Twenty-First Century Fox 2014 Annual Report Download - page 46

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40
xResults of Operations - This section provides an analysis of the Company’s results of operations for
fiscal 2014, 2013 and 2012. This analysis is presented on both a consolidated and a segment basis. In
addition, a brief description is provided of significant transactions and events that impact the
comparability of the results being analyzed.
xLiquidity and Capital Resources - This section provides an analysis of the Company’s cash flows for
fiscal 2014, 2013 and 2012, as well as a discussion of the Company’s outstanding debt and
commitments, both firm and contingent, that existed as of June 30, 2014. Included in the discussion of
outstanding debt is a discussion of the amount of financial capacity available to fund the Company’s
future commitments and obligations, as well as a discussion of other financing arrangements.
xCritical Accounting Policies - This section discusses accounting policies considered important to the
Company’s financial condition and results of operations, and which require significant judgment and
estimates on the part of management in application. In addition, Note 2 to the accompanying
Consolidated Financial Statements of Twenty-First Century Fox summarizes the Company’s significant
accounting policies, including the critical accounting policy discussion found in this section.
OVERVIEW OF THE COMPANY’S BUSINESS
The Company is a diversified global media and entertainment company, which manages and reports its
businesses in the following five segments:
xCable Network Programming, which principally consists of the production and licensing of
programming distributed through cable television systems, direct broadcast satellite operators and
telecommunication companies primarily in the U.S., Latin America, Europe and Asia.
xTelevision, which principally consists of the broadcasting of network programming in the U.S. and the
operation of 28 full power broadcast television stations, including 10 duopolies, in the U.S. (of these
stations, 18 are affiliated with the FOX Broadcasting Company (“FOX”) and 10 are affiliated with
Master Distribution Service, Inc. (“MyNetworkTV”)).
xFilmed Entertainment, which principally consists of the production and acquisition of live-action and
animated motion pictures for distribution and licensing in all formats in all entertainment media
worldwide, and the production and licensing of television programming worldwide.
xDirect Broadcast Satellite Television, which consists of the distribution of programming services via
satellite, cable and broadband directly to subscribers in Italy, Germany and Austria.
xOther, Corporate and Eliminations, which principally consists of corporate overhead and
eliminations and other businesses.
Cable Network Programming and Television
The Company’s cable networks, which target various demographics, derive a majority of their revenues from
monthly affiliate fees received from multi-channel video programming distributors (“MVPDs”) based on the number
of their subscribers. Affiliate fee revenues are net of the amortization of cable distribution investments (capitalized
fees paid to U.S. MVPDs to typically facilitate the carriage of a domestic cable network). The Company defers the
cable distribution investments and amortizes the amounts on a straight-line basis over the contract period. Cable
television and direct broadcast satellite are currently the predominant means of distribution of the Company’s
program services in the U.S. Internationally, distribution technology varies region by region.
The television operations derive revenues primarily from the sale of advertising, and to a lesser extent,
retransmission consent revenue. Adverse changes in general market conditions for advertising may affect revenues.
U.S. law governing retransmission consent revenue provides a mechanism for the television stations owned by
the Company to seek and obtain payment from MVPDs who carry the Company’s broadcast signals. Retransmission
consent revenue consists of per subscriber-based compensatory fees paid to the Company by MVPDs that distribute
the signals of the Company’s owned and operated television stations. The Company also receives compensation