Owning the world's best digital advertising technology is a pretty good business. Owning a handful of cable channels in America's quasi-oligopolistic TV industry could be an even better business.
On a profit-per-employee basis, 21st Century Fox (annual net income: $7.1b) is even richer than Google ($12.9b), according to calculations by BuzzFeed business editor Peter Lauria. That's pretty astonishing.
Now, the caveats: A great deal of the value in entertainment comes from actors, directors, grips, and assistants on TV and movie projects that are constantly starting and stopping, complicating the question of how many "annual employees" a company like 21st Century Fox really has. Google contracts with teams and companies all over the world, too. These people don't show up in its employee column even though they clearly add value.
Profit-per-employee might not be a perfect statistic for comparing companies. It might not even be a good statistic. It is, however, a statistic—and one that highlights a point I wanted to make about the television industry, anyway, so we're going with it.
An easy misconception about 21st Century Fox is that it's a movie company, just like the film studio, 20th Century Fox, that it's named after. But statistically, 21st Century Fox is more like a television company that happens to make movies. It is not an exaggeration to say that approximately 100 percent of its profits are directly relatable to the television industry—selling TV shows, syndicating movies on TV, charging TV advertising, collecting subscription fees from the pay-TV bundle, and providing infrastructure through satellite and cable overseas.
Its cable TV networks, buffeted by healthy subscription fees, account for 40 percent of the company's revenue and a whopping 73 percent of its profit. The company's "Filmed Entertainment" segment, accounting for a third of revenue and a fifth of profits, sounds like it might be a movie segment. But it's really an example of how the movie business is another tributary into the money river of the TV business.
From the latest annual report:
Higher digital distribution revenues from the licensing of the Company’s television content and higher syndication and license fees for How I Met Your Mother and Avatar. These revenue increases were partially offset by a $400 million decrease in theatrical and home entertainment revenue.
Shorter: Movies don't make money in movie theaters any more. They make money on TV.
The pay-TV business is a private tax on $100 million households whose prodigious revenue is divided between cable and entertainment companies. Who knows what it will look like in five years. For now, it is a very, very, very good business.