Twenty-First Century Fox, Inc. (formerly known as News Corporation), a Delaware
corporation, is a diversified global media and entertainment company with operations
in the following five industry segments: (i) Cable Network Programming; (ii)
Television; (iii) Filmed Entertainment; (iv) Direct Broadcast Satellite Television;
and (v) Other, Corporate and Eliminations. The activities of Twenty-First Century
Fox, Inc. are conducted principally in the United States, the United Kingdom,
Continental Europe, Asia and Latin America.
Filmed Entertainment
The Company engages in 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.
Television Programming, Production and Distribution generally, television programs
are produced under contracts that provide for license fees which may cover only
a portion of the anticipated production costs. As these costs have increased
in recent years, the resulting deficit between production costs and license
fees for domestic first-run programming has also increased. Therefore, additional
licensing is often critical to the financial success of a series. Successful
U.S. network television series are, for example, (I) licensed for first-run
exhibition in Canadian and international markets, (II) released in DVD box sets,
(III) licensed for off-network exhibition in the United States (including in
syndication or to cable programmers), (IV) licensed for further television exhibition
in international markets and (V) made available for electronic sell-through,
including individual episodes and full series. Generally, a series must be broadcast
for at least three to four television seasons for there to be a sufficient number
of episodes to offer the series in syndication in the United States or to cable
and DBS programmers in the United States. The decision of a television network
to continue a series through an entire television season or to renew a series
for another television season depends largely on the series’ audience
ratings.
Television
The Company is engaged in the operation of broadcast television stations, the
broadcasting of network programming in the United States and the development,
production and broadcasting of television programming in Asia.
Star Group Limited (“STAR”) engages in the development, production
and broadcasting of television programming to 53 countries throughout Asia.
STAR divides its markets into six regions: India; Greater China; Indonesia;
the rest of South East Asia; the Middle East; and Pakistan. STAR estimates that
approximately 300 million people in 143 million households have access to STAR’s
owned and affiliated channels. STAR’s owned and affiliated channels and
its library content are also distributed in Africa, Europe, Australia and North
America.
Cable Network Programming
The Company produces and licenses news, sports, general entertainment and movie
programming for distribution to distributors in the United States and internationally.
SKY Italia currently distributes over 100 channels of basic and premium programming
services via satellite and broadband directly to subscribers in Italy. This
programming includes exclusive rights to popular sporting events, newly-released
movies and SKY Italia’s original programming, such as SKY News, Italy’s
first 24-hour news channel.
Competition.
Motion picture production and distribution are highly competitive businesses.
The Company competes with other film studios, independent production companies
and others for the acquisition of artistic properties, the services of creative
and technical personnel, exhibition outlets and the public’s interest
in its products. The number of motion pictures released by the Company’s
competitors, particularly the other major film studios, in any given period
may create an oversupply of product in the market, which may reduce the Company’s
shares of gross box office admissions and may make it more difficult for the
Company’s motion pictures to succeed. The commercial success of the motion
pictures produced and/or distributed by the Company is substantially affected
by the public’s unpredictable response to them. The competitive risks
affecting the Company’s home entertainment business include the number
of home entertainment titles released by the Company’s competitors that
may create an oversupply of product in the market, competition among home media
formats, such as DVDs, and other methods of distribution, such as video-on-demand
services.
Similar to motion picture production and distribution, production and distribution
of television programming is extremely competitive. The Company competes with
other film studios, independent production companies and others for the acquisition
of artistic properties, the services of creative and technical personnel, exhibition
outlets and the public’s interest in its products. In addition, television
networks have affiliated production companies from which they are increasingly
obtaining their programming, which has reduced the demand for programming from
other non-affiliated parties.
The network television broadcasting business is highly competitive. FOX and
MyNetworkTV directly compete for programming, viewers and advertising with ABC,
NBC, CBS and The CW. ABC, NBC and CBS each broadcasts a significantly greater
number of hours of programming than FOX and MyNetworkTV and, accordingly, may
be able to designate or change time periods in which programming is to be broadcast
with greater flexibility than FOX or MyNetworkTV. FOX and MyNetworkTV also compete
with other non-network sources of television service, including cable television
and DBS services. Other sources of competition may include home video exhibition,
digital video recorders (“DVR”), the Internet and home computer
usage. In addition, future technological developments may affect competition
within the television marketplace.
Cable network programming is another highly competitive business. Cable networks
compete for distribution and, when distribution is obtained, compete for viewers
and advertisers with free over-the-air broadcast television, radio, print media,
motion picture theaters, DVDs, Internet, wireless and portable viewing devices
and other sources of information and entertainment. Important competitive factors
include the prices charged for programming, the quantity, quality and variety
of programming offered and the effectiveness of marketing efforts.
The magazines all compete for circulation and advertising revenue with other
published products, in their same categories, as well as other forms of media.
Competition for circulation is based on the editorial and informational content
of each publication and its price. Competition for advertising is based on circulation
levels, reader demographics, advertising rates and advertiser results.
The newspapers published by the Company compete for readership and advertising
with local and national newspapers and also compete with television, radio,
the Internet and other communications media in their respective locales. Competition
for newspaper circulation is based on the news and editorial content of the
newspaper, cover price and, from time to time, various promotions. The success
of the newspapers published by the Company in competing with other newspapers
and media for advertising depends upon advertisers’ judgments as to the
most effective use of their advertising budgets. Competition for advertising
among newspapers is based upon circulation levels, readership levels, reader
demographics, advertising rates and advertiser results. Such judgments are based
on factors such as cost, availability of alternative media, circulation and
quality of readership demographics.
The book publishing business operates in a highly competitive market and has
been affected by consolidation trends. This market continues to change in response
to technological innovations and other factors. Recent years have brought a
number of significant mergers among leading book publishers. There have also
been a number of mergers completed in the distribution channel. HarperCollins
must compete with other publishers, such as Random House, Penguin Group, Simon
& Schuster and Hachette Livre, for the rights to works by well-known authors
and public personalities. Although HarperCollins currently has strong positions
in each of its markets, further consolidation in the book publishing industry
could place it at a competitive disadvantage with respect to scale and resources.