Fox predicts record political ad spending in US midterm elections

Lachlan Murdoch, Fox Corporation chief, has hailed an “unprecedented wave” of political advertising sweeping America this year that looks on course to outstrip spending before the 2020 elections.

As he unveiled Fox’s annual earnings, Murdoch said the financial muscle being deployed in closely fought Senate, House and gubernatorial races would make the November midterm election cycle potentially the most lucrative in US history.

Murdoch told investors on Wednesday that in the three months to the end of June, political advertising revenues at Fox’s network of 29 local television stations were “roughly three times larger” than the equivalent quarter of the 2020 presidential cycle, which was itself “an all-time record for the company”.

“We are seeing an unprecedented wave of political spending which accelerates as we head towards November,” he said, adding: “The outlook is remarkably strong.” Shares in New York-based Fox rose 3.7 per cent.

The buoyancy of political advertising has been a welcome boost for the media industry as it braces for an economic slowdown that could badly hit advertising, pay TV and streaming subscription revenues.

GroupM, the WPP-owned media buying agency, has forecast political advertising budgets in America reaching a record $13bn in 2022. The figure exceeds the $12bn spending in the 2020 election year, when Joe Biden defeated Donald Trump. It is more than double the $6bn spent for the midterm election cycle of 2018.

Since Rupert Murdoch agreed to sell his treasured television and film studios to Disney in 2017, the remaining Fox company has become a much slimmer group built around live news and sports, two genres less vulnerable to disruption from streaming. The Fox News cable channel remains the company’s profit engine.

While the group footprint in traditional television leaves it more vulnerable to any ad slowdown than some of its peers, Murdoch insisted Fox had yet to see any “adverse” signs in the market, aside from some softness in some segments of digital advertising.

Through Fox News and its local stations, Fox is also well placed to benefit from the surge in political spending this year. Murdoch singled out high spending expected for races in Arizona, Florida and Georgia.

“Excluding the impact of the Georgia run-offs [in 2020] . . . this midterm cycle looks certain to surpass the 2020 presidential cycle at our local stations,” he said.

Rival local television groups Nexstar and Sinclair have also said the early signs are pointing to a bumper year.

Perry Sook, founder of Nexstar, which has 200 broadcast stations in its network, noted that questions had been asked about whether it was possible to “make up the Bloomberg money from 2020”, referring to the big-spending presidential campaign of the billionaire Michael Bloomberg.

“I think we proved that in spades,” he told investors. Although he would not commit to a firm financial forecast, Sook said: “every indication is that this will be a record midterm election”.

Fox reported a 5 per cent increase in fourth-quarter revenues of $3bn, roughly in line with Wall Street estimates, while net income of $308mn beat expectations.

Advertising revenues at Fox’s local television arm rose 4 per cent to $698mn in the fourth quarter, while Fox News generated $358mn across the same period, a 14 per cent increase.

Murdoch said he expected Fox to return record revenues and operating profits in 2023.