Twenty-First Century Fox Inc. (FOXA) Q2 2018 Earnings Conference Call Transcript

Twenty-First Century Fox, Inc. (FOXA)
Q2 2018 Earnings Conference Call
Feb. 7, 2018, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the 21st Century Fox Second Quarter 2018 Earnings Conference Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time.

If you should require assistance from the operator, please press * then 0. As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host, Mr. Reed Nolte the Executive Vice President of Investor Relations.

Reed Nolte -- Executive Vice President of Investor Relations

Thank you very much, operator. Hello, everyone, and welcome to our second quarter fiscal 2018 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'll 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 Twenty-First Century Fox's business and strategy. Actual results could differ materially from what is said.

The company has formed 10-Q for the three months ended December 31, 2017, 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 a reconciliation of such measures can be found in our earnings release and our 10-Q filing.

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 Murdoch -- Executive Chairman

Thanks, Reed, and good afternoon, everyone. It's been nearly two months since we announced our plans to create a dynamic, new Fox and to merge the remainder of our business with Disney. Over these past weeks, it's clear that investors are embracing our plan. We firmly believe these transactions will unlock the full value of our iconic brands and better position all of our businesses to compete in a rapidly evolving media and entertainment landscape.

But until the Disney deal closes sometime next year, we remain wholly focused on executing against the same growth strategies that made these strategies possible in the first place, which brings us to the second fiscal quarter where we delivered top line growth of 5% despite difficult comps driven largely by double-digit growth at both our domestic and international cable network businesses.

Importantly, this is underpinned by continued acceleration in domestic affiliate revenue. We drove a 12% year-over-year increase to sequentially surpassing the 11% gain of the prior quarter. Our strategy has been to power growth through careful but steady investment in our core brands where we have made solid progress in strengthening our news, sport, and entertainment businesses.

Integral to this strategy is live sport. In fact, live sport has never been more important than it is today. This is why we are energized and excited about our recent agreement with the NFL to make Fox Sports the official home of Thursday Night Football for the next five years. NFL programming is hands down the most powerful in all of media, and if you look at our decades-long relationship with the league, I think you'll agree. Having the most important sports rights over a longer term has always served us well.

This new agreement joins our Sunday afternoon package with Thursday nights to concentrate America's football on Fox. This concentration affords us great monetization opportunities, including through our new, expanded digital rights, and creates a clear runway to further grow the value of our broadcast business-all key goals as we think about setting up the new Fox for the future.

Broadly, this past fall, Fox Sports dominated viewership with 34% more live sports viewing than its next, closest competitor. It achieved the goal it set at last year's upfront to be the number one network in total football viewing and own the fall. For calendar year 2017, Fox Sports delivered a 21% gain over calendar 2016. Fox Sports enters 2018 as the leader in the most valuable type of programming, the leader in America's most popular sport, and the dominant brand during the most valuable time of year.

Over in news, Fox News closed calendar 2017 with its highest-rated year ever-its second consecutive year as the most-watched network on basic cable. Primetime changes broke growth in audience share across all key demographics. Likewise, Fox Business achieved its highest-rated year ever in both total day and business day beating CNBC in business day viewership.

Turning to entertainment, where we continue to strengthen our output, we are creating new hits to drive even deeper audience engagement. Fox Broadcasting has four of the top five new dramas of this season, as well as two of the top three new comedies. In addition, our mid-season is off to a promising start, with the brilliant 9-1-1, a clear standout. [Cut-to] entertainment programming has always been a critical part of FBC's lineup, and that will not change with the new Fox.

At our film studio, the great work of our colleagues and creative partners was recognized with an industry-leading 27 Academy Award nominations. This is on top of more Golden Globe wins than any of our peers, showing the breadth and reach of our creative prowess, fueled by The Shape of Water, Three Billboards, and The Greatest Showman. And we have a great slate this calendar year with Deadpool 2 set for release in May, Battle Angel Alita in the summer, and the next installment of the X-Men Franchise's Dark Phoenix set for later in the year.

Looking ahead, we are focused on achieving our near-term growth plans while successfully completing our value-enhancing transactions.

And with that, I'll hand over to John.

John Nallen -- Chief Financial Officer

Thanks, Lachlan. Today we reported our second quarter financial results highlighted by 5% revenue growth resulting in over $8 billion in total revenues, a quarterly record for our current segments. This growth was driven by strong double-digit affiliate fee increases at the cable networks, partially offset by lower advertising revenues at the television segment. Segment EBITDA for the quarter of $1.44 billion dollars was down 28% from last year. On an individual segment basis, increased cable segment contributions were more than offset by the expected impact of difficult comparisons at the television segment and lower filmed entertainment results.

From a bottom line perspective, income from continuing operations attributable to stockholders of $1.84 billion or $0.99 per share increased from the $0.46 per share reported in the prior year. And this is primarily due to a $1.3 billion or $0.72 per share benefit from the remeasurement of our net deferred tax liabilities as a result of the Tax Cuts and Jobs Act. Our adjusted EPS in the current quarter was $0.42, versus a comparable $0.53 in the prior year.

So, now turning to the performance of our operating segments for the quarter, the cable network segment reported EBITDA of $1.37 billion, a 3% increase over the prior year. Revenue growth of 11% was partially offset by a 15% increase in expenses from the higher volume of sporting events led by the earlier start of the NBA season at the RSNs, the timing of cricket matches at Star, the new big ten collegiate events at FS1, and new sublicensed sports product. This quarter's sublicensing had a 2% impact on revenue growth and a 3%-point impact on expense growth with no significant effect on earnings.

Domestic cable revenues increased 10%, led by 12% affiliate fee growth, reflecting higher average rates across all of our domestic brands, led by national sports and news channels. Domestic advertising declined 3% primarily reflecting the impact of lower general entertainment ratings from fewer hours of originals at FX. EBITDA at our domestic channels increased 1% over the prior year with the higher affiliate revenue mostly offset by the increased sports costs from the timing and volume of games at the RSNs and the national sports channels.

Reported international cable revenues grew 15% with a 13% increase in reported affiliate revenue and a 14% increase in reported advertising revenue. International content in other revenues increased 30% due to the sublicensing of Latin American soccer rights, which is fully offset in expenses. Reported international EBITDA contributions were up 8% from the prior year, reflecting the higher revenues being partially offset by expected higher programming costs largely from the earlier timing of BCCI cricket matches at Star in India.

At our television segment, EBITDA was $56 million, 85% below last year. Revenues declined 6% as continued retransmission consent revenue growth was more than offset by expected advertising revenue declines, reflecting challenging comparisons to the prior year, which included local political revenues from the general election and the highest viewership for a World Series in over two decades, as well as last year's incremental spectrum use revenue in one of our local TV markets.

Also contributing to the revenue decline were the effects of lower NFL ratings, which were more than offset by the addition of college football on the network. Television segment expenses increased over the prior year, reflecting an increased volume of college and NFL football and MLB baseball games combined with normal, contractual increases.

At the film segment, second quarter EBITDA of $131 million was $258 million below last year. This quarter included significant releasing costs for our holiday movie slate, including The Greatest Showman and Ferdinand as well as pre-release costs for Maze Runner. In all, we released eight films in the quarter, five of which are Academy Award nominees, compared to a much lighter release slate last year.

Now from an overall balance sheet perspective, we ended the quarter with $5.8 billion in cash and $19.8 billion in debt, and our capital allocation priority remains focused on the Sky acquisition.

And, finally, just to comment on tax because we have a June fiscal year, the impact of the US Tax Act will blend in over two fiscal years. In this current fiscal year, our US statutory rate will decline to a full-year average of 28%, and then beginning at next fiscal year, it will decline to the new 21% rate. At this point we're expecting our normalized effective tax rate for fiscal '19 to be in the mid-20% range. And with that let me turn it over to James.

James Murdoch -- Chief Executive Officer

Thanks, very much, John and Lachlan, and thanks, everyone, for joining today's call. In the first half of fiscal 2018, as you've seen, we made really considerable progress. Our programming from scripted to nonfiction sports and news continues to differentiate and fortify these brands. And our customer's experience continues to improve as well. Our strategy of making our content more available, not less, is paying dividends, and we're driving more flexibility, more access both in and outside the home and a better advertising experience across the board.

IP delivery of entertainment is driving a better environment for the business, and we're making strides. I want to highlight just a few advances. As of today, we're approaching 4million digital MVPD subscribers even as we're still in the very early innings. Many of these services have yet to roll out distribution and marketing to important cities throughout the US. The growing subscriber contributions from these new entrants, which reflects 50% sequential growth from the September to December quarters offset declines in the traditional distribution marketplace, maintaining our domestic subscriber levels. Our affiliate Hulu recently announced strong growth as well, crossing 17 million subscribers and notably adding more United States subscribers than Netflix in both of the last two quarters.

Along with strong first half results as well, Sky recently announced streaming plans for key markets in Europe developing cost-efficient platforms to extend the Sky Q and streaming businesses without the need of a satellite dish driving growth opportunities in both existing and new markets.

Let me update you on our proposed transactions, starting with Sky, which has moved forward to the next phase of the regulatory review process. With the recent publication of provisional findings by the UK Competition and Markets Authority, we'll continue to engage constructively with the CMA to address their concerns ahead of their May 1st final report. We anticipate regulatory approval for our proposed Sky transaction by the end of June as we've said earlier.

And, finally, on the new Fox and Disney, we're currently engaged in a planning process for the separation of the businesses with a view toward the integration of our assets with Disney and the establishment of the new Fox. We're convinced that the creation of these two dynamic media companies will set a path forward for our businesses to thrive and realize their full potential and for our shareholders to benefit from compelling growth opportunities.

 In summary, we're continuing to make operational advances that bolster our competitive footing and position as for long-term growth. So, with that, I think we'll go to your questions, Reed.

Reed Nolte -- Executive Vice President of Investor Relations

Yes, thank you. And now, operator, we'll be happy to take questions from the investment community.

Questions and Answers:

Operator

Okay, ladies and gentlemen, if you do wish to as a question, please press * then 1 at this time.

Our first question will come from the line of Michael Nathanson, MoffettNathanson. Please, go ahead.

Michael Nathanson -- MoffettNathanson -- Analyst

I have one for James or Lachlan about the NFL and one for John about taxes. So, in the NFL, you guys already had Sunday night. So, the question is what does another night of NFL give you that you had before? And then could you talk a bit about the digital rights received and how you're going to leverage those digital rights, and what are they? And then for John, any update on what the tax rate would be for new Fox assuming that deal gets done.

James Murdoch -- Chief Executive Officer

On the NFL, I think Lachlan put it well in his opening comments. They're really concentrating the NFL audience and NFL product on the Fox network. It's something we think is very attractive, and I think when you look at the licensing that the NFL has undertaken with the expanding the Thursday night-and we've talked in the past about what fragmentation can do to the audience of each individual day-we think the right answer there is actually to concentrate that audience and to have Fox really be the clear leader in NFL broadcasting with a product as powerful as it is. So, we think that's pretty attractive to have the extra night of football, and it's a powerful platform for the network both in terms of other promotions and promoting other nights and other programs. But in general, as a scarcity value of large audiences coming together around national events continues to rise, we really want Fox to be the home of that kind of compelling product.

And then with respect to the digital rights, I think just in summary the new agreement gives us much more flexibility in terms of exploiting those rights, some of which on a non-essential basis, others differently, but it gives us more flexibility to exploit the rights and really bring the product to our customers in new ways-both on a direct to consumer basis and over-the-top and on new devices.

Lachlan Murdoch -- Executive Chairman

I think that's right, James. With the NFL, I think I might have said in my prepared comments that we'll have three of the five top short of shows on the United States television with the addition of the Thursday Night Football. We think that consolidating Thursday Night Football onto one network as opposed to two gives us a great opportunity to actually grow the ratings of Thursday Night Football. And we've already seen sort of good momentum behind the network. I think we finished January as the number one network on television. We're the only network with growth. We're about 15% growth in January. We liked our fall launches and our mid-season shows. Obviously, I mentioned 9-1-1 and also The Four has been a good reality show for us. So, we actually feel we've got momentum, and the addition of Thursday Night Football will strengthen that as well.

John Nallen -- Chief Financial Officer

Michael, it's John. On the tax, rate there's really two parts to the answer. One is as a wholly domestic company, new Fox's rate will be close to the statutory federal and state and local rates, so in the mid-20s. But it's important from a cash standpoint to recognize, as we said in the call when we announced Disney, new Fox will also have a substantial tax shield over 15 years. So, it's cash rate will be substantially below that statutory rate.

Reed Nolte -- Executive Vice President of Investor Relations

Operator, could we have the next question, please?

Operator

It comes from the line of John Janedis with Jefferies. Please, go ahead.

John Janedis -- Jefferies -- Analyst

Ahead of the merger, how are you thinking about programming and scheduling the network? Do you start to diversify new Fox away from the Fox Studio this fall in terms of suppliers, or do you wait until the expected close? And I guess with what seems like the likelihood of further consolidation, can you talk about the probability of Fox ultimately supplying its self-content in any of the key dayparts?

Lachlan Murdoch -- Executive Chairman

Let me just start for the development for this coming fall, the way the development process works, we're already sort of deeply into sort of our development cycle and just started to order new pilots of which I've just been through a number of the scripts and the orders. And they're very excited, but that process is already well under way. So, with new Fox, you will see a diversification in terms of who we are buying our content come, but that will really become the season after this season you'll see that start to change more dramatically.

John Janedis -- Jefferies -- Analyst

Okay, and then maybe separately just on the Thursday night deal, can you talk more broadly about your view on sports rights? With the fragmentation of viewers that you guys referenced, how have you been thinking about rights as loss leaders particularly as other deals renew across the rest of the portfolio in the coming years?

James Murdoch -- Chief Executive Officer

Look, I think, John, it's always about choices. And you're always looking at, A, the cost of rights and what you can afford to do, what you think you can make a return on, on a stand-alone basis, as well as thinking about them as, I wouldn't say a loss leader, but if there's investments you make for a period of time to establish an event to gather the audience but also use it as a platform for promoting other things. So, I think around the world we look at sports rights pretty straightforwardly that we just have to make judgment calls in each option, in each situation, and with each package of rights that come up. And that can be from the IPL in India, which we're commencing broadcasting for the first time this year, to soccer and European football rights, to the NFL or baseball here.

So, each time you have to look at it and think about the overall balance of investment and how you go forward. I think with respect to the overall fragmentation of viewing kind of generally, I think the value of a concentrated audience is very high, even if the absolute number of viewers may be a little bit lower as the fragmentation impacts. The scarcity value of those events is tremendous, and advertisers remain very attracted to that. So, we think it's an important part of the portfolio, but you would never make a blanket assumption about prices, about which events and what you're doing going forward because you have to look at it on case-by-case basis, as you've seen in the past where we've walked away from things or waiting until the structure of a package was just right and then been more confident investing in it. And that's the way we're looking at it.

Reed Nolte -- Executive Vice President of Investor Relations

Thanks, John. Operator, next question, please.

Operator

It comes from the line of Marci Ryvicker with Wells Fargo. Please, go ahead.

Marci Ryvicker -- Wells Fargo -- Analyst

Two questions. As new Fox, would you say you see more of an opportunity in higher retrans rates versus reverse comp, or do you think the opportunity to gain more leverage is about the same? And then just a quick question on Star, given that your fiscal year is half over, any update there on that $500 million EBITDA figure for '18?

Lachlan Murdoch -- Executive Chairman

Maybe I can answer the new Fox question, and James can address Star. Yeah, absolutely, at new Fox we see a great potential to increase our retransmission revenue quite aggressively. We think that for two reasons: one, obviously, some of the focus and investment in sport and with the new NFL on Thursday night package, but also, I think just as being a more focused-on company with fewer channels in our bundle. We'll be able to drive our retrans for the stations quite aggressively.

James Murdoch -- Chief Executive Officer

Yeah, I think just on that retransmission, it's really just still a growth trajectory in terms of getting to what we think is a fair price given the strength of the network, the strength of the stations and the size of that audience and its leadership. So, even irrespective, we think there's good opportunities there. And with respect to Star, yeah, it's halfway through the fiscal year. Always there's ups and downs in these things, but we see nothing at this point to make us feel any differently about the targets both in the short term and the medium term. And we're thinking about the long-term as well. So, we're very excited about the balance of the year. Star Bharat, the big free-to-air channel has done very, very well in its launch this year. And we'll get thereabouts.

Reed Nolte -- Executive Vice President of Investor Relations

Thank you, Marci. Operator, next question, please.

Operator

And that comes from the line of Ben Swinburne with Morgan Stanley. Please, go ahead. We'll move on to the next line. It comes from the line of Jessica Reif Cohen with Bank of America/Merrill Lynch. Please, go ahead.

Jessica Reif Cohen -- Bank of America/Merrill Lynch -- Analyst

Kind of a bigger picture, what do you see as the biggest challenges and opportunities between now and closing with Disney? You've alluded about possibly launching a direct to consumer service. Maybe you could talk about that and TV station acquisitions but any way you want to address that question.

James Murdoch -- Chief Executive Officer

Jessica, look, I think the first thing to remember is that we've got a little way to go here. We've got regulatory approval to be obtained, and we're very focused on that. We're very focused on closing all the transactions that we have up in the air, be it Sky in the near term and a little bit further out the Disney transaction and the standup and separation of the new Fox. So, we're focused on those things very much, but until we get there, we're very much operating this business at a high velocity in a mode around building each business and each brand as best we can as we would have anyway. So, I think ahead of closing you have to operate on a business as usual basis, and you have to try to make the right decisions for each business and each brand there.

So, for example, we continue to build our capabilities in direct to consumer. We've revamped all of our major, over-the-top apps in the United States and in some cases outside with Fox Plus in Latin America and, for example, NatGeo One, which launched in Australia recently. So, we continue to push the pace on that, and I think as we get closer to closing and the separation, then you have to establish a kind of glide path for each different chunk. But in the meantime, I think we just continue to build, and we're seeing really good progress, great customer numbers there, really great customer engagement. As I mentioned comments, the customer experience just gets better and better as we've invested in this capability and rolling out new features and new upgrades to all of those things.

So, we continue to do that, and with respect to other opportunities-you mentioned stations, etcetera-we have to be openminded and do the right thing for the long-term value in the business. And none of the pending transactions change that. We think we're on a pretty good course, and we'll continue to be.

Jessica Reif Cohen -- Bank of America/Merrill Lynch -- Analyst

Great, can I just ask one quick follow-up? I may have missed this, but can you comment, if you haven't, on the affiliate outlook? Your numbers were astounding.

John Nallen -- Chief Financial Officer

We'd just repeat what we said at the beginning of the year. We expect every quarter, so far with two under our belt, to be high single digits or better. And we're still confident in that.

James Murdoch -- Chief Executive Officer

And, Jessica, look. We've been talking for two years about increased competition from digital MVPDs starting to generate real growth in the marketplace, and competition always creates growth and innovation. That's why we believe in it, and we've enabled a lot of these new competitors to really get into the market. When we talk about licensing our product in a way that makes our content and our brands more available and not less, it's all about enabling that competition. So, we're really seeing that come through now, and you're seeing it overall in the market. It's certainly not done. There's a lot to play for going forward, but we're very encouraged by the growth of these new platforms and encouraged for the sector generally on the basis of that.

Reed Nolte -- Executive Vice President of Investor Relations

Thank you, Jessica. Operator, next question, please.

Operator

And that comes from the line of John Hodulik with UBS. Please, go ahead.

John Hodulik -- UBS -- Analyst

Maybe a quick follow up on the Thursday Night Football package, any color you guys could give us on the sort of near-term financial impact that we may see in the EBITDA line as a result of the contract? And then on the domestic affiliate, you called out in the prepared remarks that it was led by national sports and news. Should we read into that that the affiliate fees related to new Fox are sort of growing faster than that 12% level you guys reported today? Thanks.

John Nallen -- Chief Financial Officer

Let me cover of them for you, John. First on the NFL, as James referred to earlier, this is all about choices. So, as we look at the NFL, it's as against what our plans were. So, in the first year we expect to make an investment into the Thursday package, and thereafter as against our plans, we feel we'll be in a very comfortable place as against where we thought we'd be. As it results to the sports and news channels, I don't know that we want to actually call out any one particular channel. We increasingly are selling these channels as a group. We do isolated deals here or there, but every single channel performed very well for us in the quarter and continues to.

Reed Nolte -- Executive Vice President of Investor Relations

Thank you, John. Next question, please, operator.

Operator

Comes from the line of Barton Crockett with B. Riley FBR. Please, go ahead.

Barton Crockett -- FBR Capital Markets -- Analyst

I wanted to go back a little bit to the Thursday Night Football deal in conjunction with the Disney deal, and the question is really about scale in sports. With the Disney deal, there's obviously some measure of slimming down by giving them the RSNs, and you're following that up with a bigger check for big NFL rights. I'm just wondering. Should we read from this that the RSNs really didn't contribute to scale that they were such a different business that it doesn't really give you any more leverage for fee recovery for big sports rights or to be able to kind of make an economic case for them? Or is the idea that scale is important for these big sports right, maybe less important than some of us might have thought?

James Murdoch -- Chief Executive Officer

With respect to the rationale around the separation of the RSNs and new Fox, etcetera, I mean, it's really a question of organizing all of the brands in the businesses in a way that we think are going to be most attractive from a long-term value perspective both with respect to the merged Fox-Disney company as well as the new Fox. I think the economic performance of the RSNs has been tremendous, but also remember that they have their own set of rights-local rights. It's a very different market. They don't really compete with the rest. So, as a stand-alone business driving audience and driving engagement there, we continue to think it's a very attractive business, and that's why we think it was a very attractive opportunity to include those in the merge with Disney. That said, the national sports market, which is pretty distinct in terms of rights, in terms of how you do it, etcetera, is one that we also believe in. As you can see with the rapid growth of Fox Sports One and Two, the big ten network, and we're excited about that. That's why we started Fox Sports One only a few years ago.

Barton Crockett -- FBR Capital Markets -- Analyst

Okay, if I could just follow up, I think one of the questions has been the durability of companies like yours to pay higher sports rights as others might come in-the internet companies. I was just wondering if you think scaling up is important to be able to compete in that future, or maybe that's less important for you guys as a strategic priority right now.

James Murdoch -- Chief Executive Officer

Well, I'm not so sure it's the future. I think, actually, it's the present. If we look at the IPL auction in India last year, we were competing very aggressively with Facebook in that auction, and we have a great platform there. It's a great platform for monetization. It's a great platform for reaching audience, and we were able to win that auction. But in all of these places, it's a question really of making choices, and that's why you don't have to be all in on every set of rights and pay whatever it takes. It doesn't really matter who's bidding. I mean, people have to make economic choices around the value of these rights, the value of these products. So, we like our ability to compete across the board with these brands with a variety and a diversity of rights that I think we've proven ourselves in terms of being able to put together really compelling packages there. But it's never a question of all or nothing. You have to make choices, and sometimes you don't think something is worth as much as somebody else does, and you steer the business in a different direction.

Reed Nolte -- Executive Vice President of Investor Relations

Thank you, Barton. At this point, we have time for one last question.

Operator

Okay, and that will come from the line of Benjamin Swinburne with Morgan Stanley. Please, go ahead.

Benjamin Swinburne -- Morgan Stanley -- Analyst

Two questions. John, on the Disney deal now that the tax reform has been signed into law, can you update us at all on the dividend payment that new Fox was making to Twenty-First Century at the close before the spend and how that relates to sort of the balance sheet or the debt level at new Fox once this is all closed? I know there's moving pieces, but now that we have the tax law signed, I was hoping you could give us some clarity.

And then just at the risk of beating Thursday Night Football to death, you guys have invested a lot in ad:tech to try to monetize viewers better, but certainly, the consensus view is that the ad revenues on the NFL are flat to down looking forward given the ratings trajectory. I'm just wondering if you have a different perspective based on what you've been able to do with TrueX and other products to try to monetize large, live audiences. And maybe we're being too conservative in our outlook on the advertising side of the NFL.

John Nallen -- Chief Financial Officer

It depends on how you value new Fox to answer this question, but in my own mind, the tax liability that will result from the spend of new Fox is somewhere in the plus or minus zone now with tax reform in of $6 billion. Remember. There's always as part of the deal a minimum debt level at new Fox of $6.5. So, as a result, I think you should assume we'll be making the minimum distribution, and the spread between the tax and the debt is accomplished or compensated for by an adjustment to the exchange ratio. You pick a point on what you think the equity trading value is. For every dollar that that market value moves one way or another, it's about $425 million of cash tax.

Benjamin Swinburne -- Morgan Stanley -- Analyst

Dollar on Twenty-First Century Fox share price. Just want to make sure I want to understand that.

John Nallen -- Chief Financial Officer

No, on new Fox. If you value new Fox at x-per-share, if a dollar moves one way or the other, that's $425 million moving one way or the other.

Benjamin Swinburne -- Morgan Stanley -- Analyst

Got it. Thank you.

James Murdoch -- Chief Executive Officer

And then on the point about advertising. I think we're making really good progress on nonlinear advertising and new advertising formats in the linear stream as well. So, we feel pretty good about that. Clearly, the ratings did impact revenue. The number of impressions we can deliver to advertisers is always gonna be something that we'll either do well or not with it. We have some pretty difficult comparisons as John mentioned in this year-on-year period, but we actually feel reasonably good about it. And I think actually the promise of a streaming environment is one where even in sort of linear broadcasting on sports, for example, having a nonlinear, really data-driven advertising platform sitting underneath that and being able to monetize that audience is hugely attractive. And we see that starting to bear fruit, but it's still not an enormous part of the audience that's consuming linear product on digital streaming platforms. So, that's something that as that grows we think that the yields from a minute by minute, customer by customer basis will continue to improve. We certainly see that, for example, in the Hulu streams where we just have dramatically better monetization on Hulu, our owned and operated apps, than we do, for example, on the traditional MVPD distribution, which is encouraging in terms of leveling up and equalizing those over the next number of years, which we think is very possible.

Reed Nolte -- Executive Vice President of Investor Relations

Thank you, Ben, and thank you, everyone, for joining today's call. If you have any further questions, please feel free to give Mike Petrie or me a call. Thanks, everyone.

Operator

Okay, ladies and gentlemen, that does conclude today's conference call. As I mentioned earlier, today's conference was recorded, and it was for replay. The call will be available starting at 6:30 today for three weeks until February 21st at midnight. You may access the AT&T replay system by dialing 1-800-475-6710 and entering the access code 442888. International participants can dial 320-365-3844. Those numbers again, the access code is 442888 with toll-free number 1-800-475-6710. And international is 320-365-3844. That does conclude the conference. You may now disconnect.

Duration: 39 minutes

Call participants:

Reed Nolte -- Executive Vice President of Investor Relations

Lachlan Murdoch -- Executive Chairman

James Murdoch -- Chief Executive Officer

John Nallen -- Chief Financial Officer

Michael Nathanson -- MoffettNathanson -- Analyst

John Janedis -- Jefferies -- Analyst

Marci Ryvicker -- Wells Fargo -- Analyst

Jessica Reif Cohen -- Bank of America/Merrill Lynch -- Analyst

John Hodulik -- UBS -- Analyst

Barton Crockett -- FBR Capital Markets -- Analyst

Benjamin Swinburne -- Morgan Stanley -- Analyst

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