Cable TV

FY-2015: Cable and Filmed Entertainment boost Fox op income 3.1%

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BENGALURU: Rupert Murdoch’s Twenty-First Century Fox Inc. (Fox) reported a 3.1 per cent increase in adjusted annual total segment operating income before depreciation and amortisation (OIBDA) of $6488 million for the year ended 30 June, 2015 (FY-2015) as compared to the $6291 million last year due to higher contributions from the company’s Cable Network Programming and Filmed Entertainment segments.

The company reported total revenues in FY-2015 of $28.99 billion, a $2.88 billion decrease from prior year revenues of $31.87 billion. Excluding the net revenues from the Direct Broadcast Satellite Television (DBS) businesses, Sky Italia and Sky Deutschland AG, which were sold in November 2014 to Sky plc (Sky), in both years, adjusted revenues increased $890 million, or 3.4 per cent, over the $26.06 billion of adjusted revenues in the prior year. This increase was primarily driven by double-digit revenue growth at the Cable Network Programming segment.

Fox reported annual total segment operating income before depreciation and amortization (OIBDA) of $6.72 billion, which is equal to the amount reported in the prior year. Excluding the OIBDA contributions from the DBS businesses in both years, OIBDA increased $197 million, or the above mentioned 3.1 per cent, over the $6.29 billion of adjusted OIBDA in the prior year.

Company Speak

Fox executive chairman Rupert Murdoch said, “We made clear operational strides over the last year that will further position us to benefit from the strong and growing global demand for high quality video content. We delivered a solid financial performance, driven by sustained gains in affiliate fees, while we continued to invest in building our new channels Fox Sports 1, FXX and Star Sports. The appeal of our new sports rights resonated with consumers globally, whether it was Star Sports in India setting new records with hundreds of millions of viewers for the ICC Cricket World Cup, or the more than 25 million viewers who watched the Women’s World Cup Final on Fox. Our film studio achieved outstanding critical and box-office success with a truly diverse range of films and we are proud of the creative excellence that earned it the most Academy Awards in the industry. Our company is well positioned for this time of opportunity in our industry. We will balance the utilization of our strong balance sheet to drive growth. Today’s announcement of our new $5 billion buyback authorization reflects our ongoing program to provide direct shareholder returns.”

Cable Network Programming

Cable Network Programming annual segment OIBDA increased five per cent to $4.65 billion, driven by a 12 per cent revenue increase led by continued strong affiliate revenue growth and higher advertising revenues. The revenue improvement was partially offset by a 16 per cent increase in expenses, representing higher sports programming costs driven by the broadcasts of the ICC Cricket World Cup at Star Sports, increased Major League Baseball and NASCAR rights costs at Fox Sports 1 (FS1), and higher professional team rights costs at the regional sports networks (RSNs) as well as increased entertainment programming costs at FX Networks. The segment OIBDA growth was adversely impacted by five per cent from foreign exchange rate fluctuations, primarily in Latin America and Europe.

Domestic affiliate revenue increased 17 per cent reflecting the combination of sustained growth at the regional sports networks (RSNs), Fox News Channel and FX Networks, increased contribution from FS1, and the consolidation of the Yankees Entertainment and Sports Network (the YES Network). International affiliate revenue increased three per cent driven by strong local currency growth at the Fox International Channels (FIC) and Star, partially offset by a 12 per cent adverse impact from the strengthened US dollar.

Domestic advertising revenue grew four per cent over the prior year period led by double-digit growth at the sports channels, including the impact of the consolidation of the YES Network, as well as growth at Fox News and FX Networks. International advertising revenue increased 14 per cent due to strong local currency growth at Star and FIC, which was partially offset by a five per cent adverse impact from the strengthened US dollar.

OIBDA from the domestic channels increased 12 per cent from the prior year, led by strong double-digit growth at the RSNs, which includes the impact of the consolidation of the YES Network, as well as higher contributions from Fox News Channel and National Geographic Channels. Annual OIBDA at the company’s international cable channels declined 16 per cent from the prior year as double digit local currency growth at the FIC channels and Star entertainment channels was more than offset by the impact of the ICC Cricket World Cup at Star Sports and the adverse impact from the strengthened US dollar, primarily in Latin America and Europe.

Television

Full year segment OIBDA of $718 million decreased $164 million or 19 per cent versus the prior year. The decline principally reflects the absence of advertising revenue and OIBDA generated from the broadcast of the Super Bowl in the prior year. Excluding the impact of the Super Bowl in the prior year, segment revenues were consistent with the year ago as strong retransmission consent revenue growth was counterbalanced by a 6 percent decline in advertising revenues reflecting overall lower general entertainment ratings at the Fox Broadcast Network.

Filmed Entertainment

Full year segment OIBDA of $1.45 billion increased $87 million, or six per cent, over prior year amounts reflecting higher film studio contributions partially offset by lower contributions from the television production businesses and the absence of full year contributions from Shine Group (Shine), which was contributed into the Endemol Shine Group joint venture in December 2014. The film studio’s growth was led by strong worldwide theatrical and home entertainment performance across a diverse set of releases, including Dawn of the Planet of the Apes, The Fault In Our Stars, Taken 3, Gone Girl, Kingsman: The Secret Service and The Maze Runner as well as the home entertainment performance of Rio 2. The film studio’s commercial and creative success was further highlighted by the all-time industry record it set of more than $5.5 billion in global box-office receipts for calendar 2014, as well as its industry leading eight Academy Awards for Fox Searchlight, including Best Picture for Birdman: Or (The Unexpected Virtue of Ignorance). Segment OIBDA growth was also adversely impacted by nine per cent from foreign exchange rate fluctuations.

Total equity (losses) earnings of affiliates

Annual equity earnings from affiliates were $904 million as compared with $622 million in the prior year. The increased contributions from affiliates reflects increased contributions from Sky primarily resulting from the Company’s share of Sky’s gains on the sale of its ownership stakes in National Geographic Channels International, Sky Betting & Gaming (Sky Bet) and its shares in ITV partially offset by purchase price amortization recorded by Sky related to its acquisition of the DBS businesses from the Company, as well as the absence of pre-tax gains related to the Company’s participation in Sky’s share repurchase program which ended last fiscal year. The higher Sky contributions were partially offset by the inclusion of equity losses of Endemol Shine Group, the absence of the YES Network contributions in the current year resulting from its consolidation in February 2014 and higher losses from Hulu.

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