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2 Stocks to Suffer as U.S. Fails to Qualify for 2018 World Cup

It was a day of anguish for U.S. fans as its soccer team failed to qualify for the 2018 FIFA World Cup for the first time since 1986, following a shocking defeat at the hands of Trinidad & Tobago. The U.S. national team’s failure to make the final cut might impact the financials of a few media companies as well.

Twenty-First Century Fox: The Major Loser

Twenty-First Century Fox, Inc. FOXA shelled out over $400 million for the broadcasting rights of this elite soccer spectacle. In fact, the company managed to outbid The Walt Disney Company’s DIS ESPN for the FIFA World Cup tournaments from 2015 to 2022.

Per media reports, the company will lose $10 million to $20 million in advertising sales following the elimination of the U.S. team. We believe the failure of the team to qualify for the biggest event in soccer will hurt viewership. Despite the elimination of the U.S. soccer team in the Round of 16 of 2014 World Cup, the matches it played accounted for 20% of the nation’s viewership.

However, Fox Sports stated, “While the U.S. was eliminated, the biggest stars in the world, from Lionel Messi to Cristiano Ronaldo, stamped their tickets to Russia on the same day, and will battle teams ranging from Mexico to England that have massive fan bases in America.”

Impact on Comcast’s Telemundo Deportes

Apart from Twenty-First Century Fox, Comcast Corporation’s CMCSA Telemundo Deportes is another media company that had acquired U.S. broadcast rights for the 2018 and 2022 World Cups. Telemundo Deportes had paid $600 million for the rights. Together, both Twenty-First Century Fox and Telemundo have paid in an excess of $1 billion. This reflects a substantial rise from the combined cost of $425 million paid by Disney’s ESPN ($100 million) and Univision ($325 million) for the 2010-2014 events.

We believe Telemundo, which is an American Spanish-language terrestrial television network, might not get impacted by the elimination of the United States by much as the company will still broadcast matches of Argentina, Mexico, Spain and Columbia, which have dedicated fans in the country.

As we know that both viewership and rating are proportional to each other, if the company fails to attract audiences it will result in lower ad revenues, which in turn might affect the company’s profitability.

Summing Up

The popularity of soccer has changed drastically over the past few years. Soccer started gaining popularity in the United States, especially after the national team made it to the Round of 16 of 2014 FIFA Men’s World Cup held in Brazil. Moreover, the women’s edition has also managed to garner sizable attraction globally, which was reflected in rising viewership for the 2015 FIFA Women’s World Cup.

Twenty-First Century Fox saw ratings hit the roof when USA defeated Japan 5-2 to lift the 2015 FIFA Women’s World Cup. With nearly 25.4 million viewers on Fox and 1.3 million on Spanish network Telemundo, it was the highest viewed soccer match in the American history.

Both Comcast and Twenty-First Century Fox carry a Zacks Rank #3 (Hold). A better-ranked stock in the same space include Lions Gate Entertainment Corp. LGF.A, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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