Twenty-First Century Fox 2006 Annual Report Download - page 53

Results of Operations (CONTINUED)
Television (22% and 24% of the Company’s consolidated revenues in fiscal years 2005 and 2004, respectively)
The Television segmentreported revenue of $5,338 million for the fiscal year ended June 30, 2005 as compared to $5,027
million in fiscal 2004. Operating income at the Television segmentwas$952 million as compared to $950 million in fiscal
2004.
Revenues for the fiscal year ended June 30, 2005 at the Company’s U.S. television operationsincreased approximately
6% from fiscal 2004. The Company experienced increased advertising revenues from the telecast of the Super Bowl and
Daytona 500, which were not telecast on FOX in fiscal 2004 and higher pricing for NFL regular season andprime time
broadcasts. This increase was partially offset by adecrease in prime time ratings as compared to fiscal 2004, advertising
weakness in the U.S. markets, as well as the adverse impact of the transition to LPMs on ratings. Operating income for the
fiscal year ended June 30, 2005 at the Company’s U.S. television operationsdecreased approximately 7% as compared to
fiscal 2004. This is due primarily to increased sports programming costs for the Super Bowl and Daytona 500 and increased
entertainment program costs for returning series. Partially offsetting this increasein Operating loss are loweradvertising
expenses, lower priced renewals of expired syndicated product and lower music license fees.
Revenues and operating income for the fiscal year ended June 30, 2005 at the Company’s international television oper-
ations increased from fiscal 2004. These increases were primarily driven by increased advertising revenues due to growth in
India and increased subscription revenues due to the launch of new channels in India.
Cable Network Programming (11% and 12% of the Company’s consolidated revenues in fiscal 2005 and 2004,
respectively)
Total revenues for the Cable Network Programming segment increased by $279 million or approximately 12% from $2,409
million to $2,688 million for the fiscal year ended June 30, 2005. This increase reflected improved results across all of the
Cable Network Programming channels. Fox News, FX and the RSN’s revenues increased 20%, 18% and 9%, respectively,
over fiscal 2004.
At Fox News, advertising revenues increased 22% over fiscal 2004 primarily driven by higher national pricing and
higher volume. Net affiliaterevenue increased 14%, which can be attributed to an increase in subscribers and higher rates
per subscriber as compared to fiscal 2004. As of June 30, 2005, Fox News reached approximately 88 million Nielsen house-
holds, a3% increase over fiscal 2004.
At FX, advertising revenues increased 18% over fiscal 2004 due to higher ratings and improved pricing. Net affiliate
revenue increased 18% over fiscal 2004, reflecting an increase in subscribers and higher average rates per subscriber. As of
June 30, 2005, FX reached approximately 87 million Nielsen households, a4%increase over fiscal 2004.
At the RSNs, net affiliaterevenue increased 11% over fiscal 2004 primarily due to an increase in DBS subscribers and
higher average ratespersubscriber, net of allowances related to the cancellation of the 2004-05 NHL season, as well as the
additional revenue from the consolidation of the RSNs in Florida and Ohio in April 2005. Advertising revenues increased
3% due to the consolidation of RSNs in Florida and Ohio in April 2005, which more than offset the negative impact from
the absence of NHL telecasts as a result of the cancellation of the NHL season.
The Cable Network Programming segment reported operating income of $702 million, an increase of $214 million over
fiscal 2004. This improvement was primarily driven by the revenue increases noted above, as well as lower programming
costs at the RSNs due to the NHL season cancellation andtheabsence of losses from the Los Angeles Dodgers (“Dodgers”)
due to its sale in fiscal 2004. Partially offsetting these improvements were higher programming expenses for original series
and movies at FX, higher programming and news gathering costs at Fox News and for additional MLB and NBA events at
the RSNs.
Direct Broadcast Satellite Television (10% and 8% of the Company’s consolidated revenues in fiscal 2005 and 2004,
respectively)
For the fiscal year ended June 30, 2005, SKY Italia’s revenues increased to $2,313 million from $1,665 million in fiscal 2004.
The 39% revenue growth was primarily driven by the addition of approximately 650,000 net new subscribers during fiscal
2005 which resulted in SKY Italia’s subscriber base growing to approximately 3.3 million at June 30, 2005. SKY Italia also
improved its subscriber churn rate to approximately 9% from approximately 19% in fiscal 2004.
Also contributing to revenue growth during the fiscal year ended June 30, 2005 was an increase in ARPU from approx-
imately €42 in fiscal 2004 to approximately €44 in fiscal 2005. This increase was driven by subscribers opting for more
premium programming.
SAC increased from €204 in fiscal 2004 to €243 in fiscal 2005 primarily due to the Company’s free installation program
implemented in fiscal 2005.
For the fiscal year ended June 30, 2005, the operating loss at SKY Italia of $173 million improved by 38% as compared
to the loss of $277 million in fiscal 2004. The revenue growth was partially offset by increased programming spending
primarily due to the broadcast of additional soccer matches and movie titles, as well as the addition of ten new entertain-
ment and news channels on the basic programming tier. Additionally, the Company incurred costs associated with the
one-time swap-out of set-top boxes which were using outdated encryption software. In fiscal 2005, the weakening of the
U.S. dollar against the Euro resulted in approximately 6% of the increase in revenue and operating loss as compared to fis-
cal 2004.
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