Twenty-First Century Fox 2008 Annual Report Download - page 56

NEWSCORP
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
and, from time to time, various promotions. The success of the newspapers published by the Company in competing with other newspapers and
media for advertising depends upon advertisers’ judgments as to the most effective use of their advertising budgets. Competition for advertising
among newspapers is based upon circulation levels, readership levels, reader demographics, advertising rates and advertiser results. Such
judgments are based on factors such as cost, availability of alternative media, circulation and quality of readership demographics. In recent years,
the newspaper industry has experienced difficulty increasing circulation volume and revenues. This is due to, among other factors, increased
competition from new media formats and sources, and shifting preferences among some consumers to receive all or a portion of their news from
sources other than a newspaper.
The Newspapers and Information Services segment also derives revenue from the provision of subscriber-based information services and the
licensing of products and content to third-parties. Losses in the number of subscribers for these information services may affect revenues. The
information services provided by the Company also compete with other media sources (free and subscription- based) and new media formats.
Licensing revenues depend on new and renewed customer contracts, and may be affected if the Company is unable to generate new licensing
business or if existing customers renew for lesser amounts, terminate early or forego renewal.
The Company believes that competition from new media formats and sources and shifting consumer preferences will continue to pose
challenges within the Newspapers and Information Services industries.
Book Publishing
The Book Publishing segment derives revenues from the sale of general and children’s books in the United States and internationally. The
revenues and operating results of the Book Publishing segment are significantly affected by the timing of the Company’s releases and the number
of its books in the marketplace. The book publishing marketplace is subject to increased periods of demand in the summer months and during the
end-of-year holiday season. Each book is a separate and distinct product, and its financial success depends upon many factors, including public
acceptance.
Major new title releases represent a significant portion of the Company’s sales throughout the fiscal year. Consumer books are generally sold
on a fully returnable basis, resulting in the return of unsold books. In the domestic and international markets, the Company is subject to global
trends and local economic conditions.
Operating expenses for the Book Publishing segment include costs related to paper, printing, authors’ royalties, editorial, art and design
expenses. Selling, general and administrative expenses include promotional expenses, salaries, employee benefits, rent and other routine
overhead.
Other
NDS
NDS supplies open end-to-end digital technology and services to digital pay-television platform operators and content providers. NDS technologies
include conditional access and microprocessor security, broadcast and broadband stream management, set-top box and residential gateway
middleware, electronic program guides, digital video recording technologies and interactive infrastructure and applications. NDS provides
technologies and services supporting standard definition and high definition televisions and a variety of industry, Internet and Internet protocol
standards, as well as technology for mobile devices. NDS’ software systems, consultancy and systems integration services are focused on
providing platform operators and content providers with technology to help them profit from the secure distribution of digital information and
entertainment to consumer devices which incorporate various technologies supplied by NDS. Significant NDS expenses include smart card costs,
royalties for the use of certain intellectual properties, salaries, employee benefits, travel, rent and other routine overhead.
FIM
The Company sells, through its FIM division, advertising, sponsorships and subscription services on the Company’s various Internet properties.
Significant FIM expenses include development costs, advertising and promotional expenses, salaries, employee benefits and other routine
overhead. The Company’s Internet properties include the social networking site MySpace.com, IGN.com, FOXsports.com, Scout.com,
RottenTomatoes.com, Askmen.com and Photobucket.com. The Company also has a distribution agreement with Microsoft’s MSN for
FOXsports.com and a search technology and services agreement with Google.
News Outdoor
The Company sells, through its News Outdoor businesses, outdoor advertising space on various media, primarily in Russia and Eastern Europe.
Significant expenses associated with the News Outdoor business include site lease costs, direct production, maintenance and installation
expenses, salaries, employee benefits and other routine overhead. In June 2007, the Company announced its intention to explore strategic options
for News Outdoor in connection with News Outdoor’s continued development plans. The strategic options include, but are not limited to, exploring
the opportunity to expand News Outdoor’s existing shareholder group through new strategic and private equity partners. No agreement has yet
been entered into with respect to these strategic options.
Other Business Developments
In December 2007, the Company completed the acquisition of Dow Jones pursuant to the Agreement and Plan of Merger, dated as of July 31, 2007,
by and among the Company, Ruby Newco LLC, a wholly-owned subsidiary of the Company (“Ruby Newco”), Dow Jones & Company, Inc. (“Dow
Jones”) and Diamond Merger Sub Corporation, as amended (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, each
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