I’m pleased to have this opportunity to discuss with you our company’s
important achievements over the last fiscal year, and our outlook for the
challenges and opportunities we will be confronting.
News Corporation is in the midst of profound change. Yet as we navigate this
period of change, we are guided by the same spirit of integrity and innovation
that has driven us from our company’s earliest days.
By sticking to a consistent, well-conceived, and long-term strategy over the
course of many years, our company has achieved spectacular rates of growth – on
average, 13% revenue growth and 18% operating income growth annually over the
last three years alone.
The core elements of our strategy are easy to understand, if not always easy to
implement. First, we are willing to ignore or even take on conventional wisdom.
Second, we generally try to invest early in new businesses rather than
overpaying for already established businesses.
Third, we are patient as these new efforts find their footing.
Fourth, we enjoy the growth and profitability as the businesses mature, but we
are always thinking about and building the next generation of new revenue
sources.
Our early – and in many cases substantial – investments in these new businesses
have sometimes been criticized as excessive and unwise. Some of that criticism
has even come from people in this room. Yet in nearly every case, we have been
vindicated by time and results.
Fox television – at the time of its launch, the first new broadcast network in
four decades – is now the number one network among the key 18-49 demographic two
years running, and boasts what is far and away the most popular show on the air.
Our cable businesses – launched amidst much uncertainty a decade ago – are today
huge profit generators, and still growing. The Fox News Channel celebrated its
tenth anniversary this month by continuing its ratings dominance, and has now
held the number one position in cable news for 19 straight quarters.
This month, our initial deals with cable and satellite providers have begun to
expire, and we are working to renew these carriage agreements at substantially
higher rates to reflect our enormous and enthusiastic audience. And earlier this
week, we successfully completed a new deal with Cablevision at an attractive new
rate. Meanwhile, FX is now one of the top five basic cable channels in the US,
driven by hits like Rescue Me, The Shield, and Nip/Tuck.
Sky Italia successfully reached profitability last year and its profit growth
now exceeds that of any of our company’s other assets. Its broad appeal and wide
channel offerings have pushed subscriber levels to more than 3.8 million with
the lowest churn – below 10% – of any of our pay TV businesses.
And our new media assets – our latest investments – are moving quickly toward
profitability. With the acquisition of MySpace.com and other popular sites, in
the space of one year, our company has begun to rival and in some cases surpass
the Internet elite.
News Corporation sites now rank second in total page views and fifth in unique
visitors, reaching more than 70 million people per month in the United States.
Revenues from MySpace alone have doubled every four months over the last year.
And others are noticing. This summer, after the fiscal year-end, we announced a
landmark deal with Google to provide search functionality to all of our Internet
sites – most importantly MySpace. With $900 million guaranteed to us over 15
quarters, this agreement more than pays for the MySpace acquisition. More
importantly, it allies us with one of the great companies of the digital age,
while signifying our ability to monetize our traffic in ways that make sense for
our audience.
We can afford to make these investments in high growth businesses because our
established businesses are such reliable generators of steady cash. Indeed, the
bedrock of our strategy is to ensure that our company is always comprised of a
mix of businesses in various stages of growth and development. Established
businesses produce modest growth yet sizable cash flows. Businesses in the
middle stage are the primary growth drivers of the company, delivering strong
profit growth. And our youngest efforts are being nurtured and developed by the
cash generated by our mature businesses, to allow them to find their footing and
realize their potential as the company’s future growth drivers.
Our print businesses, and especially newspapers – the historic heart of this
company – continue to deliver value for our company and shareholders, in part by
generating huge amounts of cash that fund and fulfill our strategy. Right now
our print business have more total readers than they ever have, thanks to the
Internet. The distinction that today seems to divide “new” and “old” media will
prove illusory over time. In the meantime, we are investing in the future of
these businesses, with new color printing plants in the UK. In Australia,
operating income was up on strong advertising sales and higher circulation
revenues.
The results of this strategy have not gone unnoticed. Our share price is up 40%
in the last twelve months, and nearly 80% over the last five years. Investors
are recognizing that we are the best positioned media company in the world
today, with the best mix of assets with real global spread to maintain growth
and produce value for shareholders over the long term.
To some in the traditional media business, these are the most stressful of
times. But to us, these are great times. Technology is liberating us from old
constraints, lowering key costs, easing access to new customers and markets, and
multiplying the choices we can offer.
Thank you for your attention, and for the loyalty and faith you’ve shown in us.
And now I’ll be happy to take your questions.