Twenty-First Century Fox 2004 Annual Report Download - page 8
Download and view the complete annual report
Please find page 8 of the 2004 Twenty-First Century Fox annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.6
forecast. At current growth
rates, we expect to achieve
operational breakeven in the
second half of this fiscal year.
SKY Italia has become
the laboratory of our pay-
TV future. Fox channels are
included on the service’s
basic tier, while Fox films are
featured on its premium tier.
FOX News Channel executives
have helped launch the SKY
Italia news channel at the
same time their FOX Sports
colleagues helped design
SKY Italia’s new studio sets.
Our own 78 percent-owned
NDS is ensuring the system’s
uncompromised conditional
access and BSkyB, the most
advanced satellite platform
in the world, is helping mod-
ernize its customer service.
Indeed, BSkyB is the
model of a successful direct-
to-home satellite platform.
During 2004, BSkyB added
more than half a million
subscribers while maintain-
ing its industry-low churn
rate. At the same time, it
is experiencing higher ARPU
as more customers opt for
premium services. Taken
together, these factors have
led to dramatically increased
associated income for News
Corp. this year, with the
expectation of even higher
returns going forward.
With all of the expertise in
satellite distribution that
News Corp. now has at its dis-
posal, I convened a meeting
of the top executives from
each of our satellite plat-
forms in March. For three
days, we discussed the future
of satellite technology and
covered in depth how we
can use our size to grow
subscription bases, improve
offerings and lower costs.
That weekend meeting was
a powerful example of how
News Corp. is able to marshal
the resources and expertise
of its component parts to
lift the entire group, and
I anticipate holding many
more of these meetings in
the future.
What enables us to
embrace strategic opportu-
nities such as DIRECTV,
BSkyB and SKY Italia is
the continued robust growth
we have achieved at our
core assets. And once again,
these gains were evenly dis-
tributed across our key oper-
ating segments. Combined,
we are poised for great
organic growth throughout
the Company.
In Fiscal 2004 at our
Filmed Entertainment seg-
ment, we achieved something
few expected: another record
year of operating income. A
question I was persistently
asked this year was: Is the
momentum at the film studio
sustainable? Frankly, no one
knew for certain, given the
historic vagaries of the film
industry. Today, however, I
am pleased to report that
operating income reached
US$886 million, besting last
year’s number by 38 percent.
Again, it was a combination
of smart film-making, better
risk management, a focus
on profitability over market
share and an exploding home
entertainment market that
generated our success. In
fiscal 2004 and early in fiscal
2005, Twentieth Century Fox
films had an industry record
six films in a row open
to US$20 million-plus box
offices. Meanwhile, Day
After Tomorrow has grossed
more than US$500 million
worldwide. Worldwide home
entertainment and pay-TV
performances of X2: X-Men
United, Cheaper by the Dozen
and Daredevil, among others,
also contributed to our suc-
cess, as did the continued
growth in our home enter-
tainment sales of TV DVDs.
This year, on sales of such
popular shows as 24, The
Television Stations; and the
mounting success of STAR.
FOX Broadcasting Network
again finished the year as the
number one rated network
among teens and adults aged
18-34 and a strong number
two in the coveted 18-49
demographic. And in its
third season, American Idol
cemented its place as a cul-
tural phenomenon, finishing
the season as the number one
rated program in primetime
and increasing its ratings
nearly 10 percent.
Despite the network’s
strong overall performance,
we suffered bad ratings in the
first half of the year, particu-
larly in the two months
following our highly rated
broadcast of post-season
baseball. What became clear
to us was this: we could
no longer abide the tradi-
tional September start to
the broadcast season if we
wanted to remain competi-
tive. Something had to
change. Beginning this past
summer, we moved to a 12
month season and the early
results have been promising
(if somewhat uneven), with
several new shows showing
great potential for their
return in November.
Operating income at Fox
Television Stations rose 7
percent over last year. Our
duopoly strategy is clearly
working, reflected in the
record market share the sta-
tions achieved this year as
well as lower overall costs.
With nearly all of the cost
savings already realized from
our integration efforts, the
focus now is to capitalize on
the revenue opportunities
available from owning nine
duopolies in some of the
Gains were evenly
distributed across our
key operating segments.
We are poised for
great organic growth
throughout the
Company.
886
641
957
851
617
430
271
256
592
400
158
133
(267)
(68)
(150)
(111)
Filmed Entertainment
Television
Cable Network Programming
Direct Broadcast Satellite Television
Magazines and Inserts
Newspapers
Book Publishing
Other
Operating Income by Industry Segment: 2004 versus 2003 (U.S. Dollars, in Millions)
NEWS CORPORATION ANNUAL REPORT 2004NEWS CORPORATION ANNUAL REPORT 2004
■2004
■2003
Note: These financial highlights are taken from the Concise
Financial Report.
Note: DBS segment was consolidated as of April 30, 2003
and had only two months of results in prior year
Simpsons and M*A*S*H, we
generated a significant new
revenue stream, demonstrat-
ing once again that the only
limit to our bottom line is
the limit of our creative
thinking.
Like many of our peers,
however, we are not taking
the explosion of the DVD
market for granted. One
of the hallmarks of our
Company’s success is our
ability to anticipate chal-
lenges early, to address them
head-on and to craft durable,
creative solutions. That is
precisely what we are doing
now with the issue of
digital piracy. If we are to
continue to reap the rewards
from our digital content,
we must protect ourselves
from the threat of its theft.
Peter Chernin, the Company’s
President and COO, took
a leading role in both
Hollywood and Washington
this past year in formulat-
ing technological, legal and
educational answers to this
vexing problem. The solu-
tions are not obvious, nor
easily implemented. But I
am pleased with the amount
of attention and creative
thought our executives have
given to the issue and I am
hopeful that, through our
work and the work of others,
a new consensus can be
forged which will ultimately
win this war.
At our Television segment,
operating income rose US$106
million to US$957 million,
the result of a strong overall
advertising environment,
which pushed up pricing for
our primetime schedule and
sports programming; higher
advertising revenues and
market share gains at our Fox