The television market in Italy is one of Europe’s largest, with about 22 million television households.
- The pay TV penetration in that country is barely topping 20% and this compares to pay TV penetration of over 55% in Britain, 45% in Spain, 32% in France.
- The the rapid expansion of the international Fox and National Geographic channels, and the regional sports networks with longer term affiliate carriage deals and long-term sports rights contracts have all contributed to cable’s success and strong competitive standings.
- Australian titles are in extremely good shape and operating in an economic climate which seems to be quite different to that in the U.S.
- Dow Jones is now developing a web-based delivery platform that will allow it to target customers far beyond the traditional institutional clients and will extend reach around the world in partnership with Star, Sky, and MySpace.
Key questions and answers from the fourth quarter earnings call conducted by News Corp. (NWS) on August 5, 2008.
Rich Greenfield (Pali Capital):
Can you give us a sense of how big enterprise media now is within your newspaper segment, and particularly within Dow Jones?
Rupert Murdoch: More than half the profits already come from various digital efforts there, or digital delivered products, such as the newswires, Factiva, the indexes, and so on.
All of these things are growing very fast. We see Dow Jones as being the whole, right at the forefront of the digital revolution. For instance, just the very basic thing, wsj.com, is expanding extremely fast.
It leads into the subscription service, of which we have now well over 1.1 million subscribers at a healthy price, which it will -- and one that can be increased and will be increased, and that of course also leads into very specialized wires for which we can charge very high premiums.
It is an information service, not a newspaper, an information service which will be neutral to all platforms, whether it comes on a Kindle or a mobile telephone or a PC or whatever.
That really goes for all our newspapers. Our newspapers should be seen as services to their public and their communities but will be available in every way.
Rich Greenfield (Pali Capital):
Comments about the difficulties in the advertising environment for both newspapers and TV?
Peter Chernin:It is important to point out that we have got a pretty good group of television stations right now, including nine duopolies in major markets, so a big chunk of our television station inventory is now tied up in duopolies which continue to outperform the market.
Jessica Reif Cohen (Merrill Lynch):
Can you talk about the leverage at FIM?
Peter Chernin: We believe that we are still in a scale gain business and it is a very competitive environment and it’s important that we keep growing and we keep investing to grow, investing to grow in terms of development, in terms of technology, in terms of international, in terms of new features, in terms of content and we will continue to do so.
Our expectation is that we can grow our margins in the FIM business in fiscal 2009, so our costs will continue to grow and we are expecting right now I think our projections are we can have revenue growth of 30%.
Our costs will continue to grow but we expect the margins to grow also, so that we will outpace our cost growth with the revenue. But we will certainly continue to focus on growing the overall category, into the making the right kind of investments.
Jessica Reif Cohen (Merrill Lynch):
Local advertising is clearly weak for everyone but national still seems to be strong. Are you not seeing any spillover in key categories like auto into national?
Peter Chernin: We are seeing real strength in national and particularly in some of the cable up-fronts, but also on our broadcast network business. In terms of key categories, certainly the auto category is probably the one that is a little bit weaker but we have a couple of key advantages.
One is that our single biggest advertiser is Ford and they chose to renew their advertising in American Idol, which is their biggest chunk, so that is significant to us. We had also made multi-year sports deals with a number of the car advertisers, so we had locked in two years, sometimes even three-year deals, particularly with the big three, and so those deals had been locked in last year.
One of the other things we are seeing is that the car companies, even as they are cutting back, at least for us, they continue to emphasize national advertising because we have had some interesting conversations with them.
And as their potential buyers go into a show room, they have done significant work on the Internet and they know what cars they want to buy but they need to do national television advertising in order to get them to look at that brand on the Internet.
Jolanta Masojada (Credit Suisse):
With the $1.1 billion of cash you received from the TV stations and the upcoming cash from the sale of NDS, can you talk about your plans for corporate strategy?
Rupert Murdoch: We are going to be opportunistic and we are going to be careful like everybody else. We think there is enough uncertainty around for us to put the strength of our balance sheet as our absolutely number one priority.
Benjamin Swinburne (Morgan Stanley):
As you look at the Italian market, are there additional products that you woud like to sell alongside Sky to help reaccelerate or drive further penetration?
