Twenty-First Century Fox 2007 Annual Report Download - page 49

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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
SKY Italia’s average revenue per subscriber (“ARPU”) for the fiscal year ended June 30, 2007 was approximately €44 and was
consistent with that of fiscal 2006. 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 number 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
calculated for the respective periods by adding the beginning and ending subscribers for the period and dividing by two.
Subscriber acquisition costs per subscriber (“SAC”) were approximately €260 in fiscal 2007, which was consistent with that of
fiscal 2006, primarily due to an increase in commissions being offset by lower average installation costs. SAC is calculated by divid-
ing total subscriber acquisition costs for a period by the number of gross SKY Italia subscribers during the period. Subscriber acquis-
ition costs include the cost of the commissions paid to retailers and other distributors, the cost of equipment sold directly by SKY
Italia to subscribers and the costs related to installation and acquisition advertising, net of any upfront activation fee. SKY Italia
excludes the value of equipment capitalized under SKY Italia’s equipment lease program, as well as payments and the value of
returned equipment related to disconnected lease program subscribers from subscriber acquisition costs.
For the fiscal year ended June 30, 2007, Operating income at SKY Italia improved by $182 million as compared to fiscal 2006.
The improvement in fiscal 2007 was primarily due to the revenue increases noted above, partially offset by higher programming
costs due to the increased subscriber base, as well as higher sports rights amortization.
During the fiscal year ended June 30, 2007, the weakening of the U.S. dollar resulted in an increase of approximately 7% in
both revenues and Operating income as compared to fiscal 2006.
Magazines and Inserts (4% of the Company’s consolidated revenues in fiscal 2007 and 2006)
For the fiscal year ended June 30, 2007, revenues at the Magazines and Inserts segment increased $29 million, or 3%, as com-
pared to fiscal 2006. The increase in revenues primarily resulted from an increase in volume of in-store marketing and free-standing
insert products, partially offset by lower rates for these products.
Operating income for the fiscal year ended June 30, 2007 increased $28 million, or 9%, as compared to fiscal 2006. The
increase was primarily due to the revenue increases noted above, as well as lower printing costs.
Newspapers (16% of the Company’s consolidated revenues in fiscal years 2007 and 2006)
For the fiscal year ended June 30, 2007, revenues at the Newspaper segment increased $391 million, or 10%, as compared to
fiscal 2006. Operating income increased $136 million, or 26%, for the fiscal year ended June 30, 2007 as compared to fiscal 2006.
The weakening of the U.S. dollar resulted in increases of approximately 7% in both revenues and Operating income for the fiscal
year ended June 30, 2007 as compared to fiscal 2006.
For the fiscal year ended June 30, 2007, U.K. newspapers’ revenues increased 9% as compared to fiscal 2006, primarily due to
favorable foreign exchange movements and higher Internet revenues which were partially offset by lower circulation and advertising
revenues. Operating income increased for the fiscal year ended June 30, 2007, as compared to fiscal 2006, primarily due to a higher
redundancy provision in fiscal 2006. During the fiscal year ended June 30, 2006, the Company recorded a redundancy provision of
approximately $109 million as compared with a $24 million provision recorded during fiscal 2007. The increase in Operating
income was also a result of lower production costs due to decreased circulation and lower promotional costs, partially offset by
higher operating costs associated with the launch of a free London newspaper, increased investment in Internet businesses and
higher newsprint costs.
For the fiscal year ended June 30, 2007, Australian newspapers’ revenues increased 10% as compared to fiscal 2006, primarily
due to favorable foreign exchange movements, an increase in advertising revenues and incremental revenue from the acquisition of
the Federal Publishing Company’s group of companies in April 2007. Operating income increased 3% as compared to fiscal 2006,
primarily due to the impact of favorable exchange rate movements, partially offset by higher employee and newsprint costs.
Book Publishing (5% of the Company’s consolidated revenues in fiscal years 2007 and 2006)
For the fiscal year ended June 30, 2007, revenues at the Book Publishing segment increased by $35 million, or 3%, from fiscal
2006, primarily due to strong sales on key titles, including The Dangerous Book For Boys by Conn and Hal Iggulden, The Reagan Dia-
ries by Ronald Reagan, The Children of Hurin by J.R.R. Tolkien and The Measure of a Man by Sidney Poitier, partially offset by lower
revenues from the successful children’s title The Chronicles of Narnia by C.S. Lewis in the corresponding period of fiscal 2006. During
the fiscal year ended June 30, 2007, HarperCollins had 128 titles on The New York Times Bestseller lists with 16 titles reaching the
number one position.
Operating income for the fiscal year ended June 30, 2007 decreased $8 million, or 5%, as compared to fiscal 2006. The
decrease was primarily due to lower sales of the highly profitable The Chronicles of Narnia which were included in fiscal 2006.
Other (8% and 6% of the Company’s consolidated revenues in fiscal 2007 and 2006, respectively)
For the fiscal year ended June 30, 2007, revenues at the Other operating segment increased $889 million, or 64%, as compared
to fiscal 2006. The increase was primarily driven by an increase in the number of active users and higher advertising revenues from
FIM’s Internet sites. The revenue increase was also driven by incremental revenues from acquisitions by FIM in October 2005 and
from the Jamba joint venture which was formed in January 2007. Also contributing to the revenue increase was Global Cricket
Corporation’s sale of the broadcast and sponsorship rights of the International Cricket Council (“ICC”) Cricket World Cup with no
comparable event in fiscal 2006.
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