Rupert Murdoch's Nightmare of a World Series

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

News Corp. (Nasdaq: NWS  ) CEO Rupert Murdoch is hoping this year's World Series will warm more than the hearts of the fans of the Texas Rangers and St. Louis Cardinals.

That may be a faint hope.

TV viewers are taking a pass on the best-of-seven series. Ratings for this year's postseason have been dismal, according to Adweek, because the Rangers and Cardinals don't have big fan bases. Viewership for Game 1 was down slightly from last year, and the numbers will probably continue to decline because teams with big fan bases in major media markets such as the New York Yankees, Boston Red Sox, and Philadelphia Phillies, who had the best record in baseball, either did not make the postseason or got eliminated early.

For New York-based News Corp., this is bad news. News the parent of Fox Sports, which has broadcast baseball's championship for more than a decade. It has more than a passing interest in America's pastime.

In 2006, baseball renewed its broadcasting deal with News Corp. and Time Warner's (NYSE: TWX  ) Turner Broadcasting System. The seven-year deal reportedly was worth $3 billion and probably offers more money for Fox since it gives the network the exclusive rights to the World Series, All-Star Game, and Saturday afternoon baseball. Between 2006 and 2010, Fox earned more than $908 million in advertising revenue from the World Series, according to Kantar Media. During that same time, it generated $918.5 million from the Super Bowl, a game that is probably more profitable for Fox since it happens only once a year.

Sports are a big business for News Corp., which also broadcasts NFL games and will televise this year's Super Bowl. Its television business, which includes Fox Sports, generated $223 million of the company's $1.35 billion in operating income in the latest quarter, second only to Cable Network Programming. Revenues were $1.12 billion out of $8.96 billion.

Broadcasters sell most commercial time for big events such as the World Series months in advance by offering advertisers guarantees that a certain number of viewers will watch their spots. If fewer people watch these spots than News Corp. expected, than the New York-based media conglomerate will have to offer "make goods," essentially free commercials of equal value.

For News Corp., lackluster World Series ratings couldn't come at a worse time. Shares of the parent company of 20th Century Fox and Fox News Channel were pounded this year because of the U.K. phone-hacking scandal that lead to the closure of the News of the World tabloid. The stock has rebounded since July after the conglomerate announced a $5 billion share buyback that came one day after it delayed plans to buy the 61% of BSKyB (OTC: BSYBY.PK), a satellite broadcasting and telephone company, that it didn't already own. Reporting better-than-expected quarterly results certainly helped, too.

Nonetheless, News Corp. shares are pricey. The company trades at a price-to-earnings ratio of 14.85, ahead of the 12.81 multiple for the peers in its sector, according to Reuters. Analysts expect it to see a 3.3% revenue increase in the current quarter and a 1.7% increase in the December quarter. They have an average price target of $20.53 on the stock, ahead of the $16.98 level where it recently traded.

Sports-mad investors should consider ESPN parent Walt Disney (NYSE: DIS  ) , which trades at a cheaper multiple of 14.35 than News Corp. but offers better growth prospects, with revenue expected to increase 6.4% and 4.5% for the next two quarters. Time Warner, which has a 14.54 multiple, may be an even better alternative. Revenue in the next two quarters is forecasted to rise 9.4% and 5.2% respectively.

Unfortunately for News Corp., the World Series is the least of its worries. Investors should avoid the stock for now.

Fool contributor Jonathan Berr owns no shares of any stocks listed here. Follow him on Twitter, where he goes by @jdberr. Motley Fool newsletter services have recommended buying shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1574761, ~/Articles/ArticleHandler.aspx, 10/23/2016 6:00:52 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
DIS $93.03 Up +1.00 +1.09%
Walt Disney CAPS Rating: *****
FOX $25.91 Up +0.55 +2.17%
Twenty-First Centu… CAPS Rating: ***
TWX $89.48 Up +6.49 +7.82%
Time Warner CAPS Rating: ***