Twenty-First Century Fox 2011 Annual Report Download - page 21

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
primarily due to increases at STAR and FIC. The higher advertising revenues at STAR were primarily due to the strengthening of the advertising
market in India and higher ratings. The strengthening of the worldwide advertising markets led to improvements at existing FIC channels in Asia
and Latin America.
For the fiscal year ended June 30, 2011, operating income at the Cable Network Programming segment increased $492 million, or 22%, as
compared to fiscal 2010, primarily due to the revenue increases noted above. The revenue increases were partially offset by a $507 million increase
in expenses, primarily due to higher sports rights amortization and higher entertainment programming costs.
Filmed Entertainment (21% and 23% of the Company’s consolidated revenues in fiscal 2011 and 2010, respectively)
For the fiscal year ended June 30, 2011, revenues at the Filmed Entertainment segment decreased $732 million, or 10%, as compared to fiscal
2010. The revenue decrease was primarily driven by the successful worldwide theatrical and home entertainment releases of Avatar,Ice Age:
Dawn of the Dinosaurs and Alvin and the Chipmunks: The Squeakquel during fiscal 2010 as compared to the worldwide theatrical and home
entertainment releases of The Chronicles of Narnia: Voyage of the Dawn Treader, and Black Swan and the worldwide theatrical release of Rio in
fiscal 2011. The revenue decreases noted above were partially offset by higher contributions from Twentieth Century Fox Television and the
inclusion of revenues from Shine which was acquired in fiscal 2011. The revenue increase at Twentieth Century Fox Television was primarily due
to higher home entertainment, international television and digital distribution revenues from Glee, Modern Family, Sons of Anarchy, initial
syndication revenues from How I Met Your Mother and American Dad and revenues from the Glee concert tour.
For the fiscal year ended June 30, 2011, the Filmed Entertainment segment operating income decreased $422 million, or 31%, as compared to
fiscal 2010, primarily due to the revenue decreases noted above, partially offset by lower amortization of production and participation costs.
Television (14% and 13% of the Company’s consolidated revenues in fiscal 2011 and 2010, respectively)
For the fiscal year ended June 30, 2011, Television segment revenues increased $550 million, or 13%, as compared to fiscal 2010. The increase
was primarily due to increased advertising revenues at the television stations owned by the Company and at FOX as well as higher retransmission
consent revenues. The advertising revenue increase reflects the broadcast of the Super Bowl, which was not broadcast on FOX in fiscal 2010,
higher revenues from NFL regular season games, higher pricing resulting from improvements in the advertising markets, particularly in the
automotive and financial sectors and higher comparative political advertising due to the 2010 mid-term elections. These revenue increases were
partially offset by the absence of revenue from the broadcast of the Bowl Championship Series (“BCS”) games which were broadcast on FOX in
fiscal 2010 and lower MLB advertising revenues due to lower post-season ratings and the broadcast of one less post-season game.
The Television segment reported an increase in operating income for the fiscal year ended June 30, 2011 of $461 million as compared to fiscal
2010. The increase was primarily due to the revenue increases noted above, lower prime-time entertainment programming costs and the absence of
BCS programming costs, partially offset by higher NFL programming costs due to the broadcast of the Super Bowl.
Direct Broadcast Satellite Television (11% and 12% of the Company’s consolidated revenues in fiscal 2011 and 2010, respectively)
For the fiscal year ended June 30, 2011, SKY Italia’s revenues decreased $41 million, or 1%, as compared to fiscal 2010, due to unfavorable
foreign exchange movements. SKY Italia had an increase of approximately 230,000 subscribers during fiscal 2011, bringing the total subscriber
base to 4.97 million at June 30, 2011. Revenue, on a local currency basis, was consistent with fiscal 2010 as higher subscription revenues were
offset by lower advertising revenues, primarily due to the absence of the FIFA World Cup. The total churn for fiscal 2011 was approximately
508,000 subscribers on an average subscriber base of 4.9 million, as compared to churn of approximately 630,000 subscribers on an average
subscriber base of 4.8 million in fiscal 2010. Subscriber churn for the period represents the number of SKY Italia subscribers whose service was
disconnected during the period. During the fiscal year ended June 30, 2011, the strengthening of the U.S. dollar against the Euro resulted in a
decrease in revenues of approximately 2% as compared to fiscal 2010.
Average revenue per subscriber (“ARPU”) of approximately €43 in the fiscal year ended June 30, 2011 was consistent with fiscal 2010. 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”) of approximately €335 in the fiscal year ended June 30, 2011 increased from fiscal 2010,
primarily due to higher average installation costs related to an increased penetration of high definition personal video recorder set-top boxes. SAC
is calculated by dividing total subscriber acquisition costs for a period by the number of gross SKY Italia subscribers added during the
period. Subscriber acquisition 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, 2011, SKY Italia’s operating income increased $2 million, or 1%, as compared to fiscal 2010, as lower
programming expenses related to FIFA World Cup and Olympic Games which occurred in fiscal 2010, were offset by the lower revenues noted
above and higher installation costs.
Publishing (27% and 26% of the Company’s consolidated revenues in fiscal 2011 and 2010, respectively)
For the fiscal year ended June 30, 2011, revenues at the Publishing segment increased $278 million, or 3%, as compared to fiscal 2010. The
increase in revenues was primarily due to increased revenues at the Australiannewspapersduetofavorableforeignexchangefluctuationsandhigher
advertising and circulation revenues at The Wall Street Journal.Theserevenueincreaseswerepartiallyoffsetbytheabsenceofrevenuesfromthe
financial indexes business which was disposed of in fiscal 2010, lower book sales due to fewer new releases and lower licensing fees resulting from a
settlement received at HarperCollins in fiscal 2010. The weakening of the U.S. dollar against the Australian dollar and British pound sterling resulted
in a revenue increase of approximately $309 million, or 4%, for the fiscal year ended June 30, 2011 as compared to fiscal 2010.
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