Feb 9, 2016
Operator
Ladies and gentlemen, thank you for standing by. Welcome to the 21st Century Fox Second Quarter 2016 Earnings Release.
At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time.
[Operator Instructions]. As a reminder, today's conference is being recorded.
I would now like to turn the conference over to our host, Mr. Reed Nolte, Senior Vice President, Investor Relations.
Reed Nolte
Thank you very much, Ryan. Hello everyone and welcome to our second 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 December 31, 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 as 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 in our earnings release. And with that, I'm pleased to turn it over to Lachlan.
Lachlan K. Murdoch
Thanks Reed, good afternoon and welcome to our second quarter earnings conference call. After my remarks I’ll turn the call over to John and James and then we’ll take your questions.
Despite some near-term challenges, more specifically due to foreign exchange and disappointing results at our film division we are making good progress on our objectives across the group. The core growth strategies that will move our business forward over the long-term building powerful brands that offer great value to our customers, delivering great story telling, must have news and sports, and innovating in advertising and packaging are delivering real results for the business.
Domestic affiliate revenues increased strongly in the quarter. This predictable revenue underpins our financial position.
Even in an environment with an increasing number of viewing options, our affiliate revenues continued to grow. This underscores the strong demand for and the value of our brands.
Developing these brands has been a key strategic priority for us. We believe the work we have done and the investments we have made render our portfolio indispensible for any broad consumer offerings whether established or emerging.
The expansion of our national geographic partnership is an important milestone in the execution of this strategy. Our overall domestic multichannel subscribers continued to grow increasing in aggregate by 1% over the prior year quarter.
This despite the fact that the average fully distributed channel in the MVPD Universe lost around 2% of their subscribers over the same period. And we are seeing strong momentum in high growth international markets like at Star in India where we continue to expand our customer base and our offerings.
While foreign currency headwinds are creating short-term issues, they reflect the size and scale of our international businesses which are increasing well positioned. The strength of our global brands is of course a direct result of our success in creating unique and compelling creative content.
Our distinction in this area was recognized last month with eight Golden Globe Awards across our Film and Television businesses more than any of our peers. 21st Century Fox Film not only led the industry with Golden Globe wins but currently dominates the competition for this year’s Academy Awards with a total of 30 nominations, double our nearest competitor.
But success in the content production business can be tough to deliver consistently and this year we have seen mixed results at our Film Studio. Financial results from the Martian were strong but they were more than offset by less than anticipated results from several of our other releases.
While our film business is running behind our financial expectations we feel good about our releases moving forward. The Revenant and Kung Fu Panda 3 are currently performing well.
Deadpool and Eddie the Eagle are slated for later this quarter and X-Men Apocalypse and ID 4 Resurgence for the fourth quarter. At our television production business there is also good momentum.
We are producing 36 scripted series this forecast season including 20 returning and 16 new series. Many of the new shows are supporting the turnaround of the Fox Network, including the X-Files which tuned audience of over 21 million people surpassing the original series most watched season ever.
Globally the X-Files reached an impressive audience of more than 50 million viewers across our international network of Fox owned channels. Developing and producing our own shows which in turn drive enhanced ratings on our owned platforms is a priority for us.
Just this last week, one of our productions, the People versus OJ Simpson premiered to the highest ratings ever on FX. That is an all the key demos and in total people.
What I've just described is at the core of our long term value that we drive for our shareholders. Namely our ability to create, own and monetize hit content that powers our global brands.
Overall we are pleased with the momentum at the majority of our businesses. Our focus on building powerful brands, creating compelling content for consumers, and driving advertising innovation continues to create meaningful long-term value for our shareholders.
And with that I’d like to call -– hand the call over to John.
John Nallen
Thanks, Lachlan and good afternoon everyone. To start out I’ll remind you that because of the sale of our DBS businesses to Sky in November of 2014, our comparative reported financial results for the second quarter are not like-to-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 period, and most of my comments that follow will be on this adjusted basis. In the second quarter, adjusted revenues of $7.4 billion declined slightly from the year ago quarter as higher revenues at both our Cable Network and Television segments were offset by lower revenues at our film business.
Note that adverse foreign currency movements combined with the absence of Shine, negatively impacted quarterly revenue comparisons by approximately $340 million in the aggregate. Absent these factors, our second quarter adjusted revenues would’ve increased 4% over the prior year.
Total segment adjusted EBITDA for the second quarter was $1.73 billion, a 2% increase over a year ago. This increase was led by the Cable Network segment and was partially offset by slightly lower results at our Television and Film segments.
Overall, this quarter’s EBITDA results include an approximate $110 million negative impact from unfavorable foreign currency movements, which reduced our comparative reported results in both our Cable Networks and Film segments. After this impact, our overall quarterly EBITDA growth rate would be 8.5%.
From a bottom line perspective we reported income from continuing operations attributable to stockholders of $674 million or $0.34 per share. Excluding the net income effects in both years of other net and equity earnings adjustments primarily related to Sky’s acquisitions and dispositions, second quarter adjusted EPS was $0.44 this year versus a comparable $0.53 a year ago.
But as a reminder, last year’s net income included the recognition of certain non-recurring tax benefits of approximately $250 million or $0.12 per share. So now let me provide some additional context on the performance at our operating segments in the second quarter and we’ll start with the Cable Networks segment, where total segment EBITDA of $1.25 billion was up 8% on segment revenue growth of 9%.
Domestic revenues increased 11% in total, led by affiliate fee growth of 10% and advertising increases of 3%. Fox News and our domestic sports channels led the advertising growth posting double-digit percentage increases, but this was partially offset by lower revenues at FX due to reduced ratings against a year-ago comp that included the final season of Sons of Anarchy.
EBITDA at our domestic channels increased 7% over the prior year, reflecting the strong revenue growth, partially offset by higher regional and national sports rights costs. Also note that the inclusion of the National Geographic Partner’s business that were acquired in November, added approximately $70 million to quarterly other revenues and about the same to expenses.
So those acquired businesses were significant to second quarter EBITDA. Second quarter reported international cable revenues grew 6%, driven by a 15% increase in advertising revenues with strong growth at both Star and the Fox International channels.
Reported international affiliate revenues were essentially flat against the prior year as low double-digit organic growth led by FIC was offset by negative foreign currency movements. Reported international channel EBITDA contributions increased 8% over the prior year period from strong local currency growth at both Star and the Fox International channels, which was partially offset by an approximate $60 million negative impact from foreign exchange.
Turning to our Television segment, second quarter EBITDA was $279 million, $11 million lower than a year ago. Revenues increased 6% overall, led by low double-digit Ad revenue growth at the Fox Network and higher retransmission consent revenues.
This overall revenue increase was achieved despite the cyclically lower political advertising revenues at the stations due to last year's mid-term elections and too fewer world series games this year versus last. The revenue gain was offset by increased programming expenses principally from contractual step ups in our NFL and MOB rights.
At the film segment, second quarter EBITDA was $302 million down $34 million versus last year. This quarter's higher contributions from the film studio owing largely to the successful theatrical release of the Martian were more than offset by lower TV production contributions and those reduced contributions were from the substantial increase in the number of new first year series delivered and their related initial deficits as well as lower contributions from Sons of Anarchy which aired its final season last year.
Additionally foreign exchange movements negatively impacted this quarters segment EBITDA by approximately $50 million. Revenues decreased 14% primarily reflecting both difficult home entertainment comparisons to last year's very successful releases including X-Men Days of Future Past and Dawn of Planet of the Apes as well as the absence of revenues from showing.
Shifting over to capital management from July 1, through today we repurchased approximately $3.5 billion worth of Fox A shares of which approximately $3 billion has been against our buyback authorization of $5 billion. During the second quarter we also completed our planned investments in National Geographic Partners and the Maa TV channels at Star.
In addition in the quarter we issued $1 billion in new debt repayed $200 million in maturities and were approximately $500 million of future maturities over the next year. At this halfway point in our fiscal year there are a couple of obvious headwinds that will impact our full year performance outlook.
First, we continue to be unfavorably impacted by foreign currency rate comparisons in our sizeable international Cable and Film operations. While the local currency performance at these businesses is strong, the converted U.S.
dollar amounts continue to be affected by the strengthened dollar. Just for perspective last August when we gave full year guidance for fiscal 2016 earnings, we estimated that currency changes would negatively impact our growth rate by 3 percentage points or approximately $200 million based on exchange rates at that time.
So far in fiscal 2016, currency rate movements have already adversely impacted the six month EBITDA results by approximately $220 million. And based on where exchange rates are today, the full year impact from currency movements will be approximately $350 million or nearly a 6 percentage point impact on our EBITDA growth.
Additionally it’s clear that our content production businesses have underperformed our original plans largely from the theatrical releases of most of our films so far despite the success of The Martian. So based on these principal factors and all of the assumptions inherent in our current outlook, we now expect that our total segment EBITDA percentage growth rate for fiscal 2016 will be in the range of flat to up low single-digits above the $6.49 billion we reported for fiscal 2015.
With that let me turn it over to James.
James Murdoch
Thanks John and good afternoon everyone. As Lachlan said earlier we are confident in the business is really on track to support our long term objectives.
However two main factors, continued currency movement against us and disappointing commercial results from the film business are simply too significant for us to offset over the next six months to hit our original near term target. But if our only goal was to hit short-term targets we’d pursue efforts like cutting programming cost at the expense of building future profits.
That’s not our approach. We think shareholder value is better built through long term investment and growth.
Our near-term outlook should not detract from the fact that in the first of the year we’ve accomplished much. We renegotiated or negotiated multiyear agreements with two of our largest U.S.
distributors. Successfully achieving pricing and revenue goals as well as providing for better products for customers.
FBC had its highest rated autumn in four years and Fox News is like number one across all cable channels. We completed the national geographic partner’s transaction and the acquisition of the broadcast business of Maa TV in India.
We reorganized our international channels business, as well as made significant strides in cost management across the company as we reshaped the company to best compete in the future. And as we start our second half, we're delivering outstanding new content across our markets, including the X-Files, Lucifer, American Idol and Glee Fly at FBC to name a few.
The People versus O.J. Simpson, the American Crime Story and Baskets at FX, a new season of Kabaddi at Star, and a strong post-season at the NFL, capping the second most watched NFL season on Fox ever.
At FBC we're encouraged by the clear turnaround underway. Broadcast season to date prime time ratings have stabilized and overall Ad revenues for the network were up in the quarter.
While linear ratings at Fox show much improvement, the more meaningful measure of video consumption is 30 day multi-platform viewing, which is up mid-single digits season to date. Whether the show is being watched on linear broadcast or on a time-shifted basis all viewers are alive, so all live viewers need to be measured.
And in order to better monetize that viewing we've been focused on innovation, with new Ad products and packaging options that are showing clear results. There's a sizeable opportunity to monetize this audience and its one that we're determined to seize.
That said, the bulk of our broadcast revenue today is from linear advertising and in the quarter performance was strong. National scatter is up at 20% premiums versus up fronts and local station markets were up 3% to 4% in the second quarter, excluding political spending.
Lachlan commented earlier on our production businesses and while we've fallen behind our earlier expectations we continue to invest in developing and producing the creative assets that will drive the business in the future. At our non-consolidated businesses, we're making good progress too.
In fact Sky recently reported first half fiscal 2016 earnings with 10% earnings per share growth driven by the addition of 337,000 new customers in the December quarter. And Hulu also continues to grow, deepening its content offering and adding customers.
Hulu is an important platform for us to roll out our targeted and interactive Ad capabilities and new Ad prepackaging for customers, initiatives that are off to a great start. So while the team has much work to do, the progress we've made in the quarter against our long-term goals have been good and we think the key fundamentals to our long-term success are in place.
Investments in our brands are reaping rewards, our international portfolio continues to flourish particularly at Star in India, our sports and news audiences are expanding, our U.S. broadcast business is stabilizing, and we're implementing solutions to improve monetization, and while short-term film performance is obviously a disappointment, the business is fundamentally sound and the 20th Century Fox Television with strength of several new series will add considerable value for years to come.
As I said at the outset shareholder value is built through long-term investment and growth and we, in this exciting time for our company and industry, are confident we have the right assets and strategies in place to achieve that goal. With that we're very happy to take your questions.
Reed Nolte
Ryan, now we're happy to take questions from the investment community.
Operator
Okay. [Operator Instructions].
Our first question will come from the line of Jessica Reif Cohen with Bank of America. Please go ahead.
Jessica Reif Cohen
Thanks. I just want to follow up on James’s comment on Hulu.
All of the partners -- well I guess all the investors have been ramping up -– you’ve been ramping up investment in new programming. It’s obviously an important asset but I'm just, can you comment on how effective you think these recent investments have been in terms of establishing the brand and the subscriber base?
Most of the industry has been very supportive of holding back expert [ph] rights and accumulating greater stacking rights for Pay-TV providers. Can you talk a little bit about how you guys have -– how you as a company are viewing the risks and opportunities Hulu faces in this current environment?
John Nallen
Thanks, Jessica. Sure, happy to talk about that.
Look, I think as I said Hulu is an important asset for us and its one that we're excited to see the growth and I think all the partners would say that. And we're excited to see the real innovation that’s happening at Hulu in terms of creating new options for customers, both with respect to add innovation, new ways to monetize inventory there, as well as these ad-free options, the ad-free tier that actually is going well.
I think Hulu is going to continue to develop and I think we're very focused and Hulu’s very focused on how it continues to innovate in terms of products and packaging to expand its offerings and grow into larger segments. So, I think as a distributor of our programming we think it was very important and we think it’s a good distributor of our programming and we are really happy to push it forward.
With that said we’re also very focused on distributing our products and our programs through our other clients and other distributors the MVPDs and others, and with respect to stacking rights, with respect to all of this -- sort of the construct of the -- Windows. We were very focused on first and foremost creating a customer experience around our product, it is very, very good creating an ease of discoverability if you will so they can find the product and get it at the right time.
We are interested in having a fewer hold backs outside the Asgard [ph] Windows so that we can actually provide a better product for customers and provide our MVPD and over the top distributors with a better ability to deliver a good product experience. So I don’t think those two things are incompatible at all and I think we have to see our distributors, be it an online distributor like Hulu or a traditional facilities based distributor like cable company.
I think actually from a customer's perspective the package of those products just needs to be great and if you ever discover the programs in a right way. SO we also need to be as a supplier able to take our brands to those platforms and have more flexibility with respect to how the product is found, how it is stacked, how its consumed.
More flexibility with respect to how advertising innovation works and what we can do. As well as I think an understanding of data capabilities in a sense who is using our products particularly as the streaming element or the time shifted element grows at such a big clip because that’s a really important part.
So I don’t think those two things are mutually exclusive in anyway and we are very excited that Hulu was able to really set the pace in terms of innovation in a lot of these areas.
Jessica Reif Cohen
Right. Can I just do a quick follow up, in the trade I don’t know if you announced anything but the cost saving activity at both studios film and television/cable networks, can you talk a bit how impactful that will be and when is it, is it a fiscal 2017 event?
John Nallen
I think first of all cost management is something that happens in a business on a continuous basis. So while there was a public event with some changes that we are making at the networks group and at the studios in the company there, we focus on cost across the business all the time.
We have quantified, we haven't really quantified overall how that works. But I think it is more a 2017 and 2018 and going forward to really make the business the right shape.
One number that’s been out there is $250 million of savings around this particular program. But these are programs that are going to be ongoing.
Lachlan K. Murdoch
And Jessica they run across all the businesses not just the studios.
Jessica Reif Cohen
Okay, thank you.
John Nallen
Thank you Jessica. Ryan could we have the next question please.
Operator
Comes from the line of Anthony DiClemente with Nomura Securities. Please go ahead.
Anthony DiClemente
Thanks. I just wanted to ask a little bit more about the new guidance clearly with what's going on in the market and in the macro environment there is some worries about a recession and you guys have the big global business that achieves that in terms of your advertising business.
So I guess I just wondered to what extent is any macro uncertainty embedded in the new guidance or would any uncertainty there be incremental or kind of on an added risk to the new guidance John that you provided?
John Nallen
Well Anthony it would have to be pretty significant to dramatically impact it because there is really just six months left in this period of time. We got good visibility around affiliate fees, the advertising market feels pretty good.
So I don’t and internationally businesses are operating pretty well also. So I am not -- I don’t think there is a dramatic issue outstanding on a macro-economic basis.
I think we put into it what we know today. We don’t know beyond what we know today so that’s whats reflected in our outlook.
Anthony DiClemente
Okay, thanks and then maybe a follow up, maybe this is for James on your relationships with the MVPDs, when you guys put up double digit affiliate fee growth and that’s quite strong but we continue to get questions from investors about cost cutting, about the pace of the subscribers in your business and there continue to be speculation about these minimum subscriber limits. Do you think some of the MVPDs are running up against their contractual minimums on the subscriber limits and if so how should we interpret that.
With that slow subscriber losses, slow cord cutting that might be driven by these skinny bundles either for the industry and or for Fox? Thanks.
James Murdoch
Thanks, Anthony. Look, I think on our relationship with our distributors or the MVPD is some of our distributors, its -- I would say actually they’re – first of all, they’re pretty good.
As I mentioned in my comments we've renewed two important large affiliate agreements in the last quarter that we felt both sides really were able to achieve their goals. We haven’t seen any material change in the distribution requirements or minimum distribution requirements in any of those agreements, and I think the strategy that we've laid out and that we've executed over the last few years are really investing in these brands, investing in the rights around these brands, and being able to offer something that would mean, that really matters for our distributors’ customers has borne fruit for us with respect to pricing and distribution gains.
With respect to the whole -– the question of overall, the affiliate universe and the subscriber universe of the MVPDs. As John mentioned in his comments, well, obviously the total universe for extended basic for those MVPDs has contracted, we continue to see growth.
Our networks are distributed at different levels, each one different to another, some of them were young like Fox Sports 1 or some of the Nat Geo brands and some are more fully distributed. So we have pretty good visibility on reasonable growth going forward and I think the things like minimum distribution guarantees, etcetera haven’t been really impacted, at least in our latest negotiations and latest renewals and we think that’s encouraging.
Anthony DiClemente
Okay, thanks, James.
James Murdoch
Thanks, Anthony. Ryan, can we have the next question please?
Operator
That comes from the line of Doug Mitchelson with UBS. Please go ahead.
Douglas Mitchelson
Thanks so much, John, I think maybe a couple of questions for James. James, I was just hoping for a further update on Star, maybe a walkthrough of the sports rights that might be out to bid and any other investment prospects you might see that would sort of hold back the trajectory of margins we're all hoping for and certainly anything driving revenue that’s sort of new.
And separately, Thursday Night Football obviously went to CBS NBC and I imagine that was something that Fox was looking at. Certainly feels like it would fit with Fox, any comments you want to make around the dynamics of Thursday Night Football might be helpful to understand your investment strategy?
Thanks.
James Murdoch
Thanks, Doug. Well, first of all, sports rights, as we've said before, really it’s around -– we're a big investor in sports, we believe in sports as a real driver of the business, but that said, you make choices around different packages, you make choices about how much you're investing in different things.
With respect to Star, the landscape for sports rights in the near term, really probably dominated by what happens with the BCCI, the domestic board of control for cricket, India and the IPL, the pro-cricket league, domestically there. And we have to see how that shapes out over the next couple of years.
I think it’s in the next year, the IPL picture becomes clearer. That’s something that we don’t hold today.
But fundamentally there's nothing that we see out there that we see or would necessitate us or our adjusting our goals for the business, both from a margin perspective and absolute profit perspective over the next four to five years. The Star business is going very strong, and while there are some of those lumpy sports rights out there, we're really through the peak investment in those as we've said before.
And with respect to Thursday Night Football, as you would expect we're a partner of the NFLs and a very happy partner of the NFLs, and as players worry, discussions were had around Thursday Night Football, ultimately the NFL and NBC and CBS were able to get a good deal on there, but we're very happy with where we are with the NFL. Our Sunday package is something that’s very, very strong.
As I said in my comments earlier, this NFL season was our second best ever and we feel very strong going forward with those rights well into the next decade.
Douglas Mitchelson
Great. Thank you very much.
Lachlan K. Murdoch
Ryan, please next question, please.
Operator
And that will come from Bryan Kraft with Deutsche Bank. Please go ahead.
Bryan Kraft
Hi, good afternoon. Just wanted to ask you two questions if I could; one, just wanted to hear your thoughts on the need for you to have rights to off streamed, direct to consumer, RSN service, and just wondering if you had obtained any of those rights yet through your agreements?
And secondly, just on Hulu, is there likely to be another funding round for Hulu coming up this year or next year or is Hulu at a point where it’s close to being self-funded or have you already increased the funding, quietly? Thank you.
John Nallen
Thanks. On the streaming RSN is this – I think, we have – the one change in rights has been around baseball, which is the ability – we obtained the ability for the RSNs to do in-market streaming of baseball games on an authenticated basis alongside the RSN distribution.
But that would be -- but there is no plan to do any separate over the top kind of RSN business. There its really embedded in the experience of the overall brand of the RSN in that and those are -- I think we announced that recently.
And with respect to Hulu, the needs of the business some of the shareholders are going to be looking at on an going basis if we see the opportunity to really grow the business well then investments, all the shareholders are going to be have to look at.
Bryan Kraft
If I could just ask a follow up is the focus on Hulu going to continue to be domestic or is there a case where it might make sense to broaden out internationally?
John Nallen
I think primarily domestic right now. I think there is an opportunity internationally for Hulu to compete but that’s again a decision that all the shareholders would have to make at the time with the company.
Bryan Kraft
Okay thanks.
John Nallen
Thank you Bryan. Ryan can we have the next question please?
Operator
Next question comes from the line of Ben Swinburne with Morgan Stanley. Please go ahead.
Benjamin Swinburne
Thank you. So taking on the scene of cash flow, John, I wonder if you could just remind us what your expectations or what our expectations should be around working cap use this year.
I think you had said similar this year to last year but you are running I believe quite a bit above that in the first six months. And I didn’t know if what's happened in the marketplace on the credit market front had changed the company’s perspective on leverage or cash balances, maybe you could remind us on that?
And then one on related since you’ve called out film performance this year being less than expected thought it would be good on to ask about whether you need an update on Avatar timing, what that looks like at this point? Thank you.
James Murdoch
Okay, Ben thanks. I’ll handle the cash pieces of it.
Our first half of the year is always a big working capital investment period. We got the biggest billings for the NFL for our fall season and this year we’re a particularly large number of releases that were in the last two quarters of the calendar year.
So it is just traditional for us to have a big receivable in working capital investment it also is a prior inventory because as you know we make all of the NFL payments as an example before the end of the calendar year with the biggest games happening really after the calendar year with post season, etc. So looking at this period it is not unusual at all as against our working capital build up would be in any six month December period.
For the year we were still at the same place working capital level we expect to be about the same as a year ago. So we are consistent in that regard from what I said back in August.
To remind you our targets were to have a $2 billion to $3 billion cash balance and 2.5 to 3 times leverage. Gross leverage on our balance sheet and as we look through the year, to the end of the fiscal year we’ll start approaching those levels there or thereabouts in the next -- around that time or six months after that.
And as far as the -- sorry as far as the credit markets we continue to have long dated bonds, we look at our maturities, and unless we have a capital need which isn't present right now we’re not accessing the capital markets in any unusual way given where they are right now.
Benjamin Swinburne
Thank you.
Lachlan K. Murdoch
And then Ben on the Avatar timing there is no update now or no change there that I can give you on that as that all gets worked up. But I would say that we’re really -- we’re pretty confident about the overall slate in the film business leading up to that going forward.
As, often mentioned before with the X-Men and the Independence Day coming up in the balance of this year after Deadpool just next week but we think a real strong slight leading up to that. And the Avatar when it is confirmed we’ll be disclosing that I am sure very loudly.
Benjamin Swinburne
Thanks a lot.
James Murdoch
Thanks Ben. Ryan give the next question please.
Operator
Next question comes from the line of Richard Greenfield with BTIG. Please go ahead.
Richard Greenfield
Hi, thanks for taking the question. When you look at Facebook which added like 2 million of Ad revenue in calendar of Q4 year-over-year growing something like 50 odd plus percent, how do you think about the importance of mobile to Fox overall.
Do you all need to start new business meaning kind of invest organically in new launches, do you need to acquire businesses to just overall shift your exposure more towards mobile versus legacy TV, how do you think about that?
Lachlan K. Murdoch
Thanks Rich for the question. I think first of all I would just say what we are really focused on is making our programming the creative assets, the creative assets that we make available as wide away as possible and mobile is increasingly an important part of that as we look at TV everywhere type applications like Sky Go in Europe, for example, increasingly consumed on mobile phones and tablets.
As well as consumption in the U.S. growing as video entertainment or audio visual entertainment on mobile platforms.
The key thing for us is how do we invest in the capabilities to monetize that viewing, measure it and monetize in the right way and I think we would look at investing to create those capabilities as we have for example with the formation of our advanced Ad products group, etc. which is making real headway in streaming.
I think that I would look at the mobile piece for us really as just part of the overall streaming landscape as opposed to brand new types of content for us etcetera. For us the priority is how do we execute with our creative assets today as well as we can, make them more available and not less to customers, and how do we really innovate and get better capabilities in terms of how we then monetize that platform going forward.
And then in discrete places where there's a really big opportunity we would start a new business. If we look at something like in India, the Hotstar business is a mobile internet-only video platform which we launched early this year or I should say early last year, which has really gotten off to a great start.
And that’s sports and entertainment platform that is growing very, very rampantly on the -– from a mobile consumption point of view in India and we would look at individual brands really being able to embrace those kinds of opportunities going forward.
Richard Greenfield
And just in terms of overall consolidation space, is there interest, I mean if there was renewed interest from big players, do you think consolidation needs to happen to improve kind of overall industry fundamentals which clearly are concerning investors?
John Nallen
Look, as we've said in the past, we actually are -– we're pretty happy with the asset mix that we have. While obviously there are times we will be opportunistic.
We’ll add assets like we have in this quarter with the talents of the National Geographic Partners agreement as well as our Maa TV acquisition and there are other places where we might look to do similar things. But overall our thesis has been driven by consolidation, our assets, we think are very strong.
We think we've simplified our business dramatically over the last number of years. We've invested in these brands to be stronger and more dynamic.
And we're very focused on executing the business and the plan as well as we can.
Richard Greenfield
Thanks very much.
Lachlan K. Murdoch
Thanks, Rich. Ryan, please another question, please.
Operator
Comes from the line of Jason Bazinet with Citi. Please go ahead.
Jason Bazinet
Just a quick question for James Murdoch, I'm sure we're all sitting there with that $500 million of EBITDA in that Star in fiscal 2018. I was just wondering if you could comment, if the rupee doesn’t change relative to where we are now, would you be willing to give us a revised number if FX holds steady?
James Murdoch
A revised number upwards?
Jason Bazinet
However you want.
James Murdoch
Look I think we've generally assumed modest depreciation over the rupee normalized over a period of time. We found over the years, that sure we get that wrong in a given year, but generally over time that’s held true.
And in that -– and in those numbers we've -– in those targets we've assumed modest appreciation there. So could go either one way or another but we're not in that business of currency forecasting.
But where -– with sort of historical trends and where the kind of rupee has been and where we think where it might go if it holds the same, we feel pretty confident about the trajectory of the business there. It’s very -– it’s a strong business with real velocity behind it.
Jason Bazinet
Thank you very much.
James Murdoch
Thanks, Jason. Ryan, at this time we have time for, I think, one last question.
Operator
And that will come from the line of Michael Morris with Guggenheim Securities. Please go ahead.
Michael Morris
Thanks guys, good afternoon. Two questions, first, I'm hoping you can talk a little bit about your competitive position relative to Netflix, especially as it pertains to technology and what I mean is, Netflix is spending a lot on technology, hundreds and millions of dollars a year and they used to sort of only be a distributor and now they’re, I would say, infringing on your sort of content territory by launching their own content.
So how do you feel about your need to invest in your own technological expertise to compete with them on that front? And then second, on the Regional Sports Networks, you’ve talked about how you like them, the tribal element.
The investor concern seems to be around everybody paying for the RSN with a certain price, but maybe from your perspective, how do you look at the price inelasticity there for the true fan who wants that network and do you think maybe that’s underappreciated by those who are concerned about the RSNs? Thanks.
James Murdoch
Thanks, Michael. Look, with respect to investment in technology, we invest constantly in the technology around delivering a better product to customers where we can.
We have definitely been doing that with respect to advertising innovation, investing in that, creating new capabilities there. And we have also been investing in our capabilities which are improving around domestically here in the U.S.
direct to customer distribution with our authenticated apps for example and other platforms. So, we think there is an investment that is ongoing and it will continue.
And then around the world where we are -- where we are heavier in direct to customer businesses and product oriented businesses for example, the Sky business. It is very heavy investment in technology that we actually bears real fruit in terms of creating a product for customers that they really like.
I am not sure that the investment and technology you referred to really has a bearing on the production of creative assets and getting into original production. I think that is kind of a different issue.
We feel very good about our ability to do that. I think in the future as we did today, we are going to see a continued competition for talent, continued competition for story tellers, and a continued favorable appetite for various players to invest and there will be multiple internet TV companies doing that including our own.
So I don’t think -- I don’t think the investment technology necessarily has a bearing on that creative output or that competitive dynamic that you mentioned. But it clearly does have a bearing on the product set for customers, how good they are and how you can monetize there as well.
And as to your second question with the RSNs, I think at this point we feel pretty good about RSN pricing. Where we are anyway, I can't speak for the overall market.
And as I said in the renewal of recent distribution agreements earlier we were able to achieve our goals there. For example pricing elasticity for the hardcore fan is something that, there probably is some pricing elasticity there.
There is -- pay a lot but I think you have to remember that the RSNs are very broad. They are not just for super fans.
The RSNs in many of our markets are the number one rated broadcast platforms in their market, particularly in baseball season where you see markets like St. Louis for example, beating all broadcast networks on those game nights.
So I think it is a very, very broad offering and one that we tried to price in the fairest way that we can that provides both returns for our partners, the teams in those businesses, but also a fair price for the distributors that they can pass on to customers in the right way.
Michael Morris
Great, thank you.
Reed Nolte
At this point we are out of time. Thank you everybody for joining today's call.
If you have any further questions please give Mike Petrie or me a call. Thanks.
Lachlan K. Murdoch
Thanks very much everyone.
Operator
Ladies and gentlemen, this does conclude today's conference, thank you for your participation. It is available for replay starting at 07:00 p.m.
today and going through February 18, 2016 at midnight. You can access the AT&T replay system by dialing 1-800-475-6701 and entering the access code 383904.
Those numbers again 1-800-475-6701 with the access code 383904. You may now disconnect.