Twenty-First Century Fox 2005 Annual Report Download - page 46

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NEWS CORPORATION
Book Publishing
The Book Publishing segment derives revenues from the sale of adult and children’s books in the United States and internationally. The revenues
and operating results of the Book Publishing segment are significantly affected by the timing of the Company’s releases and the number of its
books in the marketplace. The book publishing marketplace is subject to increased periods of demand in the summer months and during the end-
of-year holiday season. Each book is a separate and distinct product, and its financial success depends upon many factors, including public
acceptance.
Major new title releases represent a significant portion of the Company’s sales throughout the year. Consumer books are generally sold on a
fully returnable basis, resulting in the return of unsold books. In the domestic and international markets, the Company is subject to global trends
and local economic conditions.
Operating expenses for the Book Publishing segment include costs related to paper, printing, authors’ royalties, editorial, art and design
expenses. Selling, general and administrative expenses include promotional expenses, salaries, employee benefits, rent and other routine
overhead.
The book publishing business operates in a highly competitive market and has been affected by consolidation trends. This market continues
to change in response to technological innovations and other factors. Recent years have brought a number of significant mergers among the
leading book publishers. The book superstore remains a significant factor in the industry contributing to the general trend toward consolidation in
the retail channel. There have also been a number of mergers completed in the distribution channel. The Company must compete with other
publishers such as Random House, Penguin Group and Simon & Schuster for the rights to works by well-known authors and public
personalities. Although the Company currently has strong positions in each of its markets, further consolidation in the book publishing industry
could place us at a competitive disadvantage with respect to scale and resources.
Other Recent Business Developments
In July 2005, the Company announced the formation of Fox Interactive Media (“FIM”), a new unit that will manage the Company’s entertainment,
news and sports brands, including foxsports.com, foxnews.com and fox.com, and the Company owned television station web properties, across
the Internet. FIM will focus on leveraging the Company’s current and archive video assets, while building an integrated web domain with multiple
points of entry and navigation capabilities that users will be able to customize and personalize.
In July 2005, the Company also announced that it signed a definitive agreement to acquire Intermix Media, Inc. (“Intermix”) for approximately
$580 million in cash, or the equivalent of $12 per common share. In a related transaction, the Company agreed to loan approximately $70 million
to Intermix, which may be used by Intermix to exercise its option to acquire the 47% of MySpace.com that it does not already own. Upon
completion of the transactions, both MySpace.com and Intermix’s websites will become part of News Corporation’s newly formed Fox Interactive
Media unit, as discussed above. This transaction is expected to close in the second quarter of fiscal 2006 and is subject to certain customary
conditions including the approval of the Intermix common and preferred stockholders.
In August 2005, the Company announced that it had signed a definitive agreement to acquire Scout Media, Inc., the parent company of
Scout.com, the country’s leading independent online sports network, and Scout Publishing, producer of widely read local sports magazines in
the U.S., for approximately $60 million.
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