Twenty-First Century Fox 2006 Annual Report Download - page 6

6NEWS CORPORATION
Now that we have the traffic, we are thinking
creatively and aggressively about how to translate
that traffic into rising profits. Revenues from
MySpace alone have nearly doubled every four
months over the past year. And others are noticing.
Earlier this summer, after the fiscal year-end,
we announced a landmark deal with Google to
provide search functionality to most of our Internet
sites – most importantly MySpace. Google will
also become the exclusive text-based advertising
provider and has the right of first refusal on
all remnant display advertising. With at least
$900 million committed to us over four years, 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.
This deal is but one way we are generating
revenues from our Internet businesses. In just the
past few months, we have sharply increased the
number and quality of FORTUNE 100 companies
buying display ads on our sites, thereby reaping
the rewards of higher ad rates. As we focus on
growing revenues, we are also intent on improving
the user experience for our 120 million-plus users
worldwide. MySpace’s offerings have expanded
more in the past three months than in the previous
four years since its creation. We’ve added stream-
ing video, special comedy clips, free classified
ads and instant messaging. In a major deal with
Burger King, we made available on MySpace
episodes of hit shows like 24. MySpace is a major
driver of traffic to the so-called “Internet 2.0” sites
– picture-hosting sites like Photobucket and video
repositories like YouTube. There is no reason why
we can’t replicate that functionality and retain
that traffic – and its attendant revenue.
There is more to this revolution than just the
Internet, however. The broader term “digital” better
captures the scope of the tremendous change and
tremendous possibilities that lie ahead. No less
important than online media are mobility and
storage, and we are active on both these fronts.
Earlier this year we launched Mobizzo, a website
that makes available digital content for cell
phones and other mobile devices. This is a first
for any major media company, and it follows the
success of our introduction of the “mobisode,”
a short, downloadable show based on popular
characters and franchises. We are making available
music, art, games, video clips and other content –
much of it based on popular Fox brands such as
Family Guy,American Dad,Napoleon Dynamite and
Ice Age – that can be purchased and downloaded
directly to a mobile device.
With respect to storage, we have made some
exciting new deals and introduced some innova-
tive new products. We completed an agreement
with Apple to make television content from FOX,
FX, SPEED, FUEL TV and the Twentieth Century
Fox Television library available at the iTunes
Music Store. Customers can purchase and down-
load our content onto their computers or iPods.
The precise business model for sustained prof-
itability from our digital investments is still
uncertain at this point. Consequently, in some
ways, we are embarking on a period of trial and
error. But we are confident that, as the most
innovative and fearless media company in the
world today, we can devise a model that delivers
a first class digital experience for our customers
and significant revenues for our company.
To the casual observer, News Corporation’s
entry into digital media may seem to be a depar-
ture from our past business models and practices.
But in truth there is fundamental continuity
to our approach. We have always sought new
markets and new avenues for distribution. Our
company launched Australia’s first national paper
and America’s first new television network in
40 years. We helped pioneer the TV DVD market.
We upended a decade-and-a-half of received
wisdom about what works in the cable news mar-
ket. Now we are bringing that same innovative,
entrepreneurial spirit to the Internet.
We have always grown this company by intelli-
gently managing a mix of businesses in various
stages of growth and development. Established
businesses produce modest growth yet sizable –
and reliable – cash flows. Businesses in the middle
stage are the primary growth drivers of the com-
pany, 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.
The importance of our so-called traditional
media businesses cannot be overstated however –
both as solid performers for our company and as
sources of cash flow to build up our next generation
of properties. And on both scores, our established
businesses performed spectacularly this past year.
Record operating income at our Filmed
Entertainment segment was driven by four factors.
First, Fox scored some genuine mega-hits at
this year’s box office. Ice Age: The Meltdown has,
to date, grossed nearly $650 million worldwide.
X-Men: The Last Stand scored the strongest Memorial
Day opening in box office history and is now
As the most innovative and fearless
media company in the world today,
we can devise a model that delivers
a first class digital experience
for our customers and significant
revenue for our company.