by Jonathan Berr | November 26, 2012 8:00 am
Comcast‘s (NASDAQ:CMCSA) MSNBC has basked in favorable publicity in the wake of President Obama’s re-election. Throughout the course of the election, the channel gained significant ground on arch-rival Fox News Channel — owned by Rupert Murdoch’s News Corp. (NASDAQ:NWSA) media empire.
Despite its gains, though, talk about MSNBC “catching up” to Fox may be nothing more than wishful thinking. Why? Three simple reasons.
1. Fox is a bigger deal to Murdoch. Rupert Murdoch got into the cable news business in 1996, defying conventional wisdom in his attempt to counterweight what he perceived as CNN’s liberal bias — not looking to make a quick buck. In fact, Fox News was barely profitable as of late 2002, according to The New York Times.
Comcast’s CEO Brian Roberts is Murdoch’s polar opposite in many ways. To him, MSNBC is business — not a political cause. In fact, politically, Roberts is conservative, which worried some observers concerned about whether he might try to change MSNBC’s political direction after his company took over NBC Universal from General Electric (NYSE:GE) in 2011.
Those worries proved to be groundless. Roberts is no ideologue; MSNBC could spout Libertarian propaganda for all he cares as long as it meets its profit targets.
2. Fox is a bigger deal to News Corp. Fox started out as an ideologically venture but suddenly, conservative media soared in popularity. Combine that with ever-increasing fees from cable companies, and things started looking good for Fox News. Today, the channel may be News Corp’s most important asset.
MSNBC, on the other hand, is far less profitable than Fox. Because Roberts thinks strictly in terms of the bottom line, he may not — or, really, should not — be willing to pour more money into the channel given its mediocre returns.
See, the channel is only expected to spend around $189 million on content this year. News Corp. is forecast to spend more than $609 million on programming at ratings-leader Fox News Channel this year and even CNN — owned by Time Warner (NYSE:TWX) — is projected to spend $400 million.
SNL Kagan estimates that Fox will generate more than $985 million in cash flow this year, easily dwarfing the $202 million expected for MSNBC and topping the $311 million forecast for CNN. Fox isn’t just bigger, but is a better investment.
3. Both are a bigger deal during the election. Plus, ratings for the cable news networks are probably going to fall in coming months anyways now that the election has been decided and viewers will focus their attention on other things. Sure, they will tune in when the next big story emerges, but they will also tune out in droves as they always do.
At the same time, Fox — which still largely rules the cable ratings — could regain its lost ground in the coming months if Obama’s policies in his second term prove to be unpopular.
In the end, there is little reason for Comcast — or its investors — to hope that MSNBC will catch up to competitor Fox. And pouring money into the channel in hopes of doing so probably wouldn’t be worth it anyways.
As of this writing, Jonathan Berr did not own a position in any of the aforementioned securities. Follow him on Twitter@jdberr.
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