Deadpool's opening weekend broke several records, including blowing the previous highest-grossing R-rated opening out of the water.
In this clip, Sean O'Reilly and Vincent Shen talk about what the movie -- and its success -- means for Twenty-First Century Fox (NASDAQ:FOX) (NASDAQ:FOXA). They also look at how much Fox depends on superhero movies for its top line, what other avenues the company uses to bring in revenue, and how the stock has performed in the last few years.
Listen to the full podcast by clicking here. A full transcript follows the video.
This podcast was recorded on Feb. 16, 2016.
Sean O'Reilly: So what does this mean for Twenty-First Century? Their stock's up, isn't it? This is good stuff.
Vincent Shen: The studio's banking on some of these superhero films to continue driving the results for their film entertainment segment at Twenty-First Century Fox, and that's the second largest business for them. It makes up about one-third of their top line, and just to give you some perspective, for the film entertainment segment, five out of their top 10 opening weekends have been from Marvel titles, Deadpool is now No. 1, the other four are the X-Men movies.
Shen: Two of the others that you mentioned were actually the Star Wars titles, too, the prequels. They definitely depend on those proven franchises. But the thing is, they also have a lot of great movies on tap. The studio has more Marvel coming with X-Men: Apocalypse -- very, very highly anticipated.
O'Reilly: Yeah, which we saw a preview for that in Deadpool, so.
Shen: They also have the stand-alone Gambit origin story probably coming out later this year, and they also have long, long awaited sequel with Independence Day: Resurgence.
O'Reilly: That movie, do you realize how much money the original Independence Day made?
Shen: Yeah, it was actually, coincidentally, one of Fox's highest grossing films of all time. And they also have Assassin's Creed, and that's based on ...
O'Reilly: Oh, that's the video game.
Shen: Yeah, huge video game franchise that has sold over 80 million total copies in its run, because they have had, I think, like nine installments of the game at this point.
O'Reilly: Oh my gosh.
Shen: So that also has a lot of fans excited, and hopefully could be a big blockbuster for them. But with all that said, you know, they have this really strong slate of movies lined up. The thing is, as is always the case with a Hollywood-based business like this, it can be really hard sometimes to call how successful these movies are. You know, they had a huge flop last year with Fantastic Four -- same studio. It can be really choppy, can swing high or low, with unexpected hits like this one, with Deadpool, and disappointments like Fantastic Four. You'd think the whole superhero thing is pretty proven at this point, but they still have their flops as well. At the same time, I think management seemed to prove that they understood their audience with this movie. They marketed it brilliantly.
Shen: The buzz in terms of social media and all these other places just really added to the success for the movie over the weekend. So hopefully, it's something they keep in mind and can leverage going forward.
In terms of their other segments, just for the company and the rest of the businesses at Twenty-First Century Fox, you know, they have the presidential election, which should really help their television cable network programming for the remainder of their fiscal 2016 and at least half of fiscal 2017, especially some of them in news, with this potential nomination coming up for the Supreme Court justice, just, I think a lot of people are going to be glued, obviously, to some of Fox's networks.
O'Reilly: It's a good time to be Rupert Murdoch.
Shen: Yes, and another thing is we're notice from a lot of other content providers -- think Disney as well,for example -- is you know they're seeing higher programming costs for their networks, and a lot of that's being driven by sports. Fox specifically mentioned soccer, major league baseball, college football rights, having increasing costs contributing to that, or contributing to higher programming costs for that segment, and that's something we're seeing across the board. Live sports have this very obvious understanding that they are the hold for a lot of these cord-cutters and things like that, so they can charge these premium prices.
Otherwise, the stock overall is actually down about 30% since the end of 2014. I think management's really focused on returning capital to shareholders too, so they authorized $5 billion of share repurchases last summer. They expect to use up that authorization by August 2016, and in the past five years, they've reduced their shares outstanding about 25%, so pretty significant. You know, 2015 they bought back about $6 billion worth of shares, the year before that almost $4 billion. The company's definitely very focused on that. I'm interested to see ... It might only be the second segment in terms of filmed entertainment, but just always nice to have fun, fan-favorite kind of movies coming out like this.
O'Reilly: For sure. OK.
Sean O'Reilly has no position in any stocks mentioned. Vincent Shen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.