Twenty-First Century Fox 2007 Annual Report Download - page 48

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
wide theatrical revenues were driven by the worldwide release of Night at the Museum, Eragon, Borat: Cultural Learnings of America
for Make Benefit Glorious Nation of Kazakhstan, The Devil Wears Prada and Fantastic Four: Rise of the Silver Surfer. Fiscal 2006 theatrical
releases included Ice Age: The Meltdown, X-Men: The Last Stand, Fantastic Four, Walk the Line, Big Momma’s House 2 and Cheaper by
the Dozen 2.
Operating income at the Filmed Entertainment segment for the fiscal year ended 2007 increased $133 million, or 12%, as
compared to fiscal 2006. The improvement was primarily due to the revenue increases noted above, which were partially offset by
higher releasing costs and higher amortization of production and participation costs directly associated with the increase in revenues
noted above.
Television (20% and 21% of the Company’s consolidated revenues in fiscal 2007 and 2006, respectively)
For the fiscal year ended June 30, 2007, Television segment revenues increased $371 million, or 7%, as compared to fiscal
2006. The Television segment reported a decrease in Operating income for the fiscal year ended June 30, 2007 of $70 million, or
7%, from fiscal 2006.
Revenues at the U.S. television operations increased for the fiscal year ended June 30, 2007 as compared to fiscal 2006. The
increase was primarily due to the broadcasts of the BCS and NASCAR’s Daytona 500 with no comparable events in fiscal 2006 and
higher FOX prime-time advertising revenue due to higher pricing and additional commercial inventory sold. Also contributing to the
increased advertising revenues was higher political advertising at the Company’s television stations due to the November 2006 elec-
tions. The increase in revenue was partially offset by revenue decreases at the Company-owned MyNetworkTV affiliated stations.
Operating income at the Company’s U.S. television operations for the fiscal year ended June 30, 2007 decreased from fiscal 2006.
The decrease in Operating income was a result of expenses associated with the first full year of MyNetworkTV which was launched
in September 2006, higher sports programming costs related to the BCS, Daytona 500 and the new NFL contracts, partially offset
by the increase in revenues noted above.
Revenues for the fiscal year ended June 30, 2007 at the Company’s international television operations increased over fiscal
2006. The increase was primarily due to higher advertising revenues in India and higher subscription revenues. Operating income
for the Company’s international television operations decreased for the fiscal year ended June 30, 2007 as compared to fiscal 2006,
primarily due to higher programming costs.
Cable Network Programming (13% of the Company’s consolidated revenues in fiscal 2007 and 2006)
For the fiscal year ended June 30, 2007, revenues at the Cable Network Programming segment increased $544 million, or 16%,
as compared to fiscal 2006. The increase was driven by higher net affiliate and advertising revenues at the RSNs and FIC, as well as
increased net affiliate revenues at Fox News and FX.
The RSNs’ revenues increased 12% for the fiscal year ended June 30, 2007 as compared to fiscal 2006, primarily due to advertis-
ing and net affiliate revenue increases. The increase in advertising revenues was primarily due to additional revenues from the
increased number of MLB and National Basketball Association (“NBA”) games broadcasted. The increase in net affiliate revenues was
primarily due to higher average rates per subscriber and a higher number of subscribers, including those from the acquisition of
SportSouth in May 2006.
Fox News’ revenues increased 19% for the fiscal year ended June 30, 2007 as compared to fiscal 2006, primarily due to net affili-
ate and advertising revenue increases. Net affiliate revenues increased for the fiscal year ended June 30, 2007, as a result of increases
in average rates per subscriber and lower cable distribution amortization as compared to fiscal 2006. Advertising revenues for the
fiscal year ended June 30, 2007 increased as compared to fiscal 2006 due to higher pricing and higher volume. In addition, revenue
from licensing fees contributed to the increase in fiscal 2007. As of June 30, 2007, Fox News reached approximately 92 million Niel-
sen households.
FX’s revenues increased 4% for the fiscal year ended June 30, 2007 as compared to fiscal 2006, primarily due to an increase in
net affiliate revenues. Net affiliate revenues increased as compared to fiscal 2006, primarily due to an increase in the average rate
per subscriber and in the number of subscribers. As of June 30, 2007, FX reached approximately 92 million Nielsen households.
Revenues at the Company’s international cable channels increased 65% for the fiscal year ended June 30, 2007 as compared to
fiscal 2006. The increases were due to the consolidation of NGC Network International LLC (“NGC International”) and NGC Net-
work Latin America LLC (“NGC Latin America”) beginning January 1, 2007, as well as improved advertising sales and subscriber
growth at the other FIC channels.
The Cable Network Programming segment Operating income increased $226 million, or 26%, for the fiscal year ended June 30,
2007, as compared to fiscal 2006. This improvement in Operating income was primarily driven by the revenue increases noted
above, partially offset by higher sports rights amortization mainly due to additional games, higher entertainment programming for
new shows and incremental expenses from the consolidation of NGC International and NGC Latin America.
Direct Broadcast Satellite Television (11% and 10% of the Company’s consolidated revenues in fiscal 2007 and 2006, respectively)
For the fiscal year ended June 30, 2007, SKY Italia’s revenues increased $534 million, or 21%, as compared to fiscal 2006. This
revenue growth was primarily driven by an increase in subscribers over fiscal 2006. During fiscal 2007, SKY Italia added approx-
imately 368,000 net subscribers, which resulted in SKY Italia’s subscriber base totaling almost 4.2 million at June 30, 2007. The total
churn for the fiscal year ended June 30, 2007 was approximately 423,000 on an average subscriber base of approximately 4.0 mil-
lion, as compared to churn of approximately 314,000 subscribers on an average subscriber base of approximately 3.6 million in fis-
cal 2006. Subscriber churn for the period represents the number of SKY Italia subscribers whose service was disconnected during the
period.
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