Twenty-First Century Fox 2006 Annual Report Download - page 48

Results of Operations (CONTINUED)
with no comparable events in fiscal 2006. Partially offsetting these decreases is an increase in primetime net advertising
revenue as a result of higher primetime ratings, pricing and continued growth in local news programming versus fiscal
2005. Operating income at the Company’s U.S. television operationsforthefiscal year ended June 30, 2006 increased
approximately 11% from fiscal 2005. The increase was mainly due to the absence of programming costs for the Super Bowl
and Daytona 500 that were broadcast in fiscal 2005, partially offset by the decreased revenues noted above and by higher
programming costs for returning shows, local news expansions, music license fees and new sports programming on the
UPN affiliated stations.
Revenues for the fiscal year ended June 30, 2006 at the Company’s international television operationsincreased over
fiscal 2005. The increase was primarily driven by higher advertising and subscription revenues. Operating income for the
Company’s international television operationsincreased for the fiscal year ended June 30, 2006 over fiscal 2005, primarily
driven by increased revenues, as noted above, which were partially offset by increased programming costs associated with
the launch of new programming.
Cable Network Programming (13% and 11% of the Company’s consolidated revenues in fiscal 2006 and 2005,
respectively)
For the fiscal year ended June 30, 2006, revenues for the Cable Network Programming segment increased $670 million, or
25%, as compared to fiscal 2005. For fiscal 2006, Fox News, FXandtheRSNs revenues increased 13%, 14% and 30%,
respectively, from fiscal 2005.
Fox News’ advertising revenues increased 5% for the fiscal year ended June 30, 2006 from fiscal 2005, primarily driven
by higher pricing and higher volume. Net affiliaterevenue increased 7% for the fiscal year ended June 30, 2006, as aresult
of increases in subscribers and average rates per subscriber from fiscal 2005. As of June 30, 2006, Fox News reached approx-
imately 89 million Nielsen households.
FX’s advertising revenues increased 14% for the fiscal year ended June 30, 2006 as compared to fiscal 2005. The
increase was driven by higher pricing and higher ratings as compared to fiscal 2005. For the fiscal year ended June 30, 2006,
net affiliaterevenue increased 15% as compared to fiscal 2005, reflecting an increase in average rates per subscriber and DBS
subscribers. As of June 30, 2006, FX reached approximately 89 million Nielsen households.
The RSNs’ advertising revenues increased 21% for the fiscal year ended June 30, 2006 as compared to fiscal 2005. The
increase was primarily due to the acquisition of the Florida and Ohio RSNs in April 2005. Also contributing to the increase
in revenue was the resumption of NHL games in the second quarter of fiscal 2006 after the cancellation of the 2004-05 NHL
season. In addition, there was an increase in overall advertising pricing in fiscal 2006 as compared to fiscal 2005. Affiliate
revenues increased 33% for the fiscal year ended June 30, 2006 as compared to fiscal 2005. This increasewasprimarily due
to the consolidation of the Florida and Ohio RSNs, the absence of fiscal 2005 allowances related to the cancellation of the
2004-05 NHL season, an increase in DBS subscribers and higher average rates per subscriber.
The Cable Network Programming segment Operating income increased $162 million, or 23%, for the fiscal year ended
June 30, 2006, as compared to fiscal 2005. This improvement was primarily driven by the revenue increases noted above,
partially offset by higher programming expenses. Programming expenses increased primarily due to the consolidation of
the Florida and Ohio RSNs and Fox Sports Net in April 2005 and the programming costs associated with the resumption of
NHL games after the cancellation of the 2004-05 season. Also contributing to this increasewere newly acquired series and
more original programming at FX. In addition,marketing expenses increased at FX due to increased promotion costs for its
new original series, as well as returning shows in fiscal 2006.
Direct Broadcast Satellite Television (10% of the Company’s consolidated revenues in fiscal 2006 and 2005,
respectively)
For the fiscal year ended June 30, 2006, SKY Italia revenues increased $229 million, or 10%, as compared to fiscal 2005. This
revenue growth was primarily driven by an increase in subscribers over fiscal 2005. During fiscal 2006, SKY Italia added
approximately 513,000 net subscribers, which resulted in SKY Italia’s subscriber base totaling more than 3.8 million at
June 30, 2006. The total churn for the fiscal year ended June 30, 2006 was approximately 314,000 on an average subscriber
base of 3.6 million, as compared to churn of approximately 270,000 subscribers on an average subscriber base of 3.0 million
in fiscal 2005. Subscriber churn for the period represents the numberofSKY Italia subscribers whose service was dis-
connected during the period.
Average revenue per subscriber (“ARPU”) for the fiscal year ended June 30, 2006 was over €44. The ARPU for the fiscal
year ended June 30, 2006 improved slightly over fiscal 2005 primarily due to anearly €2price increase during the second
quarter of fiscal 2006, which was partially offset by price promotions. SKY Italia calculates ARPU by dividing total
subscriber-related revenues for the period by the average subscribers for the period and dividing that amount by the num-
ber of months in the period. Subscriber-related revenues are comprised of total subscription revenue, pay-per-view revenue
and equipment rental revenue for the period. Average subscribers are calculatedfortherespective periods by adding the
beginning and ending subscribers for the period and dividing by two.
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