fox's business and strategy.
Actual results could differ materially from what is said. The company's Form 10-Q for the three months ended September 30, 2015, identifies risks and uncertainties that could cause actual results to differ and these statements are qualified by the cautionary statements contained in such filings.
Additionally, this call will include certain non-GAAP financial measurements. The definition of and the reconciliation of such measures can be found in our earnings release and our 10-Q filing.
Finally, please note that certain financial measures used in this call, such a segment operating income before depreciation and amortization, often referred to as EBITDA, and adjusted earnings per share are expressed on a non-GAAP basis. The GAAP to non-GAAP reconciliation of these non-GAAP measures is included our earnings release.
And with that, I'm pleased to turn it over to Lachlan.
Lachlan Murdoch
Thank you very much, Reed, and good morning, everyone, and good afternoon to those of you who might be in different time zones. I'm pleased to join you today from Los Angeles to report our first fiscal quarter earnings.
I'm going to make a few comments, then turn the call over John and James who are both in London. We've made good progress this quarter.
Our performance underscores the strength of our business and the durability of the growth strategies we have pursued over the last number of years and continue to do so. But even with progress, we are all united in the view that this is a time of transformative change in our industry.
It's the kind of change that demands equal measures of clear thinking and of calculated risk-taking. In this quarter, we've applied both to good effect.
Now there are some essential points that must be considered. While demand for the type of high quality storytelling, news and live sport that we produce continues to grow, our viewers are increasingly choosing when and how they experience our programming.
Live viewing of television is contracting as a percentage of total viewing, especially in the younger demographics coveted by advertisers. The definition of rating success has evolved from overnight ratings to three-day and seven-day ratings to more accurately reflect how programming is being consumed, and it will need to evolve further.
Take for example the season two premier of our breakout hit, Empire. It reached nearly 12 million total viewers in live plus same day; a great number.
But that figure more than doubles to 25 million when we look at 30-day multi-platform viewing. We see similar lifts across our networks when we look at actual consumption across the spectrum of viewing when compared to the current live plus three-day industry standard.
Using Nielsen live plus seven-day ratings, the Fox network is up a couple of percent year-over-year, and excluding sports, we are up almost 10%. But that tells only half of the picture.
Our Fox Networks average nonlinear audience has risen by about a third year over year. It's a testament to the fact that premium broadcast content is in more demand than ever, but it also illustrates the needs for the industry to move to modern ratings currencies.
It reflects today's consumption of media in a way that is highly measurable and relevant to advertisers. Driving part of this change is without doubt the emergence of over-the-top services such as Hulu and Netflix.
Another byproduct of these services is clearly the maturing of the traditional large cable bundle. While we see this trend as having less impact on Fox as a group and perhaps on others.
That's because our key U.S. brands, Fox, Fox News, Fox Sports, National Geographic and the FX Suite are in great demand, due in large part to the years of significant programming and marketing investments.
In fact, this quarter's results saw increases in our aggregate number of U.S. domestic subscribers compared to the year ago of over 1%, with subscriber additions at our younger, less distributed channels more than offsetting the overall 1% to 2% declines impacting the overall industry.
And internationally, we also continued to see subscription growth and are benefiting from demographic trends and pay television gains in high-growth markets. Overall, we feel exceptionally well positioned, with robust demand for our quality programming, leadership across entertainment, sports and news, and enhanced digital products focus and strong brands that we have made a focus of our investment.
We look forward to continuing to make strides against our strategic plan to continue to return real value to our shareholders over the remainder of this fiscal period and beyond. And with that, I'll now hand it over to John and James in London for their comments and for questions.
John Nallen
Thanks, Lachlan. It's John, and good morning, everyone.
Starting off, I'll remind you that because of the sale of our DBS businesses to Sky last November, our reported financial results for the first quarter are not like for like. So as we've done in the past, we're providing total company adjusted revenue and adjusted EBITDA, which excludes the DBS businesses in the prior year period.
Most of my comments that follow will be on this adjusted basis. So first quarter adjusted revenues decreased by $406 million to $6.1 billion as continued revenue growth in the Cable Networks segment was more than offset by lower revenue at the Filmed segment.
Note that the absence of shine and overall adverse foreign currency movements each negatively impacted quarterly revenues by approximately $200 million. Together, these approximate the total year-over-year quarterly revenue decline.
Total segment adjusted EBITDA for the first quarter was $1.54 billion, a $37 million decrease from a year ago. This decline reflects double-digit growth at the Cable Networks and Television segments, which were more than offset by lower contributions at the Filmed segment.
This year's results include slightly more than a $100 million negative impact from unfavorable foreign currency movement. Absent this impact, our overall growth rate would be 5%.
From a bottom-line perspective, we reported income from continuing operations attributable to stockholders of $678 million or $0.34 per share. Excluding the net income effects in both years of other net and of equity owners' adjustments primarily related to Sky's acquisitions and disposition, first quarter adjusted EPS was $0.38 this year, down one penny from the comparable $0.39 a year ago.
And overall, with this first quarter now completed, we're holding to the financial guidance expectations we provided to you at our last call. So now let me provide some additional comments on the performance at our operating segments for the first quarter.
And let's start with the Cable Networks, where total segment EBITDA of $1.31 billion was up 26% on segment revenue growth of 7%. Domestic revenues increased 10% in the aggregate, led by affiliate fee growth of 11% and advertising increases of 4%.
EBITDA at our domestic channels increased 19% over the prior year, reflecting these higher revenues in conjunction with total cost increases of only 4%, led by lower costs at the FX channels. First quarter reported international affiliate fee and ad revenues were both essentially even with last year.
However, excluding the effects of foreign exchange, local currency affiliate fees and advertising revenues were each up around 10%. Reported international channel EBITDA contributions increased over 50% even after reflecting an approximate $60 million negative impact from foreign exchange.
This reported growth was largely due to lower sports programming costs at Star Sports from the absence of last year's India-England cricket series. Elsewhere, double-digit local currency EBITDA growth at the Star entertainment channels and at the Fox International Channels were essentially offset by the negative impact from foreign currency, principally from Latin America and from the euro.
Turning to our Television segment, first quarter EBITDA was $196 million, 13% higher than prior year results. This improvement largely reflects continued strong retransmission consent revenue growth and lower programming expenses at the Fox broadcast network and stations, which were partially offset by a 5% decline in segment advertising revenues.
This advertising decline reflects the expected impact of one less week of the NFL due to a later regular season start which we get back in the third quarter and lower political ad revenues at the stations due to the midterm elections in the prior year. At the Film segment, we reported first quarter EBITDA of $149 million, $309 million below last year.
This decline was primarily driven by challenging comparisons to the prior year, which included significant contributions from the theatrical release of Dawn of the Planet of the Apes and the home entertainment release of RIO 2 compared to reduced theatrical contributions this year that included the underperformance of Fantastic Four. This quarter was also impacted by the inclusion of significant pre-releasing costs in advance of the successful October theatrical release of The Martian.
Our TV production contributions were also lower in the quarter, primarily due to lower cable syndication revenues owing to last year's sale of How I Met Your Mother. Overall, revenues for the Film segment decreased by 28%, with close to half of this decline reflecting both the absence of revenues from Shine, which we merged with Endemol last December, and foreign currency movement.
Shifting over to our buyback activity since July 1 through today, we've repurchased approximately $2.1 billion of Fox A shares, and we're on plan to complete the authorized $5 billion buyback within the 12-month timeframe that we've previously announced. Subsequent to quarter end, we issued $1 billion in long-term debt and we repaid $200 million of maturities with approximately $500 million in further maturities over the next year.
With regards to financial guidance, as I said earlier, with one quarter under our belts, we're holding to the expectations we gave you three months ago. Specifically, we continue to anticipate a total company segment EBITDA percentage growth rate for fiscal 2016 to be in the mid-single digit range, above the $6.49 billion we reported for fiscal 2015, and that number excludes the impact of the DBS segment contributions.
Now foreign currencies have clearly weakened since our August call, and this volatility continues to be a risk to keep an eye on as the year goes forward, but our underlying business operating trends have generally been progressing as expected in the aggregate. As you know, when 21st Century Fox was formed in 2013, we provided our three-year goals and our guidance, and have updated you on those in each of the years in that cycle.
As we look to the end of that three-year period upon the completion of this fiscal year, I'd like to touch on our approach to financial guidance going forward. Looking back, the three years had ups and downs led by currency impacts, which absorbed hundreds of millions of growth dollars, and had structural changes to our portfolio of businesses.
But through that period, we have been and will continue to be transparent and direct about the trends we are seeing and their impact on our outlook. We are very confident in our ability to execute against the opportunities we have ahead to sustain long-term growth, but we don't want to chase a short-term target through changes in our operating plan merely because a currency rate changes, a movie release shifts or underperforms, or we modify our approach to SVOD licensing.
It's not good for our management team, and it's not good for our shareholders. So beginning with fiscal 2017, we will modify our approach to financial guidance to eliminate our emphasis on a specific dollar annual earnings target.
Instead, we'll provide you with quantitative and qualitative information on those key areas where we have good visibility and on the trends and initiatives in our businesses. We'll also provide insight into where we'll be focusing our resources to maximize opportunities through both organic innovation and through investment.
And of course, we'll also continue to provide details around our annual capital allocation plan and our targets. Now let me turn it over to James.
James Murdoch
Thanks very much, John. Thanks, Lachlan, and good morning, everyone.
Thank you all for joining us. As you've heard from Lachlan and John, the investments we've been making in our core brands in all our key markets are progressing and producing returns, and we continue to push the pace of these initiatives as we see meaningful opportunity ahead of us.
On the short-term front, as you've heard from John's review, we continue to make progress against the fiscal 2016's financial objectives. We expect strong growth in our core cable franchises, promising forward movement in our TV Broadcast segment, offset by some currency headwinds and short-term performance in the Film business, which as you know we measure over a longer period as results can be lumpy due to timings and individual picture's performance.
We also continue to execute on our key strategic priorities, specifically, to create compelling and unique storytelling to enhance the customer experience of our digital video brands and to leverage our leadership positions in developing markets where we see the greatest opportunities, particularly India and Latin America. So we've seen good momentum in our domestic cable portfolio, where our overall EBITDA growth is up 19% versus a year ago.
This growth, led by revenue gains, is a clear result of the investments we've made and the work the team has done and continues to do to bolster the customer offerings of our core brands. It also reflects increases in our aggregate number of domestic subscribers compared to a year ago of over 1%.
Looking forward, as Lachlan noted, we anticipate that some of the conversations we're having with new streaming distribution services not yet to market will result in new revenue that will augment the existing viewing alternatives. Now I'd like to update you on the progress we're making at a few of our key brands.
Our domestic Sports business continued to deliver and has increasingly become a critical component for distributors. In aggregate, our brands currently provide more than 25% of all sports viewing in the U.S., national and local combined.
I know there's been some recent attention on the potential disruption from the digital distribution of sports. Last week, Yahoo!
and the NFL announced that they had 33.6 million streams or 15.2 million unique views on their NFL Webstream game. But when digital numbers are put on a comparable basis for TV ratings, Yahoo!
delivered an average 1.6 million U.S. viewers per minute.
That same day, on average, 18 million viewers per minute were watching the NFL on Fox. FS1 is making real headway as well and is [indiscernible] plan by pretty much all metrics.
Over the past quarter, we strengthened our audience engagement, extending last spring's successes from the broadcast of the Women's World Cup and U.S. Open Golf with strong MLB regular and post-season events.
Nationally, regular-season baseball viewership on FBC and FS1 increased 16% and 22%, respectively, over last year's level. As a New Yorker and as a broadcaster, I'm disappointed of course with the World Series finishing in five games.
But unfortunately, there's no changing that now. But even with fewer gains, this year's World Series averaged close to 15 million viewers, more than last year's full seven-game performance, and ranks as the best five-game average since 2009, when the Yankees beat the Phillies in six games.
Locally, our regional sports networks are commanding presence, as demonstrated by our regular-season baseball telecast on the RSN, with 13 out of our 15 teams ranking at or near the top of local primetime ratings. And this year's World Series champion, the Kansas City Royals, carried on Fox Sports Midwest, scored the highest regular-season local TV ratings of any RSN in 13 years.
We look forward to welcoming them in all our RSN NOB teams back for spring training. What's clear from this is that our sports brands are a fundamental differentiator for 21CF and they'll continue to deliver returns for years to come.
At the FX suite of channels, we continue to deliver exciting new originals to audiences everywhere. In particular, the American Horror Story franchise continues to be a ratings and critical phenomenon.
It won five Emmy awards in September and, more recently, its fifth installment debuted as the second most watched telecast in FX Networks history in the key 18 to 49 demo, and the premiere has reached more than 15 million total viewers to date across all platforms. The reception that Fargo is getting in its sophomore outing is also very encouraging, and I encourage all of you to watch the show.
It's really one of the best and most exciting pieces of storytelling on air anywhere. We look forward to calendar 2016 as well with some truly great new and returning shows, including Ryan Murphy's American Crime Story, the People versus OJ Simpson, and the Americans on FX and It's Always Sunny in Philadelphia on FXX.
Fox News continues to go from strength to strength. The August GOP debate delivered a record 24 million total viewers, making it the number one highest-rated non-sports cable telecast of all time.
This summer, Fox News was the number one channel across all of basic cable for five consecutive weeks. The Kelly File and Hannity both reached ratings high this past quarter since debuting their current timeslots.
And the new Fox business schedule is gaining momentum, and the channel is hosting another Republican debate on November 10. And we think it's really a great opportunity to showcase and differentiate FOXBusiness in terms of depth and quality and production.
Outside of the U.S., channels have continued their growth trajectory. At STAR, the entertainment channels generated double-digit revenue and profit increases on the strength of original programming.
STAR Sports Pro per body season two continues its successful run with strong ratings growth. And we expect the business to make meaningful profit progress this year, in line with the goals we've discussed with you in the past.
The Fox International Channels, even with some regional economic headwinds, grew with unique paying subscribers by 13% over year ago levels, now approaching $300 million, while also delivering local double-digit local currency revenue and profit growth. More broadly, we're working hard to build on the strength of our brand portfolio.
A few months ago, we announced the agreement to expand our successful joint venture with the National Geographic Society. Our plans to form National Geographic Partners, which combines the National Geographic Society's branded media assets, including one of the most recognized and respected magazines in the world and a substantial digital footprint, with the National Geographic channels, among the most widely distributed television services globally, is an enormous opportunity for the company.
The new limited run series Breakthrough, which brings to life scientific and technological discovery for some of the biggest names in film, including Ron Howard, Brian Grazer and Brett Ratner, exemplify the kind of storytelling that is unique to National Geographic. Combining all these consumer-facing assets into one entity provide greater opportunities to leverage one of the world's most recognized and treasured brands, especially in a nonlinear world.
The integration planning and implementation is moving along, and we are on track to close the transaction in the next few weeks. Turning to our U.S.
Broadcast business, trends this fall season are encouraging. While still early, we're seeing positive results, driven by new programming and our investment in our returning shows.
We're happy with the performance of Empire in its second outing, the show really is a phenomenon, and it's one borne out of our desire to support storytellers and our appetite for taking creative risks. Beyond Empire, Fox has a number of new series that have provided significant gains year over year for us.
Rosewood, Scream Queens, Grandfathered and the Grinder have driven percentage increases anywhere from 21% to 78% compared to the same time slots last year. It's fair to say that Minority Report has been a disappointment, and we have shortened the series order and expect to have new programming in the second half.
While last year is not the benchmark we would aspire to measure against, nonetheless, total viewership growth, live, multiplatform, and time-shifted to date, is up 10% year on year. As with every fall broadcast season, a lot of attention is paid to the overnight ratings reports that measure the linear viewership of the new series premieres, and we're focusing, as Lachlan said, more on total viewership and driving overall consumption on a multiplatform, multi-day basis.
The Fox Network is unique in that it attracts the youngest audience of any major broadcast network. Perhaps more than any other network, we're seeing significant audience growth from multiplatform viewing and from extended C3 and C7 viewing.
For example, in addition to the Empire 30-day numbers which Lachlan talked about, Scream Queens more than doubles its live audience, over 130% when including viewership across all platforms. We're seeing similar numbers for other shows.
And in fact, more than 50% of our ad inventory is now sold in the C7 window. It's true that much of this viewership is monetized today at a lower level than what we would like, and as I've said before, the important thing is to grow the audience, and our capabilities with respect to selling that audience are improving.
We're on track to grow our non-linear ad revenue by around 40% this fiscal. This includes inventory across Hulu, VOD, FX Now, Fox Now, Fox Sports To Go and Fox Sports Digital.
We think it's important to create and distribute together, and I am pleased that approximately 70% of our new primetime shows are from our own studio, 20th Century Fox Television, up from around 50% last year. The full lifetime value of these assets is something we're very focused on.
TCF TV and its subsidiaries continue to benefit from the overall strong demand for scripted programming, producing 36 series for 12 networks this season. While a little more than half of these series, 64%, are supported Fox channels, we continue to be a major provider of shows to others, with hit series such as Homeland, Modern Family and Fresh Off the Boat.
Quality storytelling has never been more in demand. Moving to the Film Studio, first quarter film earnings were well below a year ago, reflecting release timing and the lack of a major successful release.
However, the recent success of The Martian and a very solid slate of upcoming pictures gives us some comfort here. Looking ahead, we're bringing Charlie Brown to the big screen this weekend with The Peanuts Movie, and we then have the next installment of the very successful Alvin and the Chipmunks franchise in December, and the holiday release of Joy, which reunites Jennifer Lawrence with David O.
Russell once again. Also in December, The Revenant with Leonardo DiCaprio in a wonderful film by Alejandro Inarritu, the very promising Deadpool this February, and we then wrap up the fiscal year with two big global franchises with X-Men: Apocalypse and the long-awaited sequel, Independence Day: Resurgence.
And looking a little further ahead, we'll also be releasing franchise extensions for Ice Age in the summer of 2016, Planet of the Apes, Aliens, Maze Runner, Kingsman, and of course, Avatar over the next few years. It's worth noting that the film industry is gaining strength.
The calendar year-to-date consumer spending on digital home entertainment, up mid-teens for the industry, and a bit higher for us. We're making progress as well in our non-consolidated businesses.
The combination of the three Sky businesses is producing strong results, and together, these businesses are thriving, adding around one million paid core subscription products this quarter and achieving the best overall U.K. sub growth we've seen in four years, in addition to strong customer growth in Germany and steady performance in Italy.
Sky is truly setting the pace in digital television across Europe. Hulu continues to grow both subscribers and engagement aggressively.
Year-to-date through September, total viewing at Hulu is up 85% versus prior-year, and net subscriber additions are up more than 60%. And at Endemol Shine Group, our joint venture with Apollo continues to deliver high-quality programming globally, with non-scripted content such as Hunted being picked up by CBS in the U.S.
and new scripted programming such as The Frankenstein Chronicles preselling extremely well. Established titles such as Big Brother are traveling further than ever before, with a pilot series due to air in China for the first time this fall.
So while there is still much do, we feel good about the progress in the company overall and about where we're headed. So with that, we'll hand it over to all of you for any questions you might have.
Reed?
Reed Nolte
Greg, now we'd be happy to take questions from the investment community.
Operator
Thank you. [Operator Instructions] In the interest of time, we ask that you limit yourself to one question.
[Operator Instructions] Your first question comes from the line of Michael Nathanson from MoffittNathanson. Please go ahead.
Michael Brian Nathanson
Thanks. I'll ask one to John on costs.
John, you said that domestic cost growth was 4%, and that's the lowest we've seen in years. Is that a decent run rate for the fiscal year, or are there any timing issues that we should be aware of for the next three quarters?
John Nallen
Thanks, Michael. I think if you reflect back on what we said, what I said at year end, we expect the Cable segment expense growth rate to moderate very significantly this year, and it will be down to about half the rate of growth that we experienced in the last two years.
In those two years, it was up around the mid-teens. So there's nothing that's changed in the three months that would cause us to change that outlook, either.
Michael Brian Nathanson
Okay. My other cost question is internationally, could you help us differentiate between the cost growth organically at Star versus Thick because there's some moving pieces you have going on.
So what's the underlying cost growth for those two businesses?
John Nallen
I don't want to be so precise that we're down to the channel levels, but what I called out and I think James called out and we called out in the earnings release is we did have a significant decline focused on Star Sports because of the absence of the cost of that cricket series. So the most dramatic decline internationally would've been in Star Sports, right in line with what we're expecting.
Michael Brian Nathanson
Okay. Thanks, John.
Lachlan Murdoch
Thanks, Michael. Gregory, next question, please?
Operator
Your next question comes from the line of Doug Mitchelson from UBS. Please go ahead.
Douglas Mitchelson
Thanks so much. I mean, Lachlan mentioned transformative change.
I think investors are trying to understand the pace of that change and how aggressively you might invest against that imperative. And I know that John mentioned changing approach to [indiscernible] licensing as potentially one of the items that could impact growth in the future.
At the same time last quarter, you talked about some of the growth drivers for fiscal 2017. Do you help investors understand, you know, over the last few months anything new in terms of your philosophy about how you're balancing driving growth after three-year investment cycles versus the need to invest in digital going forward?
Thank you.
James Murdoch
Thanks very much, Doug. I think, as Lachlan mentioned, it is a time of change as we all know in the business.
But I think when we look at the present state of the business with respect to the growth that we're seeing and really IP streaming video construction, this is something that we're very excited about and we have been pretty aggressive on trying to create growth there, investing in our capability with respect to monetizing that viewership and doing it a better way, developing new products for customers. As well as with partners, for example, at our Hulu partnership, growing that business very aggressively and seeing very good results at this point.
So I think when we think about investing in these areas, you have already seen a lot of that in these sort of numbers and within our kind of inorganic - within our organic internal investments as we think about how we make programming, what rights we seek to control, then how we want to sell those things. With respect to specific decisions around, when doing SVOD partners, how we are exporting program across the full lifetime of the programming.
Those are things that continually evolve, and I think it's really important for us to be able to be disruptive in those areas. I think is important for us not to cling to business rules that inevitably change and have been changing over the last number of decades.
We're in a business and in an industry that's been characterized more than anything else by really wave after wave of technological change that fundamentally creates better products for customers, creates more competition downstream, and we think in that environment we've always been best served to be able to innovate and disrupt ourselves. So I think with respect to how we think about investment, I don't want to get to, I don't want to get into sort of a backdoor way into 2017 guidance.
But I would say that we look at the sorts of things we've been doing around growing our capability as well as licensing some new entrants in the marketplace on the right business terms. And also increasing the business that we do with many of our existing partners who distribute our content.
These are the sort of things we're focused on, and I think you'll see more activity with respect to that as those agreements are concluded and adjusted and as we find, you know, new ways to distribute the product going forward over the next year.
Douglas Mitchelson
All right. I tried.
Thank you.
Lachlan Murdoch
Thanks, Doug. Gregory, next question, please.
Operator
Your next question comes from the line of Rich Greenfield from BTIG. Please go ahead.
Richard Greenfield
Hi. Thanks for taking the question.
This is really more of a follow up on just kind of broad picture thinking on the SVOD topic. Why not, as you think about it, why not actually start building your own direct-to-consumer service?
I know you've talked about it for a long time, but wondering, you continue to license content to Hulu among other platforms. I guess big picture, why Hulu, especially now that Hulu has an ad-free option, why is Hulu better than licensing to Netflix or to Amazon?
And why did you allow Hulu to do an ad-free option, I guess? I'm curious why that was something the partnership wanted.
James Murdoch
Thanks, Rich, for the question. I guess just to step back a little bit, I mean, first of all, I think as I said earlier, we believe very strongly in Hulu and whose prospects.
And as I said just a second ago in response to Doug's question, it's really crucial that we don't become overly beholden to our own incumbency. And I think that's a real, for any business, that's trying to move faster trying to grow.
That's a real danger to what has to be very alive typo, and we have to be willing to take some risk but also to be innovative and to be disruptive. And I think as you know, as leader of the business, and I think I speak for all of the leaders within the business, which is all the way through the business, because everybody has a responsibility to lead, we have to be disrupters if we're going to grow.
So when we look at growing the IP streaming sort of our growing kind of business in IP streaming in the future, we're pretty excited about the innovation that we can bring to that marketplace, and we're working hard across the board both internally when we think about developing are authenticated apps, potentially direct-to-consumer offerings, some of our competitors have been out there with those. We haven't done that yet here, but for example in India with hot star, we've been very aggressive in building out a mobile video platform that we control and that we reach to customers with directly, we're working hard within Hulu as well to both grow the business absolutely but also to grow the offerings of the business, and we're really excited about our progress there.
With respect your question about ads, we're also really pleased with the progress we're making with respect to sort of add innovation. To both the premium ad-free services, which Hulu announced and launched, but also with expanding the opt-in engagement advertising that we've talked about in the past to the Hulu platform which we just announced yesterday.
That's in addition to our own authenticated app services. So fundamentally, in advertising, these innovations are about empowering the audience to decide the value of their attention, and that make sense to them, and it also makes a lot of sense to us, and we think pricing models around attention are going to be developing, and we want to be at the forefront of developing those and understanding how those work and how we can create, you know, the best return.
And the scale of the Hulu inventory there and the scale of the Hulu audience is a great place to be innovative in that regard. They've been really embracing that.
Richard Greenfield
And you had mentioned, I think you mentioned that Hulu subs are up 60% year-over-year which is - in terms of net adds are up 60% which is an impressive number. How much is the - I know it's very recent times, but how significant is the ad free product driving incremental subscribers?
James Murdoch
Look, they have - Hulu hasn't disclose those numbers at this point. I think I'll leave it to them, and obviously in the spring with the upfront, there's going to be a lot of attention to that.
But the growth is good, and we're - I think we're - I would say, at this point, pretty comfortable with the mix of growth in terms of ad free versus ad supported. And look, I think our commitment to Hulu is self-evident.
We've invested a lot in it. We continue the license to it where it makes the most sense for our creative partners and us to do so.
But also we want to grow our ad distribution as well, and I think we're seeking to license rights to distributors of all kinds if it's on the right terms. And I think the other thing that's changing, and this is maybe to the heart of your question is that the SVOD licensing business itself is changing pretty quickly and also their surprising new approaches and new ways that I think we can provide a great service to customers that you'll see over the next little while.
So I'd just say, in that environment of all of that going on, I think our opportunities do lie kind of leading in and being disruptive ourselves and not being afraid of that. And look, I think it's consistent with the way we've managed and the way the business has grown over many, many years from disrupting the U.S.
broadcast business with Fox broadcasting so many years ago, to disrupting the European television business with the three different Sky's and disrupting advertising and the broadcast business today with Hulu and other things over the current period and the next few years, I think is a real opportunity to create enormous value. So look, I think that's one of the most important sort of cultural traits in our business, and it's one that we're going to continue to encourage and nurture because I think it has to exist everywhere in this company.
James Murdoch
Thank you, Rich.
Lachlan Murdoch
Greg, can we have the next question, please?
Operator
Your next question comes from the line of Michael Morris from Guggenheim Partners. Please go ahead.
Michael Morris
Great. Thanks.
Good morning, guys. One follow up on Hulu and really just understanding your comfort with the price of the product relative to the utility given that it's really become a great consumer product and a robust product.
At $12, it feels like it could potentially be cannibalistic to your existing business model. So how do you get comfort, number one, that you're not, in fact leading yourselves down a path of cannibalism?
And two, maybe what levers, what you're looking for, what levers you could pull to both deliver that quality experience but also protect your economics? And then just one quick housekeeping; is there anything on the domestic affiliate revenue side that's seasonal in terms of puts and takes or is that number continue to be a pretty steady with respect to absolute dollar and growth?
Thanks.
James Murdoch
Thanks very much, Michael. Look, just to clarify Hulu, I think one of the things, one thing that is important to note is that the current - the way the business looks today with all of the different services and subscription video on demand as well as the MBPTD marketplace, all of these services are going to change, and I think you've seen competitors take pricing, you've seen new tier, the new products emerge, and I think it's important to note that there's not necessarily a steady-state.
In fact, it's one of pretty rapid evolution and innovation. So I think with respect to the ad-free pricing at Hulu and the delta between the ad supported and the ad-free, as you would imagine, that was a source of robust debate.
But at the end of the day, the business just had to move forward and try, and we're learning a lot from that. And I think pricing may change, but also as a mentioned before, we're very focused on thinking about how come these services also expand their offerings and create new price points with new content or other things in them?
So I think that's going to evolve, and I wouldn't necessarily say it's a steady state today. With respect to cannibalization, cannibalism, I'll refrain from commenting on.
I think it's inevitable that new services and new competition both grow the overall market but also impact customers to other services. And we're very focused on how we think about monetization in that environment and how we make sure that overall we look at the whole business our approach to growing the streaming business very aggressively is one that's going to be more attractive for us?
And personally I think over time, is not necessarily a straight line, I think over time, the streaming entertainment business and streaming television business is much more attractive with opportunities renovation in terms of ad load, and pricing, subscription pricing, premium ad-free models, as well as the discoverability of our programming across, you know, for customers it's just a very attractive - you got a very attractive set of attributes for customers and I think for our business as well. And, but it's pretty early days in terms of finding all of the different ways that we can move it forward and we can innovate there.
And your second question...
Lachlan Murdoch
As a housekeeping point, Michael, the question on the affiliate fees. So we said at the beginning of the year, like on Michael's question, that we would have low double-digit affiliate fee growth for the year, I mean, led by the U.S., this is right in line with that.
So there's nothing unusually sees and all about the growth we experienced in the quarter against what we expect to happen for the year.
James Murdoch
Yes.
Michael Morris
Great. Thank you.
Lachlan Murdoch
Greg, can we have the next question, please.
Operator
Your next question comes from the line of David Bank from RBC Capital Markets. Please go ahead.
David Bank
Okay. Thank you very much.
I want to actually follow up on the answer to your last question regarding innovation, in particular, James. You guys have always been ahead of the curve on giving us some really useful color around viewership around nontraditional platforms.
You did more so today. I'm trying to figure out how we can use them to model the business.
So if go back to something, I think you guys said total viewership on Fox Broadcasting Network was up like 10%. Can you remind us how much of that was sort of, you know, was in the traditional C3, C7 window, whatever the Nielsen kind of - Nielsen window you sold it in?
And then can you give us what the viewership was outside that window and remind us of what the monetization of that viewership is or at least give us a sense of what the potential upside of the monetization is given that you know what audience is and you must have a sense of where you can monetize it over time. Then lastly, Lachlan talked about the growth in nonlinear viewership.
What are you doing with the data? You must be coming up with some pretty interesting data from the growth in this nonlinear viewership that I would imagine is extremely valuable in both monetization and devising a strategy for building your business going forward.
How do you think about the data? Thanks very much.
James Murdoch
Thanks very much, David. So with respect to the break-in so first of all, it is more complicated, right, so when you said, can we help you with modeling how that works, I'm thinking to myself, yes, maybe you can help us model it how it works.
What's complicated about it, and it really, I think it illustrates the point around measurement systems evolving, that Lachlan made earlier, which is what we're really focused on his what was our total audience last night and the day before and last week? And that was made up of customers and viewers watching live things, things a day old, things four days old, things 30 days old, and in some cases, things many months old.
And what you want to really do is get a picture of that overall viewership and it's not easy to come by and it lags because the measurement systems and all of those things don't always synch up when we don't get those numbers in the most primary ways that we would like. So the total picture of the audience is more complex.
That said, just to break it down a little bit for you, in the season to date, the live viewing, as I mentioned before, was just under half. Right?
So 50% was more than that. And so it's about, I think live viewing was about 40%, high 40s percentage there.
And then Hulu made up sort of in the teens, and the balance was, VOD, a very small amount for our authenticated apps, which we're working on authentication pathways and stuff to improve there, and sometime shifting on DVR. So the balance is definitely moving towards obviously time shifted and on-demand.
And from a sales point of view, about half of our inventory was sold on a C7 basis in the period. So that's sort of where that breaks down.
But it is something that's really evolving. And I think when we think about how we instrument the business going forward and how we measure the business and then deal with advertisers and all of our clients and customers on that, those are things that are going to continue to evolve.
But we're very focused on the total audience in a given time period, and then we build that up. So when we said to you that total audience was up 10% in the season to date, entertainment programming, that really was the accumulated viewership, literally on a per minute basis relative to the previous year.
And a lot of that was driven by the growth in seven-day and 30-day viewership there. And, look, we think that it's really, really encouraging that the audience is moving towards these on-demand platforms, and particularly where they're moving towards Hulu, where we can really innovate and monetize that audience.
And with respect to your second question just on data, your right, it is, it's very interesting. And, we are - it is very early days because the consumption curve is pretty dramatic.
And that's something that we're really using today to understand both how we use our air better in terms of promo inventory, sales inventory, et cetera, how we understand how customers move between different shows and different platforms. But there are also gaps in that data obviously working with third-party partners.
That is a big focus for us, and we think it's one of the - data opportunity is. One of the great characteristics of an IP streaming TV business in the future is the ability to have that data, the ability to use that to improve your products and services and monetize the viewership and the audience in the right way with respect to pricing, the attention of the audience correctly either for them or for advertisers.
David Bank
Thank you, David.
James Murdoch
Thank you.
Lachlan Murdoch
Greg, can we have the next question, please?
Operator
Your next question comes from the line of Ben Swinburne from Morgan Stanley. Please go ahead.
Benjamin Swinburne
Thanks. Just two quick ones, or hopefully quick.
John, last quarter, you gave some assumptions around the guidance, particularly on advertising, that TV, I think you said, would be flattish, cable or domestic cable up mid to high single digits. Is that still your expectation after a quarter?
John Nallen
Yes. It is early days.
And we're three months into it. Obviously a lot of the network programming is still ahead of us.
But at this point, we are still in that zone.
Benjamin Swinburne
Great. And then, just, James, bringing the conversation more to the here and now, a couple of years ago, you guys decided to invest and turn, I think, the Speed channel into Fox Sports 1.
You've made of a lot of investments at FS and that family of networks. And that's really, I think in the eyes of the investor, driving growth over the next few years.
So I'm wondering if you could just talk about where we are in the sort of EBITDA trajectory, particularly for those. They're not new assets per se, but assets that probably were profitable.
You invested a lot into them, and now we're hoping to see sort of the harvest of those investments over the next few years. Any color you can add would be helpful as we think about sort of the medium term.
James Murdoch
Sure. Thanks, Ben.
I think I'd add another sort stool to that, leg to that stool, I guess, which is the investment that we've made in India in STAR, which is also one of the things that has been the investment we are making, but also, I think, when you look forward, generates a lot of growth. So with respect to FS1, Fox Sports one, is fully in contract for the full year this year.
And we think that's a great achievement. We've invested a lot in programming, a lot in putting a great product on screen for people.
And I think that the launch and the first two years in this project, as I said in my comments earlier, has really gone to plan or ahead of plan pretty much across the board, both in terms of audience as well as the P&L. So that's sort of where that is.
And we see really good growth there going forward. Now obviously one of the key things that drives that is affiliate fee increases.
We have a lot of visibility on a lot of that, but there are as new affiliate agreements come - go forward both in terms of distribution and price, we see an opportunity to grow there. But those will come in steps.
FX we think is really - the FX suite more broadly is really one of the core creative franchises in the business today, and we think is very, very promising. We see good growth there, but obviously the investments in originals has been very high, and that's something that has impacted profit other than it would be.
And at STAR, we really took 100% of the profit in the entertainment business and invested it in building a sports business there after the acquisition of ESPN Star Sports. We're seeing very, very good progress there.
Last year, this year just gone, was really the peak year of investments in that, so as we see continued growth in the entertainment business there and the growth rate of cost in the - or rather the costs spike in the sports business and ameliorate pretty dramatically, we've got - you kind of get a double-whammy there. And the growth of the STAR business in terms of EBITDA will be substantial this year and for the next few years as that sports investment kind of backs out.
So I think I would say we feel pretty - we feel really good about all those things. And most importantly, I think as we looked at this a number of years ago and said, listen, we're going to invest in these core brands, we're going to invest in - we're going to invest actually in getting out of a lot of smaller brands, little things that weren't really moving the dial for customers.
We think that's been really successful. And when I look at our discussions with our wholesale distributors, when I look at the way we're licensing, when I look at the volume and quality of the product that we have and our fan mail, it's really - it's paying dividends in the marketplace as we negotiate new distribution contracts, as we license things in a new way, and as we grow the audience overall, as I detailed earlier.
Lachlan Murdoch
Thank you, Ben. Operator, can we have the next question, please?
Operator
Your next question comes from the line of John Janedis from Jefferies. Please go ahead.
John Janedis
Thanks. There's been a lot of discussion about the health of the ad market, and now that you've got a couple of years of FS1 on top of the rest of the portfolio, can you talk about the health of sports ad market relative to the entertainment piece, and to what extent increased programming across TV broadly on the sports front may be affecting pricing power or the balance between supply and demand?
James Murdoch
Thanks, John. I think the health of the sports advertising business is pretty good we've seen I would say pretty much across the board in our sports portfolio.
I think it speaks to the increased scarcity of big live events, mass events that can deliver big audiences consistently. And at this point, I think it's early days in the season obviously in the NFL, but it feels reasonably good and strong going forward.
As John mentioned before, we had one week less than the year before, but that reverses out and we get that week back later in the season. So I think it looks reasonably healthy.
And the baseball ratings I mentioned earlier and revenue associated with that was pretty strong. So I feel - I think we feel pretty good about it.
And the big events on FS1 like the Women's World Cup, things like that, have been really tremendous. I mean, the other day, I think it was just last Sunday, we had a really tremendous day of sports on the network and on FS1.
And all-in, it was a $100 million day. So that felt - that's pretty good.
John Janedis
Okay. Maybe a quick follow up also, James.
Thanks. Regarding your comments around multi-platform viewing and audience, can you talk about when you expect some of the Nielsen changes to kick in from a measurement perspective, and is it the assumption that modelization quickly follows as the bulk of the upfront?
It just seems like the modelization piece is perpetually a year away.
James Murdoch
So I think - I wouldn't say it's perpetually a year away, but I think it necessarily lags the audience growth. And you generally try to focus on audience growth and then create a center of gravity, create demand around that audience, and I think that's, that's just the way we've approached it.
So I feel actually pretty good in the progress there. And I would say that the Nielsen changes, C7 changes, et cetera, are relevant, but just as relevant is our ability - moving to the question before - is our ability to gather up the data around viewing and frankly articulate that in a clear way to clients and advertisers and also give them the tools that are easy for them to start to innovate and experiment themselves.
We're really happy to be able to get engagement units launched on Hulu, announced it yesterday, and we have Mondelez as a number of Mondelez brands really as sort of a launch partner to do that and has a good volume of inventory there. So I think this is picking up pretty quickly in its combination not just of the Nielsen - it's a combination of the Nielsen Ratings changes and getting a currency there that's established but also a lot of other viewership data coming from a variety of platforms and we work with all those, we work with the third-party services, some Rentrak, et cetera, but also internal data in terms of what we're streaming and we're doing it and those numbers there.
So it's a blend of all those things, and so far, we're seeing reasonably good appetite for that, although it's obviously coming from a smaller base.
John Janedis
Thank you.
Lachlan Murdoch
Thank you, John. Greg, we have one more - next question, please?
Operator
Your next question comes from the line of Alexia Quadrani from JPMorgan. Please go ahead.
Alexia Quadrani
Thank you. My question is on the RSN.
You highlighted the recent strength at your RSN around the World Series. I guess can you give us some perspective on how we should think of the RSN from a financial view versus your other cable properties?
How demand for advertising rate volume versus also demand how the outlook for maybe sub revenue looks, just maybe relative to your other cable businesses.
James Murdoch
We're very fond of our RSN's, as we've talked about before. I think the performance of the RSN's that I outlined earlier is super encouraging.
We're seeing ratings growth from a competitive perspective, real leadership in a lot of those local markets. And it really just speaks to the fact that the RSN businesses is a business built around the tribal nature of sports and the passion that people have for these teams and these brands, and what we try to do is balance the portfolio so that we have the strength in the right regions, we try to balance the long-term of that business with respect to renewals, team agreements, et cetera, so that we can provide a lot of value for our team partners there and get the value in the marketplace for them.
The majority of that business from a revenue perspective is affiliate revenue, so it's less driven by ratings and really the local ratings are more a measure of demand and really help us with respect to pricing on a wholesale basis, whereas most of them are not big advertising businesses because they are generally very, very local.
Lachlan Murdoch
Thank you, Alexia. Greg, I think at this point we have time for one more question.
Operator
Okay, that question comes from the line of Todd Juenger from Sanford Bernstein. Please go ahead.
Todd Juenger
All right. Ending it up here.
I'll try to keep it brief seeing the time. So just quickly, on the television operating expense line just wonder if you could help us from the outside understand anything that helped drive that actually down, I guess, year over year.
I mean, there seems to be plenty of exciting new shows on your networks and your broadcast network so anything on timing related or just efficiencies there, what's going on would be helpful. And then secondly real quickly and this one, James, I know you already talked a lot about STAR, so just to put one final punctuation, it's such a big incremental contributor of cash flow growth apparently over the next many years when we think about that billion dollars number that was mentioned a couple of years ago.
Anything you could say on the trajectory between now and then, what drives that? Is it just a steady rate of subscriber growth with less cost?
Is their marketing invested? Is there some inflection required?
Anything to think about the pacing of that and when we'll see it would be helpful. Thanks, guys.
James Murdoch
Okay. Todd, let me deal with the STAR answer first.
Look, I think the inflection point was really this year when we hit the sort of peak sports investment, because the business generally on an underlying basis, the entertainment business is already well on its way and it's substantial profit and I think we've disclosed this, over $300 million this year I think in EBITDA. So it's really the eating, the taking that investment, taking all that profit and reinvesting that into creating this new business in sports, we think really adds a total new dimension and real set and scale, the real scale over the business there.
The inflection point is when that peaks, and that peaked this year. So we see - yes, this last year that just ended.
So when we look at the future of that business, while I'm not going to say it's a straight line, there's always some ups and downs here and there, but the profit growth will start to be significant this year, and will continue towards that billion dollars target at the present conditions being consistent towards the end of this decade or thereabouts at the turn of the decade. So I think that feels really good.
It's totally dependent on continued creative excellence across that business, so there's a lot of execution risk as there is in all these businesses. But we've got - we feel very, very good about the products we have, about the brands, about the company there and we want to aim high with it.
We think it can really change our lives.
John Nallen
So, Todd, on your question on the TV OpEx, there's a few factors driving on a comparative basis. First, at the network, earlier in the quarter, we had lower costing programming repeats versus some of the original programming that we had a year ago, same quarter.
We've got lower programming at the station group given that some programming is just rolling off there. And of course, given the revenue impact, we have lowered costs for the NFL week moving from this quarter to the following, to the third quarter.
Offsetting that, we did have one higher marketing costs at the network given that we launched, you know, clearly a schedule and morning series than we've had in several years. So that balance a bit of the cost reduction from earlier.
Lachlan Murdoch
Thank you, Todd. At this point, we are out of time, and I want to thank everybody for joining today's call.
James Murdoch
Thanks very much, everyone.
Operator
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