Annual Report 2010
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ANNUAL REPORT 2010 405449_Cover.indd 1 8/18/10 6:42 AM POWERFUL NEWS BRANDS 405449_Cover.indd 2 8/18/10 6:28 AM 405449_12pg.Text.CS4.indd 1 8/18/10 7:16 PM 405449_12pg.Text.CS4.indd 2 8/13/10 5:14 PM WORLD-CLASS SPORTS 405449_12pg.Text.CS4.indd 3 8/13/10 5:14 PM 405449_12pg.Text.CS4.indd 4 8/13/10 5:14 PM COMPELLING ENTERTAINMENT 405449_12pg.Text.CS4.indd 5 8/18/10 3:43 PM News Corporation A LETTER FROM RUPERT MURDOCH Dear Fellow Stockholders: I am pleased to report that, even as world economies remain fragile, News Corporation has completed fi scal 2010 renewed and fundamentally stronger than when I wrote to you at this time last year. We entered this year facing strong economic headwinds and great uncertainty about the health of our markets. We focused ourselves on strengthening operations this past year and emerged with our businesses improving more than the markets themselves. Our impressive results are widely distributed across most of our business segments and from varied sources around the world. They are a testament to the clear vision our senior management has maintained in the face of broad economic challenges, as well as to the dedication of our more than 50,000 innovative colleagues. These Rupert Murdoch Chairman and Chief Executive Officer results also underscore how well positioned we are – fi scally, operationally and News Corporation strategically – for further growth across all of our markets. The growth of our cable and subscription businesses is excellent and will continue to improve strongly. But, let me be clear: I do not believe we are out of the turmoil yet. Sovereign debt pressures, soaring defi cits and unacceptable U.S. unemployment levels are key obstacles to the global economic recovery. Others may see more positive signs, but I believe until these issues are addressed, markets, governments, currencies and consumer behavior will be unpredictable. Even more unpredictable is the fundamental transformation that is disrupting the media industry. Each day new platforms and new ways of communicating and sharing content challenge us to evolve our businesses. But it is just this disruption that provides us long-term opportunities, upon which I will refl ect more later. In the midst of all these uncertainties, News Corporation has more than endured the recent downturn; we have thrived. Our full-year revenues in 2010 rose 8 percent to $32.8 billion and net income for the full year was $2.5 billion. Earnings were $0.97 per share. And our cash balance was $8.7 billion. 6 News Corporation 405449_12pg.Text.CS4.indd 6 8/18/10 6:15 AM Strategically, we made a number of moves this past year to strengthen our operations, including: Q Negotiating new retransmission consent agreements with a number of cable providers which will help ensure we return to a robust U.S. broadcast television business; Q Expanding successful franchises like National Geographic Channel, which launched Nat Geo WILD and the Fox International Channels, which launched 29 channels this past year; Q Delivering on the promise of 3D with Avatar – a big gamble that not only OUR CONTENT CHANNELS resulted in the most successful fi lm of all time, but ushered in a new era in fi lm and television production; HAVE NEVER BEEN STRONGER, OUR VIDEO Q Developing new economic models for digital journalism that will help us expand our brands. PRODUCTION BUSINESS Finally, we took steps this fi scal year for what I believe is a logical and CONTINUES TO THRIVE, disciplined plan for using our cash and strong balance sheet. We have made an attractive all-cash offer of 700 pence per share to acquire the AND OUR NEWSPAPERS 61% of BSkyB that News Corporation does not already own. ARE EXPANDING THEIR BSkyB is a well-run business with talented and committed people who have brought many innovations to customers in the U.K. and Ireland since we BRANDS THROUGH NEW founded it in 1989. It’s also a core business in which we have extensive expertise. In the past, we have considered an offer to buy the outstanding TECHNOLOGIES shares, but we feel now is the right time for both companies. So, we continue to move forward to obtain regulatory approvals. The bold, strategic moves that News Corporation makes throughout the year put us squarely in the news spotlight. But it is the consistency of our Company’s core strategy, and the clarity it brings to our operations, that resonates with me each summer when I sit down to write this letter to you and refl ect upon our performance. 2010 Annual Report 7 405449_12pg.Text.CS4.indd 7 8/17/10 8:18 AM When you have been in business as long as we have, you are no stranger to adversity or to instability. We hedge against uncertainty by investing in diversifi ed assets at all stages of growth. So as we strengthen our existing businesses, we are developing the next generation, like STAR India and new digital content models. Finally, we enjoy the fl exibility that comes from a well-managed balance sheet. From our vibrant news businesses to our newest digital initiatives, our strategy AVATAR WAS A BIG once again paid off in 2010, with double digit segment operating income growth at the majority of our businesses. Our content channels have never been stronger, GAMBLE, RESULTING our video production business continues to thrive, and our newspapers are expanding their brands through new technologies. IN THE MOST The Cable Network Programming segment was again our biggest growth driver. SUCCESSFUL FILM In 2010, operating income increased 37% over the prior year to a record $2.3 billion. All major networks showed impressive growth and, in the U.S., OF ALL TIME AND the FOX News Channel is simply unstoppable. FNC led the increase in affi liate USHERING IN A NEW revenue growth and outperformed CNN, MSNBC and CNBC combined in total viewers, for both prime time and total day categories. ERA IN FILM Ratings growth is fueling ad dollars, even in this diffi cult market. Across our AND TELEVISION cable segment, we launched several new shows and networks, including Justifi ed on FX, one of the most successful new programs in cable television. We are PRODUCTION capitalizing on the world’s most popular sport at the Fox Soccer Channel, which launched Fox Soccer Plus, a new premium network featuring premier interna- tional competition from the world’s fi nest soccer leagues. Our Big Ten Network is now seen in almost 50 million U.S. households. And Nat Geo WILD, now with nearly 40 million subscribers, marks one of the most successful and widely distributed launches in cable history. Our vast international cable operations fostered signifi cant profi t growth, lifted by higher affi liate fees, gains in advertising revenues and increased subscriptions. STAR India saw particularly robust advertising growth and we continue to develop market-leading capabilities in that important and burgeoning region. With recent investments in Asianet and other regional channels in India, as well as Rotana in the Middle East, we are positioning ourselves to drive and capture growth in these rapidly developing markets. 8 News Corporation 405449_12pg.Text.CS4.indd 8 8/17/10 8:19 AM Pay-TV is an incredibly important business for us – as evidenced in our support over the years of BSkyB. We know what these platforms can become with the right leadership and we are committed to this business long term. This past year at SKY Italia, we faced continued economic and competitive challenges but our renewed focus on premium services like HD and PVRs and the expanding choice in our programming packages is leading to lower churn. While Italy remains challenged, we’re starting to see strong stabilization in our business. Sky Deutschland is at a much earlier stage of growth. We believe there is great opportunity for pay television in Germany and we are making moves to strengthen operations. There are still huge challenges ahead, but we believe the management team of Sky Deutschland has the right strategy to build a sustainable business for the future. This past year, our television segment saw a 15% growth in operating income. Fox Broadcasting Company was once again the number one television network in the U.S. with hit shows like Glee and American Idol and our local stations saw signifi cant growth during the year. We continue to balance FOX profi tability ALL OF OUR MAJOR goals with a longer-term objective of maintaining its ratings lead as TV audiences fragment. NETWORKS SHOWED A noticeable turnaround in world advertising toward the end of calendar 2009 IMPRESSIVE GROWTH resulted in solid revenue growth, not only in our local TV markets in the U.S., but across our worldwide newspaper properties. At our popular U.K. titles, AND, IN THE U.S., The Sun delivered its highest year ever in advertising revenues in 2010. The leading global news brand, The Wall Street Journal was the only major U.S. title THE FOX NEWS to grow in circulation. CHANNEL IS SIMPLY The Filmed Entertainment segment operating profi t grew to a record $1.3 billion last year. I am only half joking when I wonder if there is anyone left on this planet UNSTOPPABLE who has yet to see Avatar. That groundbreaking fi lm’s critical reception and outstanding box offi ce, coupled with the theatrical and home entertainment performances of Ice Age: Dawn of the Dinosaurs, prove to me that audiences everywhere are still hungry for quality storytelling, particularly when it’s merged 2010 Annual Report 9 405449_12pg.Text.CS4.indd 9 8/17/10 8:22 AM with the latest technology.