Ladies and gentlemen, thank you for standing by. Welcome to the Fox Corporation Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions]. I'll now turn the conference over to Chief Investor Relations Officer and Executive Vice President of Corporate Initiatives, Mr. Joe Dorrego. Please go ahead, sir..

Thank you, Noah. Hello, and welcome to our fiscal 2020 year-end earnings call. Joining me on the call today are Lachlan Murdoch, Executive Chairman and Chief Executive Officer; John Nallen, Chief Operating Officer; and Steve Tomsic, our Chief Financial Officer.

First, Lachlan and Steve will give some prepared remarks on the fiscal year and most recent quarter, and then we'll take a couple of questions from the investment community. Please note that this call may include forward-looking statements regarding Fox's financial performance and operating results.

These statements are based on management's current expectations, and actual results could differ from what is stated as a result of certain factors identified on today's call and in the company's SEC filings. Additionally, this call will include certain non-GAAP financial measures, including adjusted EBITDA or EBITDA, as we refer to it on this call.

Reconciliations of non-GAAP financial measures are included in our earnings release and our SEC filings, which are both available in the Investor Relations section of the website. And with that, I'm pleased to turn the call over to Lachlan..

Lone Star, the season's number one new scripted show. And the network will also have a robust and stable entertainment lineup in the fall. We will debut two new series that were shot and ready to air before the pandemic, the psychological thriller, NEXT; and the Southern soap opera, Filthy Rich.

We remain hopeful that The Masked Singer's fourth season will also be on air for the fall. Of course, animation has always been a strength of Fox, and earlier in the fiscal year, FOX Entertainment brought the Bento Box animation studio into the Fox family.

Bento Box was a natural addition to enhance the capabilities of FOX Entertainment and has already proven to be an impactful investment. It's important to note that animation production has not been significantly impacted by the coronavirus pandemic.

Not only did we renew Bento Box's Emmy-winning show, Bob's Burgers for an 11th season on FOX, Bento Box is also producing 11 new animated shows, including for third-party customers such as Netflix and HBO Max. These new shows follow the May launch of Central Park, Bento Box's Apple TV+ Comedy Series.

More recently, in April, we completed our acquisition of the advertising video-on-demand platform, Tubi. Tubi has seen phenomenal growth since it joined Fox. In June, it surpassed 200 million hours streamed per month, representing more than 100% growth year-over-year.

During the fourth quarter, several Fox hit shows were added to Tubi, with The Masked Singer quickly becoming Tubi's number one streamed series. Tubi's young and diverse audience gives it a unique appeal with advertisers seeking to connect with consumers that are traditionally more challenging to reach.

Tubi complements Fox portfolio and underscores our long-term strategic initiative to broaden and enhance direct-to-consumer digital reach and engagement, while providing advertising partners with more opportunities to engage audiences at scale.

During this year's upfront season, we have begun selling Tubi advertising alongside broadcast, significantly expanding our clients' reach. According to one research company, 87% of the Tubi audience cannot be reached by cable television. They are young and diverse with a median age of only 34. It's a great business and a great fit with Fox.

Another business that's had an extraordinary year is FOX News, which ended fiscal year 2020 with record-breaking viewership. In June 2020, FOX News was the leading prime time network in all of television among total viewers, making it the first cable network to ever lead all broadcast networks in ratings for an entire month.

For the fiscal year, we were again the number one channel in all of cable for total viewers across prime and total day. Now I could say that's another extraordinary achievement, but the etymologist in me won't allow it.

That's because FOX News has been the number one channel in all cable for 4 years running and the number one channel in cable news for 18 years. We have a long track record of succeeding through multiple economic and political cycles and during administrations of both political parties.

We are pacing calendar 2020 to have our highest-rated prime time year in network history, with total viewers up 39% over 2019. Our content programs are now routinely notching around 4 million viewers a night.

Though not a head-to-head comparison, the FOX News channel is eclipsing broadcast news stalwarts like TODAY, Good Morning America, CBS This Morning and Meet the Press in viewership. And viewers are coming to us not just for news and opinion, but increasingly for documentary and lifestyle programming on platforms such as FOX Nation and FoxNews.com.

In fact, FOX Nation more than doubled its subscriber base this fiscal year, sustaining a trial to pay conversion rate of over 80% and a monthly churn rate of under 10%. Momentum built as the year progressed, with content starts up over 120% and hours watched up over 170% in the second half of fiscal year compared to the first half.

Within FOX News, we have also organically cultivated one of the most impactful digital platforms in the country. FOX News Media charted its highest digital traffic in fiscal year 2020, with record total digital page views and a record time spent. Users viewed over 40 billion pages and spent 98 billion minutes on our FOX News digital platforms.

We expect this trend to accelerate as we head into election season in November. The fall will be busy for our news organizations at FOX News and at our stations. Later this month, FOX News will bring viewers coverage of the Democratic and Republican national conventions, in whatever form they take.

And as we close in on November, we expect to continue to achieve a record amount of political revenue across both our national channels and local stations. It's important to note that according to a study by Nielsen MRI Fusion, FOX News has more than doubled the number of independent viewers than CNN, 119% more to be exact.

And we have 62% more independent viewers than MSNBC. This points clearly to our highly trusted, balanced news reporting and is a key differentiator between us and our competitors for political advertising.

In the political cycle today, inclusive of the impact of COVID-19, our political advertising revenue is pacing more than 50% ahead of the equivalent period 4 years ago. We are encouraged by recent trends in our local markets and expect healthy political demand up and down the ballot in the coming quarters.

Nine of our 18 stations are a presidential battleground space. These are led by Arizona, Florida, Pennsylvania and Wisconsin, but also include Georgia, Michigan and Minnesota. We have center races in 10 markets and lower house races in all, a number of which are expected to be close and hotly contested.

Record political revenue has already offset some of the impact from COVID-19 in local markets. While our top 7 markets where businesses have not yet fully reopened, we are now pacing, overall, down 29% at the start of Q1. Our next 11 markets are together pacing down just 4%.

That's a tremendous recovery from what we were seeing just a couple of months ago. And 3 of our markets are now pacing well ahead of last year. These are Atlanta, Tampa and Phoenix. Not coincidentally, these are all strong political markets.

The fourth quarter saw affiliate revenues grow by 8%, where healthy rate increases were offset by a decline in subscriber volumes of around 6.5%. For the full fiscal year, our total company affiliate revenues increased 7%, an important illustration of our brand's prominence and strength with audiences and distribution partners alike.

This past year, we have completed significant distribution agreements, including an early renewal with Comcast as well as new deals with Verizon, Cox, Charter and YouTube TV, among others, each with rate increases that underscore the importance of our channels.

As we articulated more than a year ago during our Investor Day and as we've demonstrated with our disciplined and intentional acquisitions to date, we are taking a deliberate and selective approach to M&A and strong businesses fit within our vision, are well-executed and properly integrated with the rest of the company.

We continually assess opportunities to deepen our strengths by expanding lines of business and the types of operations at which we excel. Our goal remains to expand the ways our audiences interact with and connect to our brands, while simultaneously diversifying each brand's sources of revenue.

But before turning things over to Steve, let me reinforce one key point as we mark the end of our first fiscal year. The assets and businesses of Fox were deliberately composed for efficient growth and success in the current media environment.

The stability and trajectory of the company are underscored by the revenue structure and unrivaled viewer engagement. Fox has demonstrated consistent clarity of vision by assembling the portfolio we have and by evolving to embrace opportunities in order to meet the challenges of our time.

We entered the COVID-19 crisis on firm footing financially, strategically and operationally.

Our innovative thinking in combination with the tailwinds of the upcoming fall sports and entertainment seasons and ongoing need for live news, analysis and opinion will see Fox emerge from this pandemic-cost year more competitive, more focused and even more strongly positioned to deliver for our viewers, our partners and our shareholders.

And now Steve will take us through a bit detailed. Thank you..

Thanks, Lachlan, and good afternoon. Despite the broader macroeconomic factors affecting our businesses, as Lachlan just highlighted, our first fiscal year as a stand-alone public company demonstrates that we are delivering on the strategies that we outlined at the time of the spin and that truly differentiate Fox.

Let me now take you through our financial results for the fiscal year as well as the fourth quarter. I'll also take a few minutes to review the key investments we've made since the spin, before concluding with some financial markets for the months ahead. Our full year results saw total revenues increased 8% to $12.3 billion.

This revenue growth was broad-based and led by affiliate revenue growth of 7% on the back of retransmission revenue increases at the television segment. We delivered this industry-leading affiliate revenue growth, despite an uptick in the rate of net subscriber declines.

Using fiscal '19 as a base, we renewed 70% of total affiliate revenue in fiscal '20. Looking forward, the renewal profile in the immediate future is significantly lighter, with around 5% of total fiscal '20 affiliate revenue due for renewal in each of fiscal '21 and '22.

Full year advertising revenues increased 5%, led by our broadcast of Super Bowl LIV. Partially offsetting this growth was the impact of COVID-19 in recent months.

As we foreshadowed in May, the impact was most pronounced at our local television stations as well as FOX Sports due to the postponement of live events and at FOX Entertainment as new scripted programs were held back for our fall schedule.

We also increased other revenues nearly 30%, primarily through the consolidation of Bento Box at the television segment beginning in August and the consolidation of Credible in our other segment beginning in October. Total full year adjusted EBITDA was $2.8 billion, an increase of 4% over the prior year.

This growth was delivered despite the negative comparison to the accounting benefit from certain shared services and overhead costs being presented on a carve-out basis in the first 3 quarters of the prior year. Full year net income attributable to stockholders was $1 billion or $1.62 a share, while adjusted EPS was $2.48 versus $2.63 last year.

Again, year-on-year comparison is impacted by the treatment of certain shared services and overhead costs in the prior year in accordance with SEC guidelines. Turning to the fourth quarter.

Total company revenues were $2.4 billion, down 4% versus last year as COVID-19 related declines in our advertising revenues, overwhelmingly influenced by declines at our local television stations, and to a lesser extent, at the FOX Network, more than offset affiliate revenue growth of 8%.

We indicated on our May call that we expected the COVID-related advertising headwinds across our business in the June quarter, excluding sports, to be in the $200 million to $240 million range, with the local market being down approximately 50%.

We ended the quarter ahead of these expectations, with our advertising revenue down approximately $160 million across these businesses, with the local market down closer to 35% and FOX News advertising revenues actually posting a year-on-year gain.

Adjusted EBITDA was $742 million, a 5% increase over the $709 million generated last year, led by higher contributions from the cable segment. This growth was partially offset in our Television segment due to the COVID-19-related advertising weakness.

From a bottom line perspective, net income attributable to stockholders of $122 million or $0.20 per share was lower than the $0.73 per share in the prior year quarter, most notably due to the higher impairment and restructuring charges, including the negotiated settlement to exit our rights agreement with the USGA.

Controlling for this and other noncore items in both years, adjusted EPS of $0.62 was consistent with the prior year quarter. Now turning to the operating performance of our segments for the fourth quarter, with Cable Networks' EBITDA of $674 million, was up 12% despite revenue being down 2%.

The lower cable segment revenues were most notably due to a $22 million or 8% decline in our advertising revenues, including the impact of the postponement of live events at our sports networks and the absence of the FIFA Women's World Cup compared to the fourth quarter last year.

Meanwhile, higher ratings and pricing helped to grow advertising revenues at Fox News Media in the quarter. Cable affiliate revenues increased 1%, supported by higher average rates, partially offset by a net decrease in pay television subscribers.

Other revenues were down 31%, primarily due to the impact of COVID-19 on our sports business, partially offset by higher FOX Nation and radio revenues at FOX News Media.

EBITDA at our cable segment increased 12% over the prior period, most notably reflecting lower sports programming rights amortization and production costs due to the postponement of live events and the absence of the FIFA Women's World Cup compared to the fourth quarter of last year.

Our television segment reported EBITDA of $169 million, down from the $214 million reported in the prior year quarter. As revenue declines of 6% were partially offset by expenses that decreased nearly 3%. Television affiliate revenues grew 22%, consistent with the overall trajectory we outlined at our Investor Day in May of 2019.

Television advertising revenues declined 29%, primarily from the impact of the pandemic on the local advertising market at the FOX Television Station and the postponement of live events at FOX Sports. Furthermore, in response to COVID-19, we deferred the planned spring premiers of certain scripted programs at FOX Entertainment into our fall schedule.

These COVID-led declines more than offset the growth in affiliate revenues along with revenue growth from our new businesses, Tubi and Bento Box. The decrease in expenses primarily reflects lower programming amortization across FOX Sports and FOX Entertainment.

From not airing sports events or first run programming, partially offset by the consolidation of Tubi and Bento Box. We expect the majority of the amortization-related savings to be timing related, with costs expected to shift into our fiscal '21 financials, but more on that in a moment.

In aggregate, we estimated that COVID-19 created an EBITDA headwind of approximately $15 million in the quarter across our entire business. Finally, from a P&L perspective, the net EBITDA loss in our other segment amounted to $101 million, a slight improvement from the comparable quarter in the prior year.

Meanwhile, our P&L tax rate ended the year at 27%. The strong overall P&L results generated free cash flow, which we calculate as net cash provided by operating activities, less cash invested in property, plant and equipment of over $850 million in the quarter and $2 billion for the year.

This equates to over 70% EBITDA to free cash flow conversion in the year, demonstrating the robust free cash flow profile we outlined at our Investor Day.

And from an overall balance sheet perspective, we ended the quarter with over $4.6 billion in cash and just under $8 billion in debt, which includes the $1.2 billion in 5- and 10-year senior notes that we raised this past quarter.

In the 16 months since the spin, we've invested approximately $1.25 billion into our businesses through organic investments in our core operations, including the recent relaunch of our FOX Sports digital properties, and through strategic M&A.

This latter group and our minority investments in acquisitions are worth highlighting given their inherent value to Fox that is not reflected in simple EBITDA multiple-based valuations. At our 2019 Investor Day, we announced a strategic partnership with The Stars Group.

At the time, we invested approximately $240 million in the publicly-traded TSG and licensed our brand to the Fox Bet suite of pay-to-play and free-to-play games. As part of the partnership, we have an option over 50 -- of up to 50% of the equity in TSG's U.S. businesses.

Subsequent to TSG's merger with Flutter and our incremental equity investment of approximately $100 million, we now own roughly 3% of parent company, Flutter, at a current market valuation of more than $600 million. We retain our up to 50% call option over TSG's U.S.

businesses, but in addition, have also secured the right to buy an approximately 18.5% equity stake in FanDuel with an exercise period of 10 years.

Last October, we completed the acquisition of a 67% stake in Credible Labs, an emerging fintech marketplace, which was a key part of the Fox business brand refresh and is now in the early stages of integrating alongside our national and local news assets.

Since announcement, Credible -- since announcement, Credible's trailing 12-month revenue has grown from the approximately $40 million that it reported as a stand-alone public company to approximately $70 million through the June quarter, with this momentum supporting our confidence to continue to invest cross promotional resources in growing the platform.

In April, we closed on the acquisition of Tubi, which we now report in our Television segment. Notwithstanding the challenges from COVID-19, we expect the boom in usage Lachlan outlined earlier, along with more effective monetization, to make Tubi a key source of revenue growth for many years to come.

These recently acquired businesses, coupled with the renowned production capabilities in real estate of the Fox Studio lot and our tax asset, collectively represents significant pools of below-the-line value, hiding in plain sight at Fox Corporation.

Before we open the call up to Q&A, let me provide a few markers to help you navigate the financial swings across our businesses in fiscal 2021.

Beginning with a reminder of the events that create comparability issues between FY '20 and FY '21, where fiscal 2020 included the Super Bowl, 7-game World Series, the culmination of the FIFA Women's World Cup, along with Fox's Emmy Awards rotation.

While fiscal 2021 will include what shapes to be a strong political year, the alternating NFC divisional playoff game and a full year consolidating our recent investments, including Tubi and Credible.

Looking specifically at Q1, the combined effect of comparability in COVID is expected to reduce advertising revenue by roughly $250 million as compared to Q1 in fiscal 2020.

While we will enjoy the benefits from political advertising, a greater volume of MLB regular season games and NASCAR races, along with the acquisition of Tubi, these will be more than offset by lower base advertising at our local stations, a reduced slate of fresh entertainment programming, fewer NFL and college football games in our Q1 schedule and the absence of the World Cup, Emmys and the MLB All-Star game.

You will recall that we amortize the costs of our live sports programming when the games actually air on our networks. As such, the postponement of the sports calendar in the June quarter creates a shift of amortization, primarily across MLB and NASCAR rights, into the first quarter of our fiscal '21.

We anticipate that this will increase our total sports operating expenses in the September quarter by approximately $70 million in the cable segment, broadly offsetting other savings.

This all, of course, assumes that the COVID-driven disruptions to major sports are behind us and that we enjoy a full season of NFL, a conference-only 10-game college football season and the MLB season completes. These assumptions remain valid today, and we have no intention of using this call to run through the list of what is.

We're in constant dialogue with our sports partners, and if circumstances change, we will take appropriate steps for the business. The same underlying fundamentals hold for FOX Entertainment, where we amortize the costs of our programming as the content is on our broadcast network.

What we are now looking at is a 2021 broadcast season that includes a number of titles originally intended for our spring 2020 schedule shifted into the fall. Furthermore, we are optimistic that our key returning titles, including The Masked Singer, can be made available for mid-season returns.

If this outlook holds, we could end up seeing a relatively full broadcast season. However, our programming amortization may not follow its normal cadence across quarters. Rather, from an amortization standpoint, our fiscal Q1 and Q2 are likely to be lighter than a normal year, with a heavier concentration of costs being absorbed in Q4.

Again, pending the timing of a return to production. From a cash flow perspective, we are planning for a high level of capital expenditure in fiscal '21, supporting the final phases of the build-out of our technical broadcast facility in Arizona and the upgrade of some of our station facilities.

We will also have higher interest payments related to our debt raised this past quarter. Underscoring our financial strength and confidence from a capital allocation perspective, we have today declare a semiannual $0.23 a share dividend payable on October 7, right in line with the pre-COVID dividend we declared in February.

While the continued uncertainties make it challenging for us to estimate the future performance of our business, the company entered this crisis in a position of operating and financial strength.

We will continue to manage our business and our balance sheet in a disciplined and conservative manner so that we emerge as well-positioned as possible to take advantage of the opportunities during the recovery. And with that, I'd like to turn the call back to Joe..

Thank you, Steve. And now we would be happy to take a few questions from the investment community..

[Operator Instructions]. We have a question from Benjamin Swinburne with Morgan Stanley..

I will limit myself to one question. I was wondering if you guys could talk a little bit more about sports betting? You've obviously talked about The Stars Group investment, and we followed that, and that's been a very successful one.

But this appears to be a market that's really booming in the states, even with COVID, and the prospects are quite optimistic.

So I'm just wondering how you think about taking advantage of that opportunity even more than you already have? Are there things you're doing strategically with your partners or even on the FOX Network to sort of really lean in to sports betting to make it a bigger part of the business and a part of the story?.

Thanks, Ben. So look, we -- I think we agree with you, from what it sounds like, and that we are big fans of the sports betting opportunity. Every projection is that it will be a several billion-dollar industry in the medium to long term.

And everything we've seen to date not only reinforces that, but I think makes us believe it could be even larger than that. I think we feel today very well positioned both in having the joint venture in Fox Bet, which we -- as Steve mentioned, we have the option to go to 50% ownership of, depending on licensing.

But we also have the 18.5% option to buy into the FanDuel. So we effectively have 2 dogs in the race, and we think that puts us in a great position. Moving forward, obviously, we have to see how the states open up from a regulatory point of view and as we move into each market.

It's not necessarily the case that you'll have FanDuel and FOX Bet in all the same markets. For example, we found in FOX Bet the best markets for us, and we've just opened in Colorado, a market that have both sports betting but also gaming licenses.

When you think about the funnel sort of monetize the customer -- the consumer, we'd start with a FOX Bet Super 6 as a free-to-play game. Those people, some of them will move through the funnel into our sports betting, the FOX Bet app or the FanDuel experience.

And then a subset of those will actually go into our gaming environment, when there's no sports betting being played. So look, we think the opportunity is huge and is something that we'll continue to spend time on to drive -- to promote to FOX Sports and to invest in..

We have a question from Jessica Reif Ehrlich with Bank of America..

I have an advertising question. Lachlan mentioned in his opening remarks that there will be or is an upfront.

Can you talk about the timing and expectations, any color you can give? Will the sales be across all of your platforms, sports, news, broadcast and Tubi? And then on FOX News, given the growth in ratings and given the expectations for strong ratings for the next few months, how -- do you feel like you're monetizing your ratings as well as -- are your ratings being monetized the way they should be? Or is there still upside from here?.

Thanks, Jessica. I know there's been a lot of talk about the upfront and some discussion about it on other calls. I think the thing -- well, the first thing I'd like to say is that the sales is very active at the moment, but it's a different sort of upfront this year for everyone, right, than in past years. I would call it sort of a rolling upfront.

It's not a process that has a beginning, a middle and an end. We are working, as I think I said in the last call, with all of the agency groups and each of our clients as they reengage with their -- with consumers and customers across our platforms. And so some have been much more heavily impacted by COVID-19 than others.

Obviously, the categories that are affected, retail, theatrical entertainment, fast food restaurants. Obviously, travel are all highly impacted by COVID-19. So each of those clients, we're engaged with and sort of negotiating with as we go forward.

I think what you'll see is as we close -- and as we have closed upfront negotiations, you'll see that going right up until really through to the beginning of the football season. And we are incredibly heartened by the strength of scatter in the market. I think scatter, across the board, is in the mid- to high teens.

I think that shows the demand for marketers to get back on air in a mass market and broad way. We are selling it across all of our platforms, news, sports, entertainment and Tubi. Tubi is now integrated in most, if not all, of our upfront conversations.

When we add Tubi to a sale, it increases reach by over 20% for the client and also obviously makes the demographic younger and more diverse. And Jessica, to your question on FOX News, FOX News ratings have been astronomical. We are monetizing them very well. One of the benefits of COVID-19 has been with a larger news audience.

The audience has also gotten younger, and that's brought actually new advertisers that hadn't advertised on FOX News, new advertisers on to the platform. So it's a very strong positive story for FOX News..

We have a question from Michael Nathanson with MoffettNathanson..

I have two quick ones, I promise. So first question is this, what is your thinking about -- I have a terrible echo, one second.

What's your thinking about Thursday Night Football returning again, given how much profits you guys made at the FOX TV business before Thursday Night? And how less are Thursday to your P&L? Second, Steve did a very good job in laying out the valuation case for your stock, and as it -- was really cheap on cash flow, asset value and any way you look at it..

Michael, we lost you on a little bit of the second part of the second question. So I'll let Steve answer that one. You came in and out a bit, but I think we got the gist of it.

And about Thursday Night Football, we don't have any update for the market nor would we of the sort of the details of our negotiations with the NFL beyond what we've said already, which is they are an incredible partner with us, they have been for 25 years.

And frankly, we value all of their content, and we'll update the market as our negotiation comes to a close with them. But there's no updates on Thursday Night Football or Sunday afternoon.

I should say though, obviously, football and our partnership with the NFL is really that and Major League Baseball form the foundation of the brand of FOX Sports, so it's important content for us..

Yes. And Michael, I'll try and answer the question I think you're asking. I think there is an element of frustration in sort of the value attributed to the company. I think the way we sort of look at it, you've got this traditional business that is in a strong, competitive and strategic position, highly profitable, throws off a lot of cash.

We don't get the sort of benefit from the cash flow generating aspects of the business, and then we've bought into various other investments, which I highlighted in my opening remarks, where it feels as though we're not even getting acquisition value for those businesses.

So the extent to which we can shine torches on both aspects of the business is helpful, we think, to sort of getting the share price to a more appropriate place..

We have a question from Alexia Quadrani with JPMorgan..

My question is really on football, college and NFL. I totally understand you guys don't want to speculate whether it will come back or not.

But speaking more broadly about your relationship with your distributors, I guess what sort of alternatives or sort of leeways do you have if these -- some or part of these sports are outright canceled and they don't return sort of later on in the year? I'm just curious about, is there any danger of breaching the sort of the affiliate contracts there?.

Thanks, Alexia. First, I should say, we fully expect both college football and the NFL to come back in the fall. We expect to hear from our college conferences later this week in terms of a schedule for their seasons. And I think the NFL has announced coming back on September 10.

So we are full speed ahead, working with the college conferences and with the NFL in ensuring a safe and consistent and full seasons for the NFL. And there's a reduction in the season for college football, so that they play within their conferences and minimize travel for their student athletes.

So we expect both to come back, and we're looking forward to it..

We have a question from John Janedis with Wolfe Research..

I was hoping you guys can expand a little more on your advertising outlook.

What are you seeing in terms of underlying demand? I guess what I'm saying, I'm trying to better understand to what extent you're seeing improvements in the first quarter, given your comments about sports and political relative to the fourth quarter?.

So we're seeing strong demand. You've got to break it down, I suppose, for us, by vertical. There's a -- the news ratings are so far above last year's. And as I mentioned, we have new clients and new categories of clients on FOX News. So news demand is really driven by the audience and by the ratings there, so we're seeing tremendous demand in news.

Obviously, it's going to be a -- continue to be an incredibly strong news cycle, I think -- and certainly through to the end of the year. There's no let up there. And I think advertisers are flocking to the certainty of those ratings and that audience. I think sports, there's a great pent-up demand for sport.

We saw that in the sellouts in Major League Baseball. We saw that when we brought back NASCAR, the advertiser interest in NASCAR, and we expect to see it with football going forward as well. As we go through our upfront process, we have visibility in terms of what the clients are telling us that they expect to spend.

And certainly, in news and sport, we're seeing healthy budgets there. I think entertainment is a different kettle of fish as people are waiting to see what happens in the fall season. As we explained earlier on the call, we have a relatively fresh scripted season with 2 shows that we had in the can that we hadn't aired.

And we do hope to have The Masked Singer, not for mid-season, but for the fall, if possible. And that would be -- that will absolutely drive ratings and revenue there as well. When we look to the stations, the -- we're heartened to see how quickly local advertising is coming back, particularly in those smaller markets.

So the bottom half of our -- I don't want to say bottom half, but the smaller half of our station group, where they have, perhaps, less sort of population density, less shutdowns due to COVID-19, and those markets are coming back well.

And as I mentioned before, the markets that are really buoyed are the ones where this political revenue has started to pour in. And then the overlay of all of that is obviously scatter being very strong, which I think just goes anecdotally to the demand by advertisers and clients to get back and sort of mass marketing..

At this point, we are out of time. But if you have any further questions, please give me or Dan Carey a call. Thank you once again for joining today's call..

Ladies and gentlemen, that does conclude your conference call for today. Thank you for using AT&T Executive Teleconference. You may now disconnect..