Twenty-First Century Fox 2007 Annual Report Download - page 53

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Filmed Entertainment (25% of the Company’s consolidated revenues in fiscal 2006 and 2005)
For the fiscal year ended June 30, 2006, revenues at the Filmed Entertainment segment increased $280 million, or 5%, as
compared to fiscal 2005. This increase was primarily due to an increase in worldwide theatrical, pay television and free television
revenues, partially offset by a decrease in worldwide home entertainment revenues. Theatrical revenues increased primarily due to
improved performance and an increase in the number of releases, driven by successful titles including 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. Fiscal 2005 theatrical releases
included I, Robot, Alien vs. Predator, Robots, Hide & Seek and Sideways. The increases in worldwide pay television and free television
revenues were primarily due to a stronger film lineup, more feature films available during fiscal 2006 and stronger revenues from the
returning primetime series 24 and new primetime series Prison Break and My Name Is Earl. Fiscal 2006 worldwide home entertain-
ment revenues were driven by the worldwide release of Fantastic Four, Walk the Line, Robots, Kingdom of Heaven and Hide & Seek.
Fiscal 2005 included the worldwide home entertainment release of The Day After Tomorrow, I, Robot, Alien vs. Predator, Garfield,
Dodgeball, Man on Fire, Napoleon Dynamite, the Star Wars Trilogy and the distribution fees earned for The Passion of the Christ. The
film home entertainment decreases were slightly offset by home entertainment revenue from television titles, including Family Guy
and 24. Home entertainment revenues generated from the sale and distribution of film and television titles in fiscal 2006 were 76%
and 24%, respectively, of total home entertainment revenues.
Operating income at the Filmed Entertainment segment for fiscal 2006 increased $34 million, or 3%, as compared to fiscal
2005. This improvement was due to the revenue changes noted above and lower home entertainment marketing and manufactur-
ing costs, partially offset by higher theatrical marketing costs directly associated with the increased number of releases.
Television (21% and 22% of the Company’s consolidated revenues in fiscal 2006 and 2005, respectively)
For the fiscal year ended June 30, 2006, Television segment revenue was consistent with fiscal 2005. The Television segment
reported an increase in Operating income for the fiscal year ended June 30, 2006 of $80 million, or 8%, from fiscal 2005.
Revenues at the Company’s U.S. television operations decreased 1% for the fiscal year ended June 30, 2006 as compared to
fiscal 2005. The decrease was primarily due to the broadcast of the Super Bowl and Daytona 500 in fiscal 2005, with no comparable
events in fiscal 2006. Partially offsetting these decreases was 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 Compa-
ny’s U.S. television operations for the fiscal 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, parti-
ally 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 non-FOX affiliated stations.
Revenues for the fiscal year ended June 30, 2006 at the Company’s international television operations increased over fiscal
2005. The increase was primarily driven by higher advertising and subscription revenues. Operating income for the Company’s
international television operations increased 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 program-
ming.
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. These increases were driven by higher net affiliate and advertising revenues at the RSNs and FX, as
well as increased advertising revenue at Fox News.
FX’s revenues increased 14% for the fiscal year ended June 30, 2006 as compared to fiscal 2005, primarily due to advertising
and net affiliate revenue increases. Advertising revenues increased in fiscal 2006 primarily due to higher pricing and higher ratings as
compared to fiscal 2005. For the fiscal year ended June 30, 2006, net affiliate revenues increased as compared to fiscal 2005, reflect-
ing an increase in average rates per subscriber and DBS subscribers. As of June 30, 2006, FX reached approximately 89 million Niel-
sen households.
The RSNs’ revenues increased 30% for the fiscal year ended June 30, 2006 as compared to fiscal 2005, primarily due to advertis-
ing and net affiliate revenue increases. The increase in advertising revenues was primarily due to the acquisition of the Florida and
Ohio RSNs in April 2005. Also contributing to the increase in advertising revenues 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 pric-
ing in fiscal 2006 as compared to fiscal 2005. Net affiliate revenues increased for the fiscal year ended June 30, 2006 as compared to
fiscal 2005. This increase was primarily 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.
For the fiscal year ended June 30, 2006, Fox News’ revenues increased 13% as compared to fiscal 2005, primarily due to adver-
tising and affiliate revenue increases. Advertising revenues for the fiscal year ended June 30, 2006 increased as compared to fiscal
2005 due to higher pricing and higher volume. Net affiliate revenues increased for the fiscal year ended June 30, 2006, as a result of
increases in subscribers and average rates per subscriber from fiscal 2005. As of June 30, 2006, Fox News reached approximately
89 million Nielsen households.
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
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