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MUMBAI:
While there is economic downturn across the globe that has
left no sector untouched, including media that has weakened
the advertising markets, and beaten down News Corp's share
price, the company's chairman Rupert Murdoch says that it
has prepared itself well for this day.
That
preparation includes maintaining a strong balance sheet and
a strategic array of businesses. "As a result, we are
as well positioned as we can be to face what may well turn
into a prolonged economic downturn. Fiscal 2009 will be a
year of many – in some cases unprecedented – challenges;
we cannot fool ourselves into believing otherwise."
Murdoch
made these remarks at the annual stockholder meeting.
Noting
that the aim will be to stick to the strategy that has brought
success in the past, Murdoch said that this would sustain
the company through these troubling times. This is an approach
that has three main parts. First, diversified assets at various
stages of development. Second, judicious investment in businesses
that represent the next generation of growth. And finally,
the flexibility that comes from a strong balance sheet.
"We
compete in a sector that is undergoing intense transformation
– driven by new technology as well as radical shifts
in consumer tastes and expectations. I’m proud to say
that – unlike so many others – we have not allowed
ourselves to grow complacent. For the past five years or so,
we have capitalised on global trends to grow our company by
an average of more than 15 per cent a year – a feat unmatched
by any of our competitors. And we’ve done it by constantly
looking forward – and determining where the growth drivers
will be five years down the road.
"We
have strengthened our balance sheet at the same time we have
strengthened our businesses. The result is that we have a
war chest of approximately $5 billion in cash, and have extended
our average debt maturity to more than 22 years.
"In
uncertain times, this capital reserve gives us stability.
It also gives us the flexibility to take advantage of opportunities
all around the globe that our competitors might not be in
a position to act on right now. We intend to continue to reevaluate
our mix of businesses and seek new growth drivers to ensure
that we have the right balance geographically … the right
balance across different business sectors … the right
balance between advertising-supported and subscription-based
businesses… and, true to our long-term strategy, the
right balance of companies at all stages of development."
Murdoch
adds that this strategy, coupled with more than a half century
of experience, will help the company to weather the economic
storm ahead. It will also guide decisions as the company looks
to increase our subscription-based businesses … focus
on the next generation of digital properties … and expand
the role in places such as India, Eastern Europe, and Asia.
"In
these emerging economies, we are seeing the creation of a
global middle class of more than two billion people. These
people are well educated, well remunerated, and increasingly
sophisticated in their choices. And in the years ahead, their
entry into the global marketplace surely means extraordinary
new opportunities for our company."
Murdoch
explains that his optimism about the future also stems from
last year’s impressive results. By any measure, 2008
was a standout year: operating income for 2008 was $5.4 billion,
representing 21 per cent growth over last year. At the same
time, earnings per share increased 68 per cent to $1.81. All
our business segments generated year-over-year gains –
with record profits at our Direct Broadcast Satellite, Cable
Network Programming, Film and Television businesses.
He
notes that once again, Sky Italia was a top performer. Since
last year, it has doubled its operating income to $419 million.
"Today it boasts more than 4.5 million subscribers –
more than 20 per cent of all Italian households. But we see
room for even more growth following the successful formula
we established at BSkyB," Murdoch said.
Cable
Network Programming was also a leader last year, with operating
income up 16 per cent. That’s a remarkable achievement
– especially given the huge startup costs for the Fox
Business Network and the Big Ten Network.
"
On the subject of Fox Business Network, we have high aspirations
for an enterprise that enjoyed the largest launch of any channel
in U.S. cable history. Today Fox Business Network has more
than 40 million subscribers, and is well on its way to becoming
a formidable challenger to its 18-year-old competitor, CNBC.
Though the FOX Business Network ratings are not large, they
nonetheless are slightly ahead of where Fox News Channel was
at a similar time in its development. We’re up 400 per
cent in prime time – and up more than 250 per cent in
our targeted demographic. And the financial crisis is translating
into greater interest for the coverage our Fox Business Network
provides," Murdoch said.
In
the films division, Murdoch notes that the company is in its
seventh straight year of operating income growth. Again, that
represents one of the highest margins in the entertainment
industry. " We reached $1.25 billion on the strong performances
of our worldwide theatrical and home entertainment products.
It’s true that we will have a difficult comparison with
last year’s results. But we have good reason to expect
that the year ahead will be another one of solid profitability,
driven by future releases that include sequels to Ice Age
and Night at the Museum."
As
far as the global digital front goes, Murdoch says that Fox
Interactive Media saw revenues grow 57 per cent and operating
income increase five-fold. This growth was on the strength
of the increase in advertising and search revenue at MySpace.
FIM sites attract 12 per cent of all U.S. traffic on the web.
"
And our recently launched MySpace Music saw more than one
billion music streams. And as we expand these opportunities,
FIM is moving beyond the desktop and expanding the reach of
its core brands with ad-supported mobile sites, signing mobile
distribution deals with every major carrier in the world.
"
In less than three years, FIM has become nearly a billion
dollar business. To put that into perspective, it took Google
five years to reach that milestone. And each month, we are
adding tens of thousands of new users from around the world.
Even more important, our profits-per-user are up 53% over
last year. Clearly, we’re still in the early stages of
figuring out the best ways to translate the huge potential
of FIM into advertising revenue. But we are encouraged by
what we see.
"
We’re also encouraged by hulu. Hulu is our online video
joint venture with NBC Universal, which has become a real
success in the six months since it launched. Already it is
the number eight site on the web for video. Indeed, more people
visit hulu to watch their favorite shows than all the network
sites combined."
Murdoch
ended by reiterating that News Corp is the most global and
the most competitive media and entertainment company on earth.
"Every day, we reach more than a billion people through
our television, films, cable, books, newspapers, satellite
technology and digital media. And despite turmoil in the markets
and revolutionary changes that are transforming our sector,
I have tremendous confidence in our future.
"Throughout
the year ahead, we will most certainly be tested. But we will
remain faithful to the core mission that has served us well
for more than a half century. And as long as we do, we will
do what we do best: connecting people all over the world,
creating choice where none exists, informing with a purpose,
challenging with a mission, taking on established competitors,
and always reinventing ourselves while judiciously investing
for the long term."
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