Twenty-First Century Fox 2002 Annual Report Download - page 8

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our operating income increased 11 percent to
US$1.86 billion. In the face of unprecedented
challenges we generated uncommon success.
As strong as our results were, however, we
were not able to transfer that strength to our share
price. Like you, I am frustrated with the underper-
formance of our stock during this past fiscal year
and know it is of little consolation that our peers –
and indeed the overall U.S. market – experienced
similar and greater losses. I and other members of
our senior management team spent considerable
time this past year educating the marketplace about
our fundamental shareholder value in the hope
that with a market rebound will come a rebound
in our stock price to levels that more accurately
reflect our true position.
Nevertheless, fiscal 2002 was a year of significant
operational success.
In the U.S., our Filmed Entertainment segment
recorded operating income of US$473 million,
a 78 percent increase over the previous year,
fueled by the record-breaking theatrical releases of
Planet of the Apes, Ice Age and Star Wars Episode II:
Attack of the Clones;by the strong performance of
home entertainment releases including the brilliant
Moulin Rouge and Behind Enemy Lines; and by
the pay-TV earnings of Planet of the Apes and
Rupert Murdoch
CHAIRMAN AND CHIEF EXECUTIVE
Dr. Dolittle 2. These are the benefits of our excep-
tional string of motion pictures over the past year
and a half: a content pipeline generating ongoing
revenues as our films are released across a variety
of ancillary windows. It is not luck that powered our
fifth consecutive year of record revenues from DVD
and VHS sales in the U.S. but rather the talents of
our executives and their 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 Television (TCFTV)
furthered its reign as the number one supplier of
series to networks. During the year, TCFTV sold
the syndication rights to such successful shows as
Buffy the Vampire Slayer, King of the Hill, The Practice
and Ally McBeal as well as raising the license fees
for network series including Dharma & Greg. Fox
Television Studios’ Malcolm in the Middle – nominat-
ed for five Emmys in July 2002 – also continued
to be a treasured television property, reflected in
the sale, shortly after the fiscal year, of rights to
re-broadcast the series to stations covering 30 per-
cent of the U.S. With 24 of our television series
incorporated into the U.S. broadcast networks’
schedules for next season – 15 of them returning
from last season – the Company is poised to
extend its unrivaled leadership in network program
creation and to augment its line of syndication hits.
Perhaps the clearest evidence of our ability to
strengthen our businesses in uncertain economic
conditions and against any competition can be seen
in the progress of our cable television platforms in
fiscal 2002. Operating income at the cable segment
increased 88 percent in fiscal 2002 as explosive
gains were achieved across all the Company’s cable
channels. Fox News Channel, once considered an
improbable challenger to an unbeatable frontrunner,
became the undisputed number one cable news
channel on U.S. television in less than six years.
Fox News beat CNN’s ratings 24 hours a day
while adding more than 12 million subscribers and
remained the most-watched cable news network
for the second half of the fiscal year. FX emerged
as a top 10 cable network as the fast-growing
entertainment channel generated the highest ratings