Twenty-First Century Fox 2002 Annual Report Download

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ANNUAL REPORT 2002

Table of contents

  • Page 1
    A N N U A L R E P O R T 2 0 0 2

  • Page 2
    ...constellation of media businesses, News Corporation's global operations encompass the fields of filmed entertainment, newspapers, pay and free-to-air television, cable network programming, book publishing, magazines and consumer marketing. Just as our assets span the world, our vision spans art and...

  • Page 3
    ... Studios Australia Fox Studios Australia (b) 50% Premium Movie Partnership (b) 20% Latin America Fox Studios Baja (a) Canal Fox (a) Telecine (b) 12.5% Television United States FOX Broadcasting Company (a) Fox Television Stations (a) WNYW New York, NY WWOR New York, NY KTTV Los Angeles, CA KCOP Los...

  • Page 4
    ... News Broadcasting Japan 80% JSky Sports 14.3% Sky Movies Corporation 50% Nihon Eiga Satellite Broadcasting 15% Latin America Cine Canal (b) 22.5% Sky Latin America DTH Platforms Mexico - Innova 30% Brazil - NetSat 36% Sky Multi-Country Partners 30% Australia and New Zealand FOXTEL 25% Fox Sports...

  • Page 5
    ...Share) Year ended June 30, Revenues Operating Income Associated entities, before Other items Income before Other items Other items, net Net Profit Earnings per share... 15,431 Operating Income by Geographic Segment 2002 Revenues by Geographic Segment 2002 Australasia 7% Australasia 8% United States...

  • Page 6
    ...Revenues...items Net Profit Financial Position Assets Debt $ 2002 $ 15,195 $ 1,855 $ $ ...2002 Revenues by Industry Segment 2002 4,274 473 4,040 458 430 2,411 235 199 118 864 (58) Ne w ine s/I nse Bo spa ok s Ot blis hin g her Film...Film ed Tele Ent ert ain Ca vis ion ble Ma Ne tw gaz per Pu Ca...

  • Page 7
    ... the vision and expertise of the individuals who manage our businesses into successful operations. It is also this spirit that has guided our principled response to world events during the past year, particularly the events of September 11. Our journalists in New York - at the Post, at Fox News...

  • Page 8
    ... creative teams, the sheer quality of the films they create and the intelligent marketing and distribution strategies they employ to maximize these products' potential. Our television production business also helped to propel the earnings increase in Filmed Entertainment, as Twentieth Century Fox...

  • Page 9
    ... duopolies in the nation's top three markets of New York, Los Angeles and Chicago. Our focused strategy of creating the most efficient television platforms in the most rewarding American markets continues to make the Fox Television Stations group a major growth engine for the Company. While much of...

  • Page 10
    ... publisher. In the U.K., the solid market leadership of our papers enabled the majority of them to increase circulation revenues year-over-year; yet these gains were counteracted by ad revenue declines. In Australia, our papers' circulation revenues also rose; but the downturn in national...

  • Page 11
    the movies that audiences crave ... â- Animation sensation Ice Age grossed more than US$300 million worldwide after achieving the highest-grossing March opening - and the third-largest animated opening - in box office history 10

  • Page 12
    ..., the Company again supplied more primetime shows to the major U.S. broadcast networks than any other studio - and will extend that leadership to four straight years with series created by Twentieth Century Fox Television and Fox Television Studios for the 2002-2003 season. News Corporation's filmed...

  • Page 13
    â- Minority Report, starring Tom Cruise and directed by Stephen Spielberg, was the number-one film in the U.S. upon its release in June 2002 â- Fiscal 2002 began with the spectacular success of Planet of the Apes, which grossed US$360 million in theaters worldwide by June 30. The film was an ...

  • Page 14
    .... Moulin Rouge grossed more than US$175 million at the worldwide box office The debut of Star Wars Episode II: Attack of the Clones marked the widest release of a motion picture ever, helping to propel the film to box office revenues of more than US$500 million worldwide by the end of the fiscal...

  • Page 15
    â- Fiscal 2002 was the fifth consecutive year of record-breaking revenues from DVD and VHS sales in the U.S., which increased 18 percent over the previous year Apart from the home entertainment success of Dr Dolittle 2 and ...

  • Page 16
    â- The Company's television production studios were the leading supplier of primetime shows to the networks for the third consecutive year. The industry leadership of Twentieth Century Fox Television and Fox Television Studios was solidified with the addition of FOX's top-rated The Bernie Mac Show...

  • Page 17
    the television shows that viewers tune into ... 16

  • Page 18
    ...the most profitable of the Company's television businesses despite a downturn in the advertising market - grew market share significantly as it continued to develop duopolies in the nation's largest television markets. Meanwhile, the FOX Broadcasting Company focused its creative talents on fostering...

  • Page 19
    ... with higher average audiences for regular season races in 2002 â- Following FOX's broadcast of Super Bowl XXXVI - the most-watched program of the year on any network - Malcolm in the Middle, the Emmy Award-winning Fox Television Studios comedy, drew an extraordinary 31 million viewers 18

  • Page 20
    ... the year, with an additional duopoly in the Chicago market formed subsequent to the end of fiscal 2002 With the Chicago acquisition, the station group includes nine major-market duopolies, among them duopolies in the top three U.S. television markets: New York, Los Angeles and Chicago â- â- 19

  • Page 21
    â- In the U.K., BSkyB, 36 percent-owned by News Corporation, solidified its position as the premier digital satellite television service as Sky's DTH subscriber base surpassed six million, its average revenue per subscriber rose and its churn rate remained among the lowest in the industry 20

  • Page 22
    ...position in the movie category with STAR Mandarin Movies In mainland China, Phoenix Chinese Channel, 37.6 percentowned by News Corporation, remained the nation's leading independent broadcaster STAR launched Xing Kong Wei Shi, a Mandarin entertainment channel, the first all-new channel granted cable...

  • Page 23
    ... than doubled its audience on a 24-hour basis and increased its primetime audience 92 percent to firmly establish itself as number one among U.S. news channels â- The addition of 12.3 million subscribers at Fox News Channel enabled the Company to increase affiliate fees, while the rapid ratings...

  • Page 24
    .... The Company's news and general entertainment channels, Fox News Channel and FX, are the two fastest-growing channels in the industry; its sports network, Fox Sports Net, is enjoying the largest ratings increase in its five-year history; and the recent launch of the National Geographic Channel in...

  • Page 25
    â- FX exploited the phenomenal popularity of NASCAR, exceeding the ratings and viewership of the previous year's NASCAR coverage. By the end of the fiscal year, FX was one of the top 10 cable channels among adults 18 to 49 â- Speed Channel, formerly Speedvision, was relaunched with a full slate ...

  • Page 26
    ... sold its 49.5 percent stake in Fox Family Worldwide to Walt Disney Company for US$1.7 billion National Geographic Channel celebrated the most successful launch of a U.S. cable network in history and expanded from 12 million subscribers to 28 million The world-famous LA Dodgers drew more than three...

  • Page 27
    ... in advertising revenues. As a result of the Company's diligence, nearly all its U.K. papers were able to increase market share over their competitors. At News Limited in Australia, circulation at most of the Company's newspapers increased during the year. Meanwhile, in the U.S., the New York Post...

  • Page 28
    ...Monday to Friday. Sales of the Sunday Herald Sun increased dramatically, boosted by a major redesign and the addition of new sections â- The Times continued to reach more opinion formers than any competitor. Average weekly sales of The Sunday Times increased by 1.6 percent to nearly1.4 million 27

  • Page 29
    ... as The Sunday Telegraph remained Australia's best-selling Sunday paper with a circulation more than 20 percent greater than its nearest competitor News Corporation's 45.3 percent-owned Independent Newspapers Limited remained New Zealand's leading newspaper publisher as its 100 titles maintained...

  • Page 30
    â- The New York Post achieved larger daily circulation increases in NewYork following September 11, 2001 than all its major competitors combined, and increased sales by 15.4 percent in the year to March 31 29

  • Page 31
    ... guide In Australia, donna hay, a cooking magazine, significantly exceeded circulation expectations in its first year The Weekly Standard, News Corporation's Washington-based political magazine, continued to shape the American policy debate as its subscription revenues increased â- â- â-

  • Page 32
    ... Magazine, the most widely circulated newspaper insert in the U.S., grew its market share substantially during the year to 50 percent â- New SmartSource at-shelf programs drove incremental sales of more than US$5 million, bringing News America Marketing's in-store sales to record levels 31

  • Page 33
    the books that readers desire ... 32

  • Page 34
    ...News Corporation's HarperCollins is a leading book publisher around the world, and its titles continued to fill bookstores and bestseller lists in fiscal 2002. HarperCollins achieved its fifth consecutive year of record profits across all its divisions in the U.S., the U.K., Canada and Australia/New...

  • Page 35
    ... of the Year and Publisher of the Year HarperCollins celebrated the renaissance of J.R.R. Tolkien's Lord of the Rings trilogy - whose sales rose 1000 percent over the previous year in the U.K., Canada, Australia and New Zealand - following the release of the film adaptation in December 2001...

  • Page 36
    ... and the U.K. by forging strategic agreements with Sichuan Provisional Networks and CCTV in China, Sky Life Korea in Korea, the Versatel digital cable system in Moscow and Bloomberg Interactive NDS' Value@TV technology powered viewers' interactive tennis games during Wimbledon in July 2001, viewer...

  • Page 37
    ... the 2002 rugby league season â- â- Broadsystem - a top U.K. provider of outsourced database management and marketing communications - won major accounts during the year with Inland Revenue, npower and MBNA while successfully integrating the operations of News Omnimedia, a News Corporation...

  • Page 38
    ... E D Annual Report 2002 Annual Report 2002 Statement of (Continued) FOR THE YEAR ENDED 30 JUNE, 2002 Concise Report FOR THE YEAR ENDED 30 JUNE, 2002 Table of Contents 39 Statement of Corporate Governance 44 Directors' Report Concise Financial Report 53 Discussion and Analysis 55 Statement of...

  • Page 39
    38

  • Page 40
    ...AT I O N L I M I T E D Annual Report 2002 Statement of Corporate Governance FOR THE YEAR ENDED 30 JUNE, 2002 Board of Directors The Board of Directors (the "Board") oversees the business of The News Corporation Limited and its controlled entities ("the Company"). To assist in the execution of its...

  • Page 41
    ... internal audit's activities; • to review the adequacy of internal controls; and • to advise the Board on any other requested issues. The Audit Committee invites senior executives of the Company, including the Chief Financial Officer and Group General Counsel, to participate in its meetings. 40

  • Page 42
    ... News Limited Chief Executive Officer, NDS Group plc Executive Vice President, The News Corporation Limited Chairman, Fox Filmed Entertainment Co-President and Chief Operating Officer, Gemstar-TV Guide International Senior Executive Vice President, Group General Counsel, The News Corporation Limited...

  • Page 43
    ...essential in order to maximise the Company's return on investment for audit services. Ethical Standards At a Board meeting on 27 February, 1996, the Board adopted "Standards of Business Conduct". The Standards confirm the Company's policy to conduct its affairs in compliance with all applicable laws...

  • Page 44
    ..., New York, New Zealand and London; and • notices and explanatory memoranda of extraordinary and general meetings. Shareholders may raise matters of concern at general meetings and have ultimate control in corporate governance as they vote for the members of the Board, the Company's governing body...

  • Page 45
    ... Corporation (Hong Kong) Limited since 2001. Director of Gemstar-TV Guide International, Inc. since 2001. Member of the Nominating and Share Option Committees of The News Corporation Limited. G C Bible (Age 65). Chairman of Philip Morris Companies Incorporated since 1995 and Chief Executive Officer...

  • Page 46
    ... of The News Corporation Limited. G J Kraehe (Age 59) Non-executive Director of The News Corporation Limited since 2001. Chairman, BHP Steel Limited since July 2002. Managing Director and Chief Executive Officer of Southcorp Limited from 1994 to 2001. Director of National Australia Bank since...

  • Page 47
    ... plc since 1992. Director of STAR Group since 1993. Non-executive Director of NDS Group plc since 1996. Director, Senior Executive Vice President and General Counsel of Fox Entertainment Group, Inc. since 1998. Member of the Nominating and Share Option Committees of The News Corporation Limited. 46

  • Page 48
    ...D Annual Report 2002 Directors' Report (Continued) FOR THE YEAR ENDED 30 JUNE, 2002 Directors' Meetings The following Directors were in office during the financial year, and attended the following number of Board meetings: Meetings of Committees Directors' Meetings Number of meetings held: Number...

  • Page 49
    ... financial statements in accordance with the Company's accounting policy, as the dividend was not declared and announced by the Directors prior to 30 June, 2002. A discount of 10% will apply to the weighted average market price of the ordinary and preferred limited voting ordinary shares used...

  • Page 50
    ...Annual Report 2002 Directors' Report (Continued) FOR THE YEAR ENDED 30 JUNE, 2002 Review of Operations A review of the operations of the Company during the financial year and of the results of those operations is detailed in the front section of this Annual Report. State of Affairs of the Company...

  • Page 51
    ...AT I O N L I M I T E D Annual Report 2002 Directors' Report (Continued) FOR THE YEAR ENDED 30 JUNE, 2002 Directors and Senior Executives' Remuneration Non-executive Directors Fees paid to Non-executive Directors on the Board take into consideration the level of fees paid to Board members of other...

  • Page 52
    ...E D Annual Report 2002 Directors' Report (Continued) FOR THE YEAR ENDED 30 JUNE, 2002 Directors and Senior Executives' Remuneration (Continued) The table below sets out the fees and other amounts paid by the Company to Non-executive Directors of the Company for the year ended 30 June, 2002: Name...

  • Page 53
    ...T E D Annual Report 2002 Directors' Report (Continued) FOR THE YEAR ENDED 30 JUNE, 2002 Directors and Senior Executives' Remuneration (Continued) [1] Other amounts comprise contributions to the Company pension plans and the cost of limited non-cash benefits in addition to salary for executives in...

  • Page 54
    ... a decline in operating income due to ratings softness at Fox Broadcasting Company, increased programming costs and a weak advertising market. The Newspaper segment also reported lower advertising revenues as a result of local market weakness in the advertising sector. Net losses from associated...

  • Page 55
    ...E D Annual Report 2002 Discussion and Analysis of the Financial Statements (Continued) FOR THE YEAR ENDED 30 JUNE, 2002 Statement of Financial Position Total assets as at 30 June, 2002 declined $... to write downs of Gemstar and Stream, the Company's sale of Fox Family Worldwide and a reduction in ...

  • Page 56
    ...AT I O N L I M I T E D Annual Report 2002 Statement of Financial Performance FOR THE YEAR ENDED 30 JUNE, 2002 Consolidated 2002 Note A$ million 2001 Sales revenue Operating expenses Operating income Net loss from associated entities Borrowing costs Interest income Net borrowing costs Dividend on...

  • Page 57
    ...M I T E D Annual Report 2002 Statement of Financial Position A S AT 3 0 J U N E , 2 0 0 2 Consolidated 2002 Note A$ million 2001 Assets ...members of the parent entity Outside equity interests in controlled entities Total Shareholders' Equity Total Liabilities and Shareholders' Equity The Statement...

  • Page 58
    ...D Annual Report 2002 Statement of Cash Flows FOR THE YEAR ENDED 30 JUNE, 2002 Consolidated 2002 A$ million 2001 Operating activity Net loss attributable to members of the parent entity Adjustment for non-cash and non-operating activities: Associated entity earnings, net of dividends Depreciation...

  • Page 59
    ... in this financial report. The Company has not recorded any revaluation increments since 1990. Dividends payable are recognised when their payment is determined by, and announced following, a meeting of the Board of Directors. This represents a change in accounting policy over the prior year...

  • Page 60
    ...D Annual Report 2002 Notes to and forming part of the Concise Financial Report (Continued) FOR THE YEAR ENDED 30 JUNE, 2002 NOTE 2 Business segment data Note Filmed Entertainment Television Cable Network Programming Magazines & Inserts 2002 A$ million Newspapers Book Publishing Other Unallocated...

  • Page 61
    ... Annual Report 2002 Notes to and forming part of the Concise Financial Report (Continued) FOR THE YEAR ENDED 30 JUNE, 2002 NOTE 2 Business segment data (continued) Note Filmed Entertainment Television Cable Network Programming Magazines & Inserts 2001 A$ million Newspapers Book Publishing Other...

  • Page 62
    ... T E D Annual Report 2002 Notes to and forming part of the Concise Financial Report (Continued) FOR THE YEAR ENDED 30 JUNE, 2002 NOTE 2 Business segment data (continued) 2002 A$ million Filmed Entertainment Television Cable Network Programming Magazines & Inserts Newspapers Book Publishing Other...

  • Page 63
    ... payment details of the above mentioned dividends refer to Directors' Report on page 48. The Directors of The News Corporation Limited recommend the payment on 9 October, 2002 of a final unfranked dividend of 1.5 cents per ordinary share and 3.75 cents per preferred limited voting ordinary share on...

  • Page 64
    ... The Company's share of the profit (loss) after income tax of its associated entities consist principally of: British Sky Broadcasting Group plc Stream, S.p.A Sky Latin America Net Sat Servicos Ltda (Brazil) Innova, S.de R.L de C.V. (Mexico) Other Fox Sports Domestic Cable (USA) FOXTEL ESPN Star...

  • Page 65
    ... sold its investment in EchoStar Communications Corporation for total consideration of $1,312 million (2001 $635 million) and recorded a gain on the sale of $468 million (2001 $415 million). (b) In October, 2001, a subsidiary of the Company, Fox Broadcasting Company ("FOX"), Haim Saban and the other...

  • Page 66
    ... Gemstar's share price at 28 June, 2002 of US$5.39 per share. (k) As a result of the downturn in sports related advertising during the year, together with the reduction in long term forecast advertising growth rates, in accordance with the Company's accounting policies, the Directors reevaluated the...

  • Page 67
    ... prior financial year, the Company changed its accounting policy with regards to, amongst other things, the treatment of marketing and development costs incurred in the production and distribution of films whereby marketing and certain development costs, previously capitalised and expensed over time...

  • Page 68
    ... T E D Annual Report 2002 Notes to and forming part of the Concise Financial Report (Continued) FOR THE YEAR ENDED 30 JUNE, 2002 NOTE 10 Subsequent events In June, 2002, the Company entered into an agreement to acquire the television station WPWR-TV in Chicago from Newsweb Corporation for US$425...

  • Page 69
    ...' Declaration FOR THE YEAR ENDED 30 JUNE, 2002 The Directors of The News Corporation Limited declare that: a) the Concise Financial Report set out on pages 53 to 67 complies with Accounting Standard AASB 1039 "Concise Financial Reports"; and b) has been derived from and is consistent with the...

  • Page 70
    ... Australia. The audit opinion expressed in this report has been formed on the above basis. Audit opinion In our opinion, the concise financial report of The News Corporation Limited complies with Accounting Standard AASB 1039 "Concise Financial Reports". Ernst & Young C N Westworth Partner Sydney...

  • Page 71
    ... Corporation Cogent Nominees Pty. Limited HSBC Custody Nominees (Australia) Limited MLC Limited The National Mutual Life Association of A/Asia Limited NRMA Nominees Pty. Limited Warnford Nominees Pty. Limited News Nominees Pty. Limited Zurich Australia Limited Transport Accident Commission CSS Board...

  • Page 72
    ...0 0 2 Corporate Ownership - Preferred Limited Voting Ordinary Shares Number of Preferred Limited Voting Ordinary Shareholders A holder of a preferred limited voting ordinary share ("preferred share") shall be entitled to vote at any general meeting of the members of the Company by virtue of holding...

  • Page 73
    ... P O R AT I O N L I M I T E D Annual Report 2002 Board of Directors and Executive Management Committee Directors K. Rupert Murdoch,AC C H A I R MA N A N D CH I EF EXECU TIVE Executive Management Committee Rupert Murdoch CHAIRMAN AND CHIEF EX E C U TI V E NEWS CO RPO RATIO N David Hill C HA I RM...

  • Page 74
    ...Leary (New York) Head Office 2 Holt Street Sydney, N.S.W. Australia 2010 Telephone 61 (2) 9288 3000 Registered Office 121 King William Street Adelaide, S.A. Australia 5000 Telephone 61 (8) 8206 2000 A.C.N 007 910 330 Auditors Ernst & Young Share Listings Ordinary Shares and Preferred Limited Voting...

  • Page 75
    N E W S C O R P O R AT I O N A N N UA L R E P O RT 2 0 0 2