Twenty-First Century Fox, Inc. 2016 Annual Report
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2016 ANNUAL REPORT The Last Man On Earth Fox Broadcasting Company We foster a culture of originality and innovation to make 21st Century Fox a place where fresh ideas, new approaches and compelling stories can take root. We are bold because we believe audiences always want, and deserve, more choice and better experiences. Our core video brands, and the breakout content that powers them, are indispensable for customers and distributors around the globe. 21st Century Fox is well positioned to build on our leadership and continue driving innovation for customers the world over. 21st Century Fox Annual Report Chairmen’s Letter 2016 Dear Fellow Stockholders 21st Century Fox Annual Report Chairmen’s Letter Our strategic plan is built around three fundamental As this development unfolds, the question is: where priorities: delivering standout creative output to power will value accrue? The answer is revealing itself. our core brands FOX, National Geographic, Fox News, Companies like ours that are upstream, investing at FOX Sports, FX and STAR India; driving innovation scale in producing compelling content that consumers for customers across multiple platforms; and further love and demand, building and supporting brands that advancing our capabilities to monetize our content have meaning and resonance, and nurturing cultures wherever it is consumed. This past Fiscal Year we made of creative risk-taking are best positioned to succeed. solid progress on all three fronts and delivered growth We are seeing the evidence to support this conviction in adjusted revenues and EBITDA for the year. every day. We are experiencing growth in both our Our major accomplishments against our key strategic affiliate fee revenue and advertising revenue. Our initiatives put us in a strong position for the future. brands are integral to not just traditional pay-tv We’ve greatly enhanced the quality of programming platforms, but also emerging competitors which are at the FOX network with a bold, new slate of shows; providing more consumers with more access to what completed the National Geographic acquisition we create. This year, we expanded the platforms on and integration of its assets; and completed our which consumers can watch our domestic television succession plan at the film studio by elevating an networks, through their inclusion on Sling TV and executive with unparalleled experience in creating expanded distribution on PlayStation Vue. More quality films for audiences globally. We recognize competition and better experiences for consumers that our film studio has delivered mixed results, means new opportunities to monetize our content. and we’re confident our new management team Increasingly, marketers are realizing that the quality will help drive more positive returns. of the consumer engagement they can reach The Fox News Channel, under new leadership, is through premium content is a source of great value. stronger than ever, and is on track to have its highest We continue to develop innovative ways to reach rated year in its 20-year history. There has been consumers and make the viewing experience better some speculation that Fox News’ unique voice and through reduced ad loads and more relevant, positioning will change. It will not. targeted advertising. And we were able to achieve all of this while also Our strong balance sheet is a competitive advantage completing an aggressive cost containment initiative for us, and one that we deploy conservatively. During that enabled us to rethink, restructure, and realign a time of industry transformation, our balance sheet key functions across the business. The result is a new, ensures we can capture and leverage opportunities. transformed organization that’s better positioned to We have also returned significant capital to our capture the many opportunities in today’s evolving shareholders. Over the last three years, we have marketplace. returned more than $16 billion to our shareholders through buybacks and dividends. Across our business we are seizing the many opportunities presented by this time of transformation With the Board’s guidance and leadership, we operate as consumers increasingly engage with our content 21CF as a growth company, prioritizing investments across multiple platforms. We established the Fox in accretive long-term growth opportunities through Networks Digital Consumer Group, which focuses on investing in our existing businesses and new initiatives strategic growth initiatives in the direct-to-consumer or acquisitions with both financial and strategic digital video category, and is already seeing great benefits. This approach has served us well and will success. In July, FOX became the first broadcast continue to guide us going forward. This year also network to launch live streaming of its primetime marks a new level of investment in creative output entertainment programming on a nationwide basis. and in our core brands. Approximately 250 million viewers in 210 markets This is a time of opportunity for us. We are convinced can now livestream the network’s primetime shows that we have the right assets, strategy and people to through FOX.com and the FOX NOW app. We are successfully navigate through this period of evolution continually innovating to ensure that viewers can for our industry, drawing upon the value of our core watch our programming whenever and wherever strengths as we continue to chase our aspiration to be they want and that we can benefit from the new the company people around the world turn to for the TV ecosystem. stories that shape and better their lives. Today, consumers spend more time watching video Sincerely, than any activity other than work or sleep. Demand for what we make is at an all-time high. New distribution entrants are making our content more available, not less. These new entrants, including our affiliate Hulu, are driving innovation and a better experience for consumers. We are pleased with Hulu’s progress Rupert and Lachlan Murdoch and are excited about its future plans. Executive Chairmen, 21st Century Fox 21st Century Fox Annual Report CEO’s Letter Dear Fellow Stockholders Through the strength of our programming, the proliferation of consumer choices for accessing our power of our brands and the inventiveness we content. More downstream competition means what bring to our products, we’ve achieved a great we create becomes more valuable. deal this year and are well positioned to create We have taken great strides in that direction, starting long-term value for our shareholders. with our work to position our brands for integration Let’s start with our content—our storytelling, news into emerging platforms. New internet-based video and sports. It’s the foundation of all we achieve services offer compelling user experiences and and fiscal 2016 has been an extraordinary year. economics, but just like incumbent distribution partners, their value proposition depends on Our film studio’s bet on a first-time director delivering video brands and quality programming broke box office records with Deadpool, which consumers demand. grossed over $780 million worldwide on a modest production budget. Our television studio delivered That’s why we put strengthening our video brands at three of the season’s top four broadcast series the center of our strategy. Toward that end, we have with Empire, The X-Files and Modern Family. simplified and strengthened our portfolio around our FX Networks delivered its highest rated series core brands: FOX, National Geographic, Fox News, ever and cable’s most watched new primetime FOX Sports, FX and STAR India. We have bolstered series with The People Vs. OJ Simpson: American our portfolio with the additions of FXX and FOX Crime Story, the first of a new anthology. National Sports 1, as well as with National Geographic’s digital Geographic Channel’s The Story of God with and other consumer properties, a transaction we Morgan Freeman was the most watched series completed in the last year. We also have built on in its history. Fox News Channel, the number STAR India’s leadership with the launch of STAR one basic cable channel over the last 12 Sports and the acquisition of MAA-TV’s broadcast months, achieved its highest rated year ever. business. And FOX Sports 1 continued its strong growth These investments have yielded strong results. trajectory, overtaking ESPN2 in prime across For the 2016 Fiscal Year we reported sustained all demographics, including total viewers. increases in affiliate revenues, our largest and most These are but a few examples from across predictable source of revenue, as well as a solid a global enterprise that is taking creative risks, year for advertising. Our video brands now underpin delivering compelling entertainment, news and multiple emerging streaming platforms domestically, sports, and providing viewers around the world including Hulu’s upcoming live and on-demand with the stories that are meaningful to their lives. service, which is core to our efforts to innovate for customers. Of course, as our industry changes rapidly, we need to do more than deliver great content. We Internationally, we have continued to grow the are also focused on being a driver of innovation number of households that enjoy our programming. in the customer experience and supporting the We are well positioned to benefit from strong pay-TV 21st Century Fox Annual Report CEO’s Letter and digital growth in international markets like India. STAR India’s profit growth is accelerating and At a time of constant its over-the-top mobile service hotstar is setting the pace of innovation. change, our insistence At a time of constant change, our insistence on on challenging the challenging the status quo is vital. Our culture is all about our appetite for change. We work every status quo is vital. day to make 21st Century Fox a dynamic place where our people are empowered to innovate in Our culture is all an environment built on trust and respect.