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News Corporation (NASDAQ:NWSA)

Investor Day Conference

June 04, 2013 11:00 pm ET

Executives

Michael Florin

Keith Rupert Murdoch - Co-Founder, Executive Chairman, Chairman of the Media & Entertainment Arm and Chief Executive of the Media & Entertainment Arm

Robert J. Thomson - Chief Executive Officer

Lex Fenwick - Head of Dow Jones

Mike Darcey - Chief Executive Officer of News International

Paul Carlucci - Chairman and Chief Executive Officer

Kim Williams - Chief Executive Officer

Greg Ellis - Chief Executive Officer, Managing Director and Director

Brian Murray - Chief Executive Officer of Harpercollins Publishers Worldwide and President of Harpercollins Publishers Worldwide

Joel I. Klein - Executive Vice President, Director, Chief Executive Officer of Education Division

Bedi Ajay Singh - Chief Financial Officer

Rupert Murdoch

Analysts

Vikas Gour - Deutsche Bank AG, Research Division

Mark McDonnell - BBY Limited, Research Division

Fraser McLeish - CIMB Research

Sameer Chopra - BofA Merrill Lynch, Research Division

Alice Bennett - Commonwealth Bank of Australia, Research Division

Richard Eary - UBS Investment Bank, Research Division

Michael Florin

Good afternoon. Thank you for coming, and welcome to Investor Day for the new News Corporation. I'm Mike Florin, the Head of Investor Relations, and I'm very excited to be here today and to share our story with you, and it's great to be at the birthplace of News Corp. in Australia.

We have a lot to cover today, so I do want to go quickly through the agenda. That is our forward-looking disclosure. I won't read that right now because I think that will take about 15 minutes.

In terms of the agenda, we're going to first hear opening remarks from Executive Chairman Rupert Murdoch, who'll be followed by the new News Corp. Chief Executive, Robert Thomson, who will provide an overview for the company and some of the pillars to value creation. We'll then going to go through each one of the operating units. We will hear from Dow Jones CEO, Lex Fenwick. We'll hear from News International CEO, Mike Darcey. We'll hear from News America Marketing Chairman and CEO, Paul Carlucci. We're then going to take about a 10-minute break. I think it says 15 up there. Let's do 10 minutes. Refreshments will be out there and there'll be a kiosk where you can sample a lot of our products from across the company. So definitely worth checking out.

When we return, we'll hear from News Limited CEO, Kim Williams; REA Group CEO, Greg Ellis; and we will hear from HarperCollins CEO, Brian Murray, our Book Publishing business. We'll then take another short break, and then we'll return to hear from Amplify CEO, Joe Klein, and new News Corp. Chief Financial Officer, Bedi Singh, to discuss the financial overview of the company.

We'll then conclude with a Q&A session of all the executives back up. First, other housekeeping items. We will be handing out the deck, so please don't feel any need to write every -- on every slide, so you'll have that when you come -- on your way out. So with that as an introduction, it is now my honor and my privilege to introduce our first speaker, Executive Chairman Rupert Murdoch.

Keith Rupert Murdoch

Thank you, Mike.

Michael Florin

Thank you. Thank you.

Keith Rupert Murdoch

Well, good afternoon. Thank you all for coming here today. It's great to be back here in Australia for this exciting moment in News Corporation's history. And I'm so pleased that some of my family could be here with us today. And, of course, Mr. Peter Barnes, and you all know who will be chairman of our new Audit Committee.

With the split of our company and the birth of the new News Corp., I've been given an extraordinary opportunity most people never get in their lifetimes: The chance to sort of do it all over again. Now I don't want to sound boastful, but I'll just to take a minute as I have you all here in my captive audience.

When I began on the journey of creating News Corporation nearly 60 years ago in Adelaide, I pretty much was working with one small newspaper and a rather overdeveloped ambition. Well, today, that company has a market cap of $77 billion. It's a powerhouse in global media, no doubt. But that is how it retains the Aussie spirit of a family company. I'm not saying I didn't make many mistakes along the way, even some spectacular ones, but not as many as everyone predicted. And I'm proud to say that again and again, News Corp. has confounded expectations.

When we move from Adelaide here to Sydney, our competitors threaten to run us out of town. And let me tell you, they were quite enthusiastic with their threats. But that's all distant memories. When we bought the London Sun in 1969 and turned it into a tabloid, The Daily -- 5-million circulation Daily Mirror just laughed. Today, the Sun sells 2 million, 2.25 million every day, and the Mirror is down under 1 million. So after 15 years of industry -- later, after 15 years of industry frustration, we opened a new printing plant, which went on and go -- went on to win the first private sector strike in 50 years in Britain and giving new life to all newspapers in that country.

When we set up the FOX Network in 1986, people thought we were positively mad, said that no one could compete with the big 3. When we came out with The Simpsons, people have said animation was just for kids. Well, today, it's still the longest-running comedy in prime time in U.S. history and has made us and a lot of other people a large fortune.

When we launched SKY, people said the public didn't need more choice and that we would go bust. The BBC should alone decide what was good for viewers. So in retrospect, I could've done without the stress of nearly bankrupting the company and my family. But today, BSkyB has over 10.6 million customers and is still growing and making a lot of money.

And when we launched FOX News, no one thought we could take on CNN. Its founder, Ted Turner, bragged that he was going to squash me like a bug and a lot of other things. But with hard work and with the genius of Roger Ailes, our Chief Executive, FOX News has been #1 in cable news for 11 straight years and now has annual operating profits of more than $1 billion.

So given that success story, you may be wondering why I want to do it all over again. Well, the simple answer is there's just opportunity everywhere. The companies that make up the new News Corp. are some of the most extraordinary and brilliant brands in the world. Yes, some have their individual challenges, but they're undervalued and I believe underdeveloped. But all that changes starting today. I will admit it feels a hell of a lot better starting out with $3 billion in liquidity than with nothing as we did in Adelaide. But there is something else we have today that is even more valuable and makes me confident at what we will do with the new News Corp. and that's talent. We have an extraordinary team of executives that you will hear from and who have strong teams around them in our businesses in the United States, in the United Kingdom and here in Australia.

We've always been an eclectic and unconventional company, so you should not expect that will change. I've told each of our CEOs to be themselves today even as we set out to tell you about the new News Corp. What we share is one core belief and I think you will see it as the common trait here today. Knowledge is the most valuable commodity in the world and never has a more ravenous appetite for knowledge existed than in today's world. So we'll create new businesses and new products, tell new stories and inform and educate the public in entirely new ways. And above all, we will continue our transformation and embrace the digital and mobile future, disrupting some industries on the way.

My goal for the new News Corp. is to compress the success time line of the original News Corp. from 60 years to 10 years. You might think that's crazy. But back in the 1950s, we only had lead pencils and typewriters. Today, we have WiFi, 4G and digital compression.

Well, now it is my pleasure to introduce to you Mr. Robert Thomson, whom we are extremely lucky to have as our Chief Executive Officer. I've known Robert for many years. As you probably know, he's a Melbourne boy like me. And actually, he started his career as a copy boy 35 years ago in the Herald in Melbourne. So we've gone full circle. But I've seen Robert excel as a senior news executive for 2 of the most storied publishing enterprises in the world. He not only knows the publishing business, he's mastered it and charted new paths for both within it. Robert has covered corporations and industries around the world for 30 years and leveraged that knowledge into the skills and vision necessary to operate, transform and expand our powerful global brands.

Under his leadership, the Wall Street Journal became the largest daily circulation newspaper in the United States. That achievement stands alongside the extended reach and revenue stream he created through WSJ.com. Today, that global platform of dedicated subscribers is helping fuel the growth of Dow Jones. At the time when many in traditional media played defense, Robert has smartly played offense in untraditional ways, growing circulation, revenue and profitability. Few in this business can say that. But earlier in his career, Robert successfully re-created the weekend Financial Times, having the foresight to anticipate the desire and create something valuable for consumers. And unfortunately, before I met him, Robert also have built the FT in the United States, tripling its circulation at a time most traditional news operations were losing subscribers. It's this kind of fearless yet brilliantly executed transformation that Robert will bring to the new News Corp.

Let me close by saying that on a personal level, there are a few whose wisdom I have found to be as valuable and on point as Robert's. I've turned to him for insight in the markets and industry, for business counsel and a critical eye, one that is informed by his having worked on the ground in Australia, Europe, Asia and the United States, all markets the new News Corp. has targeted for growth. We're thrilled to have Robert as our Chief Executive, where I believe investors will come to appreciate him as such as we do. So let me introduce Robert.

Robert J. Thomson

Rupert, thank you very much for the kind words and for the faith and responsibility that you've invested in me. The problem with such generous introduction is that the reality is that much more mediocre. I have your support, which is, of course, crucial, but I also have PowerPoint. For without PowerPoint, as everybody in this room knows, executives are both powerless and pointless.

Rupert has just described to you an extraordinary journey. One asks, as Churchill once did in rather different circumstances, is it the end of the beginning? No, it's a new beginning. The new News is an extraordinary company of scale and reach and opportunity, but it will have the sensibility of a start-up.

Now we'll let the invisible hand go to work. I presume there aren't too many anti-Adam Smith right here. That invisible hand is signing off on the launch of the new News, a company with a remarkable prominence. But that prominence will be a platform for the future. There will be restless energy and insatiable curiosity. There will be opportunism and experimentation. There will be alchemy. There will be Murdochian magic, a permanent start-up sensibility. We will be acutely and astutely cost-conscious but determined in our pursuit of profits. However, we will also be a resolutely creative company. Creativity will not be the preserve of the few, but the mission of the many.

Now you'll soon be hearing from the extremely capable division heads, and they will be able to furnish you very, very ably with both coherent strategy and fine detail. And they will give you a textured sense of a company with global reach and national depth. You will see that we are indeed focused on free cash flow, obsessed by it, and on the prudently opportunistic and strategic use of our cash balance.

But before they take you on a lively narrated tour of those businesses, I think it important for you to get a sense of the context in which the company will develop. The new News does not exist in splendid isolation. Unless we comprehend the context, we will not fully understand the scope of opportunity or fully serve our shareholders and potential investors. Some of this will be a little obvious to most of the erudite people in this room, so please bear with me. But the 2 most profound trends of our time, trends that will determine the fate of the majority of large companies, our globalization and digitization. These powerful currents are particularly influential for content companies, and that is where the structure of the new News gives us a clear comparative advantage. As I said, that is the global reach and a national depth. These trends, globalization and digitization, were obvious when I was writing about the Chinese economy in the 1980s and analyzing Japanese semiconductor companies in the early '90s. So these are not new trends, but their impact is growing with each passing year.

In the past week, we've had Chinese bids for an American icon, Smithfield, and for a French icon, Club Med. We must understand precisely how powerful these trends are, not just as an abstract concept but in the way markets are changing. And what indeed are markets? Markets are an aggregation of people's desires, demands, fears, fidelities, needs and aspirations. Customers' needs are changing, how they read and watch and communicate. These changes to lifestyle are e exponential, and the opportunities for companies and investors that actually understand the trajectory are virtually limitless.

A small example. Taste, our food website in Australia. 26 million recipes were downloaded and printed during the festive season. Frankly speaking, when I was a child in rural Australia, a sandwich with mayonnaise and not on white bread was regarded as haute cuisine. And vinaigrette dressing on a salad was thought of as perhaps a little too, shall we say, continental. Now 49% of Taste users are accessing the site from a mobile device. 22% of Taste traffic is international, and that is growing at 40%. So in this period of extreme transition, our complementary strengths give us a definite advantage. Having companies involved in different but adjoining sectors means that we really are able to learn from each other, because we are coming from the same -- coming at the same goal from different angles. And don't forget that technology, not content, is a commodity. Technology is a canvas for our content.

So the next crucial part of the context for the new News is that we are a content and knowledge company. We are acutely aware of the 3 principles that determine our success or failure. We have to create great content, deliver great content and price and sell great content. The first means having an environment in which you can anticipate and not necessarily just follow customers' interests, and then you share lessons quickly. The scale of the new News means we will have a focus that makes such sharing easier. We now have a rule that if you make a successful ad pitch in London to a client, that you must share that intelligence within 24 hours to ad managers around the world. Not to do so is to squander scarce capital and to let down our investors and to make me somewhat angry.

Editorially, we're also installing a common publishing system for our newspapers around the world so that photos and stories can be easily shared for digital and print and duplicated expenditure done away with. We want a single cost of content and multiple opportunities to profit from that content.

The delivery of great content. We will have the ability to influence the form and content for smartphones in the same way that some of our apps or templates for other publishers in the early phase of the iPad. We are still at an early stage of a second great migration, from print to web and from web to mobile. And that this is true for Paul Carlucci at News America Marketing, our coupon business, as it is for Amplify and Joel Klein.

One of our foremost ambitions outside Australia is to own the second screen. In Australia, we have the first screen. In other words, to create content that complements an event or even define that event, whether it be a football match or a British election. The second screen is the first priority, and our Australian broadcast businesses will play a crucial role culturally and technologically in helping us to exploit that opportunity.

Now as I speak of platform permutations, let me be very clear. Print is still a particularly powerful medium. 43% of Wall Street Journal readers are millionaires, and the other 57% will be millionaires if they continue to read the Journal. In this age of endless digital distraction, if I told you that you could have the undivided attention of around 2.7 million British households every morning, what is that worth? Newspaper readers. You can't multitask with a newspaper in the morning other than drinking coffee. You can't open a second, third, fourth or fifth screen. There is an intensity to the print relationship that is unique in modern media. I do think that will become more obvious to advertisers and it's our job to make it so.

Thirdly, the pricing and selling of great content. Gone are the days when flat-earthers insisted that all digital content must be free all of the time. Whether it be e-books at HarperCollins, where Brian Murray and his team have developed wonderfully sophisticated algorithms to maximize revenue, to the pricing of B2B intelligence at Dow Jones, which Lex Fenwick will take you through in detail. There is a rising tide of charging, and premium content will attract ever more premium prices. Later, Mike Darcey will explain the logic behind the imminent payment strategy for Britain's best-selling newspaper, the legendary Sun, which involves not only charging for content but the building of loyal communities. And these communities are by virtue of paying a defined and desirable demographic. They are worth far more to advertisers than digital drive-bys. And we will see that inevitably reflected in advertising ranks.

There are 2 particular facets of contents character that have become obvious to me in the 17 years I've been developing content businesses in one guise or another. I would argue that they are useful to you in analyzing our earnings prospects and those of any other media company. The first is the content curve. It's rather crude but illustrative. It is obvious enough to say that the value of content changes over time, but it's not understood well enough how much the timely delivery of content and the ownership of an event can maximize revenues. That is, the ownership of the event and then the ownership of the unfolding of that event. If one of our intrepid Dow Jones reporters breaks the story about, say, fiscal easing in Japan or a tightening of the Federal Reserve, for a minute or so that story is worth millions, tens of millions, hundreds of millions to ForEx and bond traders. That value diminishes quickly as the story becomes both copied and better known. But the question for content creators is how to plan the unfolding of a narrative so that the content is not quickly commodified. And that can only be done when content is commissioned and only if journalists have a clear understanding of the value of the story to readers and clients. One consequence, there'll be more and more windowing of content in a way that is conceptually now associated with the film industry, and there will be more revenue from more windowing. And there will be extra emphasis on owning big events even if you do not have the first rights to that event.

The second slide is, again, binary in its simplicity but profound in its consequences. You can see from the low-end production values that I am indeed a cost-conscious chairman. There are 2 facets to the relationship between a reader or a user and content, the functional and the emotional. One of my early tasks, as Rupert mentioned, was to recast and relaunch the weekend Financial Times. What normal person would want to read a business newspaper on a weekend? There had to be an emotional link above and beyond the practical provision of business news. It became the Weekend FT. And now with the Journal, we have the weekend WSJ on Saturday, which has become the paper's best-selling issue. Frankly, when we took over Dow Jones in late 2007, there was a proposal to Rupert and I that we should close that edition, which was ailing at the time.

We're certainly not just about print. FOX Sports in Australia has ingenious and compelling broadcasts of Aussie royals [ph] matches, but is also crafting emotional content to fill the awkward gaps between great games. Those hours are replete with Sage analysis, clever commentary and that absolutely crucial ingredient, wit. Think of the enormous cultural and emotional importance of the New York Post in New York. Under Jesse Angelo's inspired and inspiring leadership, yes, we are cutting costs but also building out digital verticals. The aim is to increase its affinity with the city, yes, but also to realize its potential to build much bigger communities of interest outside of purely functional delivery of New York news.

Another obvious example. Google is preeminent in the -- in its functional success with search, but is constantly looking for emotional stickiness with new products. At Bloomberg, beyond the bond charts, user chat was obviously a huge emotional plus for them. Well, at least up until recently. And particularly when people found out the helpdesk was actually helping the reporters track their clients.

We will delve into far more detail later. But it's worth a quick overview of the geographic spread of our revenues. Some preconceptions about the company are a little misconceived. What we see is an Australian business that is an important part clearly of the heritage of the company, and there's a contemporary engine of revenue. When we say Europe, frankly, that's mostly the U.K. and not the benighted Eurozone. What you will likely see 5 years from now is continuing growth in the U.S. and a tangible broadening of the other category, in particular growth in Asia and Latin America.

And the composition of our revenues. Again, there's a presumption that we are heavily advertising-dependent. But almost half of our revenue comes from non-advertising sources, and that proportion will increase significantly over the next 5 years with the rapid introduction of digital subscriptions, the development of B2B at Dow Jones and the expansion of the education business under Joel and his team.

But there'll be other changes to the character of the revenue mix. One example, data. There is now an endless discussion of data. And data has gone from just plain old data to big data. There is no doubt that intelligent data is a rich seam of value. But given the premium quality of our digital content, a flurry of firms has begun to harvest our data. I would be surprised if that model does not change dramatically, that where readers have commissioned us to gather their data, we will charge either an advertiser or their data harvester a stiff premium for the privilege. The third-party aggregation of data about our customers will become a significantly more expensive proposition.

So what is it that unifies the new News? Premium content and iconic brands, brands that are platforms in a digital age. It will be our responsibility to ensure that these companies converse and collaborate to generate more revenue and to keep costs to a bare minimum. These brands are household names, which gives us access to even more households.

And digital. Let's get a little more specific about the increase in digital revenues. At HarperCollins, the share of digital revenues doubled from 2011 to 2012 from 10% to 20%. For some published titles, digital now comprises over 50%. And, obviously, for pure e-books, it is 100%. At The Wall Street Journal Digital Network, globally, there are more than 0.5 billion page views every month, and these are views by a very desirable demographic. At Amplify, we announced a contract last week to supply our school district in North Carolina, and there will be many more of those to come. At REA, time spent on the locals -- on site by visitors is 4 times that of any risk competitor. And what does that mean in real estate reality? I visited an agent in Geelong a few weeks ago and he said that more than 90% of his leads are coming from REA. Greg Ellis will provide more enlightenment on this subject later on.

And these companies and brands are not just influential but market-leading, #1 in English news publishing in 3 continents. And I ask you to ponder the non-English for a moment. How valuable are the Chinese, Japanese, Korean, Bahasa, Turkish and soon-to-be Brazilian WSJ websites? Ponder the demographic of those sites. Now it's the virtual homepage of the People's Bank of China, the central bank. Ponder the difficulty of reliably reaching that elite demographic in those countries and ponder the potential of selling other high-end local language products on those sites. We're #1 in Australian sports programming, the #1 in subscription TV provider in Australian partnership with Telstra, #1 in real estate in Australia and in freestanding inserts in the U.S. and #2 in English language for publishing. We'll have to do something about that.

And in Australia, an evermore integrated media business that is the country's leading franchise. Increasingly, we have FOX Sports videos on the paper's websites, the newspaper journalists appearing on FOX Sports and REA coordinating with the other businesses in providing us with the expertise necessary for further global expansion in the classifieds market. Last month, news.com.au became the country's largest portal, gathering content from around the continent and driving readers to individual sites in the states. Again, these are powerful platforms, and Kim Williams' team and his background in television are allowing us to leverage both the brands and their content.

So globally, how do we become even more than the sum of our distinguished products? Let's look at the Premier League near-live football or soccer highlight rights, that was the first investment we made under my leadership and with Rupert's strong support. Think about being in a supermarket in Britain on a Sunday, Manchester United playing Arsenal in 2014. Arsenal scores a fourth goal. So you get an alert and watch that goal moments later on your phone, if you are a Sun or subscriber. And the fans share the magic moment, because you build a community of Arsenal fans who are Sun subscribers. And we had every conceivable stat, post-match analysis and other comment, tracking the sad decline of Manchester United. Words, images -- moving images, stats and, importantly, humor. To pull all that together, the News International team has been working with FOX Sports and even the Wall Street Journal's quirky sports writers to develop a different kind of content feed for smartphones. Now the way to look at this development from Australia is that it is soccer specific but smartphone generic. There will be lessons from this project that influence our smartphone applications around the world. And it also raises the prospect of being able to use similar rights and repurposing the same content flow, words and images in other languages, again, keeping costs down and redeploying content to create multiple opportunities to profit. That is what scale gets you. And you could imagine, if we pursued a project in business English, the world's true second language. Fresh lessons from that day's journal, truly contemporary content each day, not dusty case studies from 20 years ago. The teaching tools of Amplify and the deep language expertise at HarperCollins, a product that would truly be more than the sum of distinguished parts.

So listen, we're certainly not naive about the challenges facing some of our newspapers and the headwinds commercially and economically in some countries. The advertising market has been volatile and print sales have certainly declined in Australia, in part because our team has been removing what I politely called lower-yielding copies. We are in the midst of a transformation of those businesses. Costs are being confronted and cut, and the markets are being reoriented. That transformation will take longer than a couple of quarters. That is obvious. And the new News itself is in the midst of transformation, both as a corporate entity and in many of the sectors in which it operates, from the disruptive energy of Amplify to the savvy user of smartphones. We are being very frank with you about that transformation imperative.

All investors should understand that context. But we're also candidly and decidedly optimistic about the medium-term prospects for the company, in revenue growth and in margin expansion. And we have a very strong balance sheet that will be the cornerstone of our future and for future investment returns. We are focused on increasing free cash flow and using that cash flow long term to strike a balance between further expansion and the return of capital. We are not here for the short term.

News Corporation has been a remarkable success story because of long-term Murdochian momentum. Risks are taken, instincts followed and objectives pursued with passion and purpose and principle. The new News will inherit that sensibility and will strive to build on that success.

Now to provide a little insight into the ongoing global transformation, I give you Lex Fenwick.

Lex Fenwick

Fantastic. Ladies and gentlemen, good afternoon. My name is Lex Fenwick. For the next 20 minutes or so, I would like to talk to you about a fabled company, a company created over 100 years ago but with as much relevance today as it ever had; a company in transition; a company probably doing vastly more than you would ever expect; and a company with a burning ambition to succeed.

[Presentation]

Lex Fenwick

At Dow Jones, we have 2 wonderful brands and some others: the Wall Street Journal, the largest selling newspaper in America, with 138 million visitors every month to our digital network; Dow Jones, one of the leading providers of information to the finance, legal, education and/or corporate market. We have 3 distinct revenue streams: advertising, consumer circulation and institutional subscription. Our consumer audience is unrivaled in the world. 3.5 million people every day read the print edition of the Wall Street Journal. Because our content really does matter to our customers, we're able to broaden it and repurpose the content in many different languages and sites and, so far, have 6 international sites. But the quality of our audience is what's really extraordinary. Robert has touched on it, 43% of our readers are millionaires. They spend every year $124 billion. They're the #1 buyers of luxury, fashion jewelry and travel. The reputation of our news organization in the Wall Street Journal is extraordinary. 27 years in a row voted by the Pew Research Center as the most trusted newspaper in America. And we have been winners of 35 Pulitzer prizes.

100 years ago, when we started, we were a business and finance newspaper. When News Corp. bought Dow Jones over 5 years ago, Robert, Rupert decided to enormously broaden our content. And we have significantly gone into covering politics, sports, real estate, fashion, luxury and personal wealth.

We have been at the forefront of innovation. Innovation is in the DNA of our company. We were the first people in the world to put up a paywall. And in the first year of putting that paywall up, we attracted 200,000 paying subscribers. We were one of the first people in the world to create a tablet edition for our content. We created WSJ Live, many other people have copied, that is available on many different video platforms around the world. And earlier this year, we built a unique revolutionary portfolio system, which we'll talk about a little bit later. And we have been and we are the first in our industry to have a live customer help button on our page that operates 24 hours a day, 5 days a week. All of this helps us understand [indiscernible] over the last 5 years to increase our circulation. And whilst doing that, we have increased our circulation revenue by an average of 8% every single year.

Because our content really matters, we are able to broaden and to create international sites. Some content travels not so well, with the greatest of respect and I should be careful being British and being here in Australia, but Aussie rules probably doesn't travel terribly well outside of Australia. There aren't a lot of people who really want to read about Aussie rules. Maybe not many people want to read about New Zealand politics, crimes and stabbings in Brixton in London, probably not very many. But ladies and gentlemen, several weeks ago, we all cared about a little country called Cyprus. We didn't care about the politics. We didn't care about the sports. We didn't care about anything else, but we enormously cared that this country was potentially about to go bankrupt and that it affected the prices of U.S. treasuries, foreign exchange and stocks around the world. Our content matters and travels extraordinarily well, giving us an opportunity to repurpose the content by translation, which is an infinitely cheaper thing to do than writing from scratch into many different languages. 20% of our digital traffic comes from the international sites that we have built so far. And we have the vision to monetize that traffic in the same way as we have done in the U.S.

We have pricing power. We have a real ability to increase the price for our content. Just last week, we put up the price by 4%, and we will continue to do that because our content matters to our customers. And relative to our competitors, and you can go and look, we are infinitely lower priced for our weekly, monthly or annual subscription. And by spreading geographically, and because we've broadened our content set, we have an ability to continue to add subscribers.

We're building a platform on wsj.com. And a platform is a place where people go and do multiple different things, not just read the news. We have 138 million people come and see us every month, and we can leverage that and get them to do other things and help them do other things on our sites, on our platform. By doing that, you create what's called stickiness. Stickiness basically means encouraging the customer or getting the customer to spend a longer amount of time on our platform or our sites than they previously were. If they're doing several different things, checking their portfolio, we'll look at that in a minute, they spend longer. As they spend longer, you can serve more apps. As they do more things, you learn about your customer. And as you learn about your customer on what they're interested in and what they want to do, you can much better target advertising.

We can build a network business. We're going to look at WSJ Profile and how that will allow us to network our customers around the world, all of whom have similar industry -- similar interest, possibly come from similar industries. And all of this we can take and leverage into our institutional business.

WSJ Portfolio, we launched 12 weeks ago. In the 12 weeks that we've launched, we have attracted $12 billion of assets sunk onto our platform. This product is the first, and it allows customers by putting in their name and password to sync their U.S. brokerage accounts onto our portfolio system so they can look at their performance history, their aggregated return and in realtime, we can tell them how they're doing with their portfolio. We can also show them all of the news that we create as it relates to their portfolio. And not just the news that they may think they're interested in, because lots of us own mutual funds. We don't really know what's in the mutual funds. We own the mutual fund. We know what's in the mutual funds, so we can start to show the news as it relates to the stocks for the top 10 stocks and those mutual funds.

WSJ Profile. This will be launched soon, and it allows you to create your own WSJ profile. I'm sure you're all excited about the concept of that, and I'm sure you'll all be very happy to be able to do that. And you're going to be able to upload information about yourself, where you've worked, your contact details, awards that you've won, information about yourself, research papers. So if you've written research or you want to write a blog and you want to show everybody how great you are and what incredible stuff that you created, this is the place that you'll be able to put it. You'll then be able to build a network with like-minded people, customers and colleagues so that everybody knows what you're doing. And you'll be able to chat with people over our platform as well.

Let me just take a few minutes to talk to you about what we call our institutional business. We have 4 great brands that some of you may be familiar with: Dow Jones Newswires, Factiva, a venture capital database and the Risk and Compliance business. We've taken all of these products and in fact, everything that we have at Dow Jones and we put it into a brand-new exciting product code-named DJX. This is one product at one price with one contract. We already have pretty amazing customers in our institutional business: central banks over 40 of the world's governments, 70 of the top Fortune 100 and most of the top VCMP [ph] firms worldwide.

DJX is going to do some very special unique things. The first thing it's going to do is it's going to be delivered and distributed through a browser, through the Internet. Most institutional products are delivered through dedicated lines, applications. Those are extraordinarily expensive networks to, one, set up; and two, to maintain. The Internet is on an age where you can now distribute reliably and robustly institutional, professional products through the Internet. And by writing the function and the application on the Internet, what's called HTML5, it immediately repurposes itself for your mobile phone or your tablet device. That's a first.

We have built and have rolled out internally a proprietary messaging platform. On our message platform, we won't know what you're saying to each other, ladies and gentlemen. You'll know what you're saying. You'll know all your conversations, but we will not know them. We don't want to see what you're saying to each other. We will give you the tools so that you can place and look at the compliance aspect of your business in case you want to search your chats. This will be rolling out by the beginning of the fall to our customers on DJX.

We have already built supreme customer service. We have it in place today, and it will be there for all of our customers who have already subscribed to DJX, 24 hours a day, 7 days a week in many different languages. We're going to sell and deliver this product directly to the end user, to analysts, to portfolio managers, to traders, to hedge fund managers. We will not go through purchasing departments or market data departments. We will go directly to the end user. We have a team of technology people who will be involved every single day, week and month in rapid, iterative technological involution. And we have a global sales force in place already today to help sell this product. But more than anything else, at Dow Jones, we know how to do this business. I was at Bloomberg for 25 years, and I started as a salesperson. I sold the product, and I ended up running the company. We know at Dow Jones how to do this business.

Here's a little snapshot. This is what we have so far today. Hopefully, some of you may even have an interest in taking a look at it. We'd be happy to try and sell it to you, and we have a wonderful booth out back where we'll be able to prove them to you. The institutional market that we're talking about is a proven $40 billion market. We have less than 1%.

In summary, ladies and gentlemen, we think we can grow the number of subscribers to our consumer product through expansion, through geography and through broadening the content. We have pricing power, allowing us to put up our prices. Through building an application, we'll create stickiness and target much better targeting. We can leverage WSJ Profile to build a networking business. And we think, if we can marginally increase our percentage share of an institutional market, that would be fantastic.

Ladies and gentlemen, thank you very much for listening. And it's now my great pleasure to hand over to my great friend and colleague, Mike Darcey.

Mike Darcey

Thank you, Lex. So good afternoon, everyone. So my name is Mike Darcey. I'm relatively new to News International and to newspapers generally, having joined in January this year after 15 years at BSkyB. Now when Rupert rang me and asked me if I would take on this role, I have reminded him that I didn't really know that much about newspapers. I haven't worked in newspapers before, though I was a pay-TV guy. He said that was fine. In fact, he said that was perfect. And he said that, that would work because I knew quite a lot about distinctive content. I knew about the challenges selling a paid-for proposition versus free alternatives. I knew about subscription and customer service. I knew about things like bundles and brand extensions. And I also knew a bit about bidding for sports rights, which you all so seemed to want to talk about. So I knew straight away that Rupert was thinking about the future business of news brands in a quite different way than it had perhaps been thought about in the past. So here I am. Anyway, it's great to be here, and I'm grateful for the opportunity to be talking to you about some of the initiatives we have under way in the U.K.

But to begin, for those who are not familiar with our news brands, just a few moments to introduce our core editorial propositions. So the Sun, our offering in the so-called popular segment, is the single, most popular newspaper in the U.K. In February of 2012, we launched the Sun on Sunday, which very quickly became established as the #1 Sunday newspaper in the U.K. as well, and it remains so today. The Sun print franchise reaches around 7 million readers per day. And over the week, it accumulates up to 12 million unique U.K. readers, and that's around 20% of the total U.K. population. The Times is our daily offering in the quality segment, and that's read by about 1.3 million people per issue Monday to Saturday.

A few facts about the Times that some of you may know or not, it was the first newspaper in the world to bear that name, originally in 1785. And it has since proven to be a popular choice in many other places. It's also the newspaper that developed the Times Roman font that anybody who uses Microsoft Word is also likely to find fairly familiar.

And then the third title up there, The Sunday Times, is our Sunday national quality offering read by around 2.5 million people per issue.

So this portfolio of news brands represents a real advantage to us due to the unrivaled leadership position it gives us in the U.K. market. The Sun is the #1 newspaper in the U.K. by a fairly significant margin across all 7 days. So we're #1 during the week. We're #1 on Sunday. And our Sunday supplement, the Fabulous magazine, is also the #1 magazine. The Sunday Times is the #1 in the Sunday quality segment, with more than double the sales of the #2 title in that segment.

Leadership in the quality daily segment is a bit more disputed. When you look at total page sales, which is print casual plus print subscription plus digital subscription. When you put all that together, we're either #1 or #2. It's a little bit too close to call. What is clear is that both the Times and The Sunday Times continue to win numerous awards for their quality. The Times won Newspaper of the Year this year, and both are recognized as the most read papers by business readers in the U.K. quality segment.

And then when it comes to advertising, when you aggregate our strong leadership or close the leadership position in all of the key segments,the result is a strong leadership position overall in total U.K. print ad sales. We operate as a single sales house across all 3 titles. So what that means is that when we face up to the big agencies, we account for around 35% of total ad print sales in the U.K. and that means we're pretty hard to ignore.

So that's where we are today. What about where we are going? In the U.K., we are well aware of the winds of change that have been reshaping our industry in recent years, and we've been a frontrunner in taking decisive action to respond and to adapt our business. But while there is naturally much talk of change and the nature of competition has indeed evolved, some things do remain the same. And one such constant is that a core pillar of our strategy continues to be an unwavering focus on creating and delivering valuable editorial content that is distinctive and differentiated. The depth of our news, the distinctive voice of our commentary and opinion, these are what set our news brands apart. Now of course, many news businesses will tell you that, but there is a U.K. angle here that I think is worth noting.

The U.K. has a bit of a reputation for regulation and happily, in this context, it is actually helpful to us. The reason is that in the U.K., all television news is required by regulation to be impartial or neutral, which tends to translate into being a little bit bland. And this also flows into radio news because the 2 main radio news providers are the 2 main TV news providers, and their TV blandness is very efficiently repurposed for radio. And this, in turn, means that comments and opinion and a distinctive point of view have long been the preserve of newspapers in the U.K., and that continues to remain a core strength today. At the same time, we are placing ever greater focus on deepening relationships with our readers, subscription where possible, either print or digital, but also if that's not possible otherwise, other likes or forms of customer relationship, where we know who the reader is and we know something about them. And then, with these shifts comes greater insight into the nature of our customers, providing us an opportunity to deliver better targeted content, to design better subscription bundles with offers and services and to use the data around our customers to enhance our advertising proposition. Of course, the goal of all of this is to generate sustainable profit growth, an aim which is further advanced by the progress we're making in ancillary revenues and also our emphasis on cost control and efficient processes.

Of course, the goal of all of this is to generate sustainable profit growth and aim, which is further advanced by the progress we're making in ancillary revenues, and also our emphasis on cost control and efficient processes. So I talked a bit about our leading brands, and I've talked about the broad strategies that we're following. Now I want to turn to how we're taking some of our strengths and applying these strategies and to turning them into tangible results in the market. The first progress report I want to take you through relates to the tremendous advances we've made and we're continuing to make at The Times in Sunday Times. Much like Dow Jones did with the Wall Street Journal in the U.S., we were pioneers in the U.K. in affirming The Times and Sunday Times as wholly paid for propositions in all formats, a move which was made in the summer of 2010, and the results of this approach have been very pleasing. We focus on total paid sales, which as I say is print casual, plus print subscription, plus paid digital subscription, and on this basis, we think we're doing pretty well. As you can see from the chart, total paid sales for The Times now is above the level that it was before the free web option was removed. And this box, the trend in the U.K., where economic conditions have continued to be challenging, and most others in the market have experienced continued declines. Our mix has changed over this period. We're now around 50% casual sale, 50% subscription, with around 1/4 of the total being paid digital subscription. So what do we know about these subscribers? Well, we know that our readers are highly engaged with our content, and we know that our subscribers are the most committed among them and are the most engaged and this is important for subscriber retention. It's also important for pricing power, and it's also very good for our advertising opportunity as well. And then when we look at our digital subscribers, in particular, our tablet subscriber to The Times spends about 40 minutes with our product on average, which is very similar to the amount of time that people spend with the printed copy. So this is a fully immersive experience. This is not the flipping around that you might associate with some news websites. And that's why we're looking to sell our tablet audience much like we sell print at high CPMs and not the low prices of web impressions. We also know that our iPad Times readers are affluent, with average individual incomes of around GBP 70,000, which is a very attractive audience by U.K. standards.

And then underpinning our subscription offerings is our Times plus package of extras, including a wealth of events and offers, but it's a package which is soon to expand to include highlight clips for English Premier League football, something which I'll speak more about in a moment.

So onto progress report number 2 for The Sun. At The Sun, well, we're taking advantage of our expense and success at The Times and Sunday Times, and preparing to move to a fully paid for model in all formats, starting in August of this year. We're assembling a strong package of benefits and extras to combine with the 7 days of The Sun, and we're offering it all for GBP 2 a week across the web, mobile and tablet, which we think will be attractive to our most engaged online users. We also expect to see some upsides in fewer print buyers drifting over to rely on a free web option, and we might even see some of our heaviest online users returning to print now that the free option is going to be removed. And of course, we are supercharging this package of extras with exclusive web and mobile rights to all 380 English Premier league matches for the next 3 years, and I just want to take a moment to highlight the value of these rights and the importance and the role they're going to play for us.

Now here in Australia, you might say that you have 4 or maybe even 5 major professional sports, but in the U.K., I would tend to say that there really is only one major sport that matters, and that is football or what you might call soccer, and the EPL is clearly preeminent. So what are these rights that we bought? Well, the Internet clip rights are for the day after the match for all 380 matches in the season. But only about half the EPL games are actually televised in the U.K. so these highlight rights provide a great opportunity to catch up with all the key moments from the games that were not televised. But the mobile rights for tablets and smartphones, well, they're more interesting still. For half the matches that are on TV we'll have in game as live highlights delivered directly to your mobile device. And given that only 1 in 4 U.K. homes actually have access to the TV version of the game because they're on a high-priced premium channel, our mobile highlights will provide an interesting opportunity for many people. For the other half of matches, those played on a Saturday afternoon, there is no live video coverage available anywhere in the U.K. That's more of that famous U.K. regulation helping us out, and we will be the first to offer highlights straight after the game direct to your mobile device around 5 hours before those highlights appear anywhere on television. So we'll be embedding these clips in our digital products. We'll be integrating with our sports journalism, and we'll be linking across to our fantasy football game, and the Sun's Dream Team is the largest Financial football game in the U.K. by some margin, and we'll be sending push notifications to our subscribers to let them know that there's something that they really do need to see right now even though they're out shopping with the family.

So we think our video offering will be great in its own right, but even more important is the role that it's going to play for us in catalyzing the move of The Sun to a fully paid for proposition in all format. And this initiative is a great example of the opportunity to leverage the strengths of the different businesses across the whole new News Corp. portfolio. Our colleagues here in Australia, with their insight from FOX Sports Australia, in particular, were invaluable in helping us to plan and execute this initiative, including designing and developing the customer experience, but also putting in place the key production processes.

Now before moving on, I did also just want to comment that we're keen not to exclude our loyal print buyers from all this soccer excitement, and we are engineering a way for them to have access to Sun Plus, including the EPL Gold clips. That way, as well as driving for digital growth, we also set ourselves up better to maintain print volumes for those who are not quite ready to make that move to digital completely just yet.

So I talked about our core titles and the key initiatives we have for taking them forward. Now I just want to take a moment to reflect on some of the other ways that we're further monetizing our core assets and improving our profitability. One of the areas of increased emphasis in the business is to take advantage of our well-defined franchises, our growing direct customer relationships and still growing data about our customers to offer them additional products and services. One of the most established of these in the business is Sun Bingo, a popular and profitable gaming site, which is continuing to grow. But going forward, we're working on plans to augment this activity with Sun Bet, which will further leverage our sports heritage, also the Internet clip rights, the Premier League, and the 850,000 people who play our Fantasy Football Game every year.

Another rather more tangible asset is our market-leading printing capability. News International invested at scale in state-of-the-art print facilities in 2007, and has gradually become the largest contract printer in the U.K. As other publishers faced their print assets or other arrangements coming to the point where they need to require renewal, many are preferring to bring their print business to us instead, and we've continued to fill our presses with the result that we are printing more in aggregate today than we were 4 years ago in 2009. And of course, we're always looking for ways to improve our business and work more efficiently, whether as stand-alone publications or as part of a global news media organization. And we're particularly excited about the latter as we implement initiatives like Newsroom 360, which are transforming our newsrooms to modern ways of working, removing duplication and simplifying processes. And in this context, it's been of huge value to be able to learn from the Wall Street Journal, which has been further advanced in this sort of area than we were, and the teams that we've sent over to learn the art of the possible that the journal have without exception returned as inspired and enthusiastic evangelists.

So what would I like you to take away from our brief time together today? Well, very simply that we are focused on continuing our transition to a business model which delivers sustainable profit growth, and we think we're well placed to succeed in that. Why? Well, 3 simple reasons. First, we think we have the best news assets in the U.K., starting with the Heritage and their distinct editorial proposition, but also as that translates into strong positions both with readers and also with the advertisers. Second, we are the most dynamic news organization in the U.K. and the most advanced in transitioning our business model, I'm going to flip that over, our customer facing propositions and also, our business processes. And third, there are many additional levers available to us to help us drive profitability on both the revenue and the cost side.

In closing, I'd just like to say there is a real sense of excitement in the U.K. business now around the separation, around the recent initiatives that I've talked to you about and the comment in the focus that we have with the rest of the businesses across the new News Corp. portfolio. I hope I have been able to share some of that excitement with you today. Thank you very much.

We're now going to continue our talk of acts into the world, and we're now going to move from New Zealand to the New York borough of Queens, and I'd like to welcome Paul Carlucci to the stage, who's going to take you through the News America marketing story.

Paul Carlucci

Very good, Michael. Thank you. Thank you, everybody. I want to share a little story. We were here a little early this morning, and we walked around the set, and there was a young man here, and we asked him the question, has anybody famous ever spoken here? And he's no, no, no one ever -- then all of a sudden he stopped. He says; "Yes. He says Dr. Dr. Reuben Hoppenstein spoke here about 3 years ago, and Doctor Hoppenstein, as you all know, is the foremost expert on nuclear fusion in the entire world, and he does not travel by plane. He only goes in a car and he also goes by boat. And he took a 3-hour trip here and driving him was a show for a 15 years, George, and George had been all over the world with him, driving him around. And George says, "Dr. Hoppenstein, I've seen you speak numerous times, and quite frankly, I could do your speech. I memorized all yours slides. I've watched you and I could do it myself." And Dr. Hoppenstein says, "Okay, George, you're on today. Let's change hats." He says, "I'll stand in the back with a chauffeur's hat, and you get up on the stage." And they announced him, and George gets up and he starts off doing great and he gets better. He feels confident. The audience is absolutely enthused. And at the end of it, he gets a tremendous standing ovation, 20 minutes standing ovation. He was so good. He spoke for 1.5 hours, and he's standing at the platform and he felt so good he invited questions. And the first question he had was asked -- was a reporter in the third row, and he asked them a 3.5 men a question, and George looked at him and says, "I have to tell you something, young man." He says, "That's an incredibly stupid question. That's an insult to me. That's a simplistic question. It's so simple and it's so stupid, I'm going to invite my chauffeur, George to come up and answer it.

Well, thank you. Let me tell you a little bit about News America Marketing. We group News America Marketing into 4 business segments: SmartSource Magazine, which is our FSI, represents 47% of our total revenue. In-store advertising and in-store promotion represents 25% of it. We combined 5 businesses: our digital business, our merchandising business. We have been advertising agency business, Custom Publishing and direct mail, and that the represents 22% of it and our international business, which is currently exclusively in Canada, is 6% of our total revenue. Let's take a look at SmartSource Magazine, the circulation of this magazine is 74 million in America. It has 173 additions and we publish it 44 times per year. The national adult reach is 68%. We distribute the magazine through 3,600 newspapers, mostly audited, some TMC products, total market coverage, of those newspapers, and some community newspapers. 5% of our distribution is in shared mail. Our average page size is 34 pages. We have a market share of 65%. There's no editorial content. The content is all advertising and paid content. 68% is packaged good, mostly coupons. Direct response represents 16% of our total pages, and general advertising, and general advertising is DIRECTV, satellite television, advertising, fast food restaurants, banks, eyeglass, companies and so forth that represents 16% of our total business. The uniqueness of this business is the category exclusivity. If you're a diaper, if you're a tomato sauce, you're the only one in that edition. So the exclusivity is an incredible part of attraction for packaged good companies. It's a national media. It reaches an enormous number and has the ability because of the distribution through newspapers to geographically target, has a very low CPM. For $350,000, you could reach 74 million households in the United States. In fact, there's 2 interesting points. The first, will probably not be well received from editors around the world. The FSI is the most-read section in the Sunday newspaper. The second, last year, we had distribution of 300 billion coupons in the United States, and 89% of them were in the FSIs. Our install business, we have purchased the rights to sell promotion and advertising in over 50,000 stores. Our products include coupon machines, cards, floor ads, at-shelf products. We sell them on what we call 4-week cycles, 13 per year. Of the 50,000 stores, we have 16,000 food stores and 16,000 drugstores. And we have a figure, ACV. That means all come out of the volume. Our 16,000 food stores represents 46% of the total food purchased in the United States, are done in those 16,000 stores. We have a major chain, dollar stores, Dollar General with over 10,000 stores, and our other classifications, we call new class of trade. They include fast food, Circle K, Kmart, staples and Bed Bath & Beyond. The uniqueness of this business also is category exclusivity. If you buy the diapers, you are the only person in the interior of the store to advertise diapers over that 4-week period or promote, and that causes what we call category tension. The stores bid for the business many months up front and we get an upfront commitment very similar to television. It's probably even better. Much of the business that we ran, the first 5 months of this year, was purchased and under contract over 2 years ago. We're optimistic about the install business because of its current sales trend. We were battling and we have recovered from what we thought was faulted research of a major company that was in conflict with what we were selling. We are up 25% in sales over the last 49 weeks versus the previous year, a real turnaround of our business, a 49-week positive trend. We have 12 sales offices in the United States and Canada. We have over 120 sales people. Each salesperson is required to make 10 face-to-face calls every week. That's 1,200 calls per week that we're making. Most of our relationships are direct to client. Our largest clients include P&G, Kraft, Colgate, Campbell's, J&J and SCJ. Other segments and growth in those segments, our digital business, we have 3 parts of our digital business. They're all profitable and making money. The first is SmartSource.com. That's a website that we've started over 10 years ago. That is a print-at-home solution. You go onto line, you print a coupon and you go into the store and have it cashed in. It may not be a long-term behavior pattern. We developed 2 apps so far and are developing more, one is for the iPad and one is for the iPhone. We have signed 3,200 stores. If you go on to the app, you turn the pages of the FSI. It could have commercials. It could have recipes, and it has a lot of coupons. You touch the coupon, the word clip comes across the coupon, and then it automatically downloads via AOL shortcuts, a software system to your loyalty card, of which in the United States, 80% of the people who shop in food stores use loyalty cards. That loyalty card, in essence, is a paperless coupon. You also have on your mobile device a shopping list, which will be everything that you clipped when it expires and the value of it. So we think that business has great long-term potential. We need 10,000 stores. We're at 32 and we're about to sign some more.

We also are looking at an eFSI, an electronic FSI. Many of the newspapers in the United States, either on their website or on their app, on the bottom of it on the front page, now entertain and put icons that are for FSIs, and those are food stores. Those are department stores. Those are fast food restaurants. We have a PDF version, which they use and we should launch this and 300,000 circulation in newspapers by the end of the year.

We have a merchandising business. In our merchandising business, we have 3,500 part-time employees who service the stores, and they put up the signs and on the trolleys and on the floor and the coupon machines on the shelves. And so we have a limited variable course. We have now taken the merchandising aspect, and we sell it to packaged goods company said we also sell it to retailers. It's a great business for us. It's a growing business, and it's a profitable business. We went into the agency business, the advertising agency business because, again, we have a limited variable course. We have a very large media department. We negotiate with all of the newspapers that we trade in. We now represent Dollar General and Five Below, and we are their total agency for placing all their business across the United States.

Custom Publishing business. Custom Publishing, defined as a product that is owned by 1 manufacturer or a 1 packaged good company, and we distribute print and negotiate anything they need done. We represent P&G brandSAVER, which do 13 books per year, and they do 62 million circulation in the United States. We also represent General Mills, Dell and Dollar General. In fact, our relationship with Dollar General started with one Custom Publishing job, which we used our agency and we did the job that they want which is a very, very small direct mail piece. And what we eventually ended up doing is developing an in-store relationship for their 10,000 stores. In direct mail, we buy data from packaged good companies and from retailers. We sell it. We customize direct mail pieces, and in many instances, sent samples from that -- to that data.

Many growth area levels across our business, and the freestanding insert within the digital business with the eFSI and the apps, are certainly going to be growth areas. We have growth in our Custom Publishing and agency business. We have momentum and we're emphasizing these areas.

General advertising, at one time, the largest classification of advertising in the FSI and SmartSource Magazine was tobacco. Then it's switched to cereal. Now it is all over the lot with tremendous amount. So we think there is incredible opportunity, and we've taken our best salespeople and managers, and we assigned all the general advertising area, mutual funds, fidelity and all the other vanguard and so forth. Again, we're on a mission that we're selling category exclusivity. We're at the banks, credit cards. We've gotten some already, and we think this is going to be an enormous growth area and we're very enthusiastic about the FSI business because of that. Internationally, we're going to take our new relationships with our friends in England and Australia, and see if there's an opportunity to do a freestanding insert in those countries. On the in-store side, merchandising, again, the limited variable course of doing that, significant growth, very strong margins because of that. New class of trade, we're taking the concept of what we've done in drug, the concept of what we've done in food, and we're applying it to other areas that we're currently not in: automotive, hardware, big-box stores. We're trying to expand our office supply stores and our convenience stores.

And lastly, international. We are having very good success in Canada. There's a major retail there in Canada, Loblaws. There's only 3 major food retailers in Canada. We have 1 of the 3. It represent over 40% of the total food sales in the entire country. We are looking both in England and right here in Australia for the same opportunity. In Australia, we need 1 one of 2. In England, we need 1 of 3, 2 terrific opportunities to enhance our in-store business internationally.

In summary, SmartSource Magazine, we're optimistic. The exclusivity is the driving force of it, the low-cost per thousand, mass audience, very, very low cost to reach that audience. We have a very good trend in page growth. This is a product that does well in a good economy. It's a product that does good in a bad economy. And general advertising, we think we're going to have some positive growth and we're desperately -- or not desperately, we're aggressively pursuing general advertising.

In-store exclusivity, also a very, very driving important thing, a high ACV, all commodity volume, the new class of trade we're looking in to all the areas that we currently don't have. New products, we present new products every year. This year, it's in at-shelf video and it's also at 3D floor tour. Both businesses are doing very well. Both products are doing very well. And the decision at the point-of-sale, it's a characteristic that will always be there, and that's the characteristic of impulse. And hopefully, News America Marketing could have a positive impact on impulse. Digital, merchandising, agency, international, Custom Publishing, all segments are profitable. All segments of our business are growing. And lastly, our high free cash flow generation. Steady revenue and disciplined cost management, we have 5 major expense centers in our business, and that includes printing, retail feeds -- fees, what we pay the retailer, the FSI cost, what we pay the newspapers, the field, what we pay to have the 3,500 people, process everything in the stores and the paper cost for printing. 4 of the 5 are on the way down and papers' always unpredictable expense center. So we feel very comfortable what the 4 could offset anything that happened in the unpredictable, low-cost, low-capital requirements. Our cash flow in many years in the past have been higher than our operating profit.

Well, thank you very much come. It's been a pleasure chatting with you, and we have reached -- by the way, this is probably the most memorable thing I'll say all day, we have reached the break. Please come back in 10 minutes. Thank you very much.

[Break]

Operator

Ladies and gentlemen, please take your seats. The meeting is about to resume.

Michael Florin

Okay, well, I hope you all are refreshed, and I hope you had the time to check out the kiosk. Now it's my pleasure to introduce News Limited CEO, Kim Williams.

Kim Williams

Thanks, Mike. Good afternoon, everybody. It's a privilege to be here with my news club colleagues. Today, I'm going to talk to you about the local operation of the new News Corp., which are generally well known to most of you. Broadly speaking, News Corp. Australia has 3 parts to it: publishing, broadcast television and online real estate. But as you will see, they are far from distinct entities. They have close symbiotic relationships that make the whole much more than the sum of its parts. Before we start, I'm going to play you a short video that we put together to introduce the Australian businesses.

[Presentation]

Kim Williams

I'll go into more [Audio Gap] To start with, I think it's worth understanding the context in which these businesses operate. First, the structural adjustment with the move to multimedia in Australia is narrowing the experience internationally. We are all now operating in a vital multi-platform world. Online delivery is central to multimedia platforms. The recent standout performer in all of this is, of course, that friendly computer in your pocket, the smartphone. While online is still a dominant platform, mobile is rapidly growing its share of media consumption. Mobile Page impressions have grown sixfold over the past 2 years. This is a terrific opportunity for News, because as you will hear later, we have the biggest mobile news network here in Australia. In this environment, overall share of print advertising has declined over the last 10 years. Meanwhile, the placement of ad dollars in multi-platform domains continues with an annual compound growth online of 18% over the past 5 years.

Second, regrettably weak government leadership has generated pronounced consumer and business uncertainty. This has tempered the generally strong economic outlook, resulting in restrained consumer confidence. These settings will not change before the next national election in September, and may take some time to abate after a generally anticipated change of government.

Third, in this restrained consumer confidence environment, media players have been experiencing subdued revenues and declining print circulation. Needless to say, we are not exempt from this, and have been responding resourcefully. This has included the progressive elimination of low-value print copies and a myriad of other operating efficiency initiatives. What is certain is that our competitors are having a tougher time of it than we are. That said, the ad environment remains very challenged, as we indicated in the most recent News Corp. earnings release, and we're responding accordingly. This environment also, of course, offers a variety of strong opportunities for News. Our leadership positions in key categories such as news, sports, business, style, health and parenting means we are well placed to take advantage of the continued multi-platform evolution. We have also have recently launched new digital subscription products, which I will cover later. Also, FOXTEL, FOX Sports and REA are among several local media companies that are performing well. They are market leaders with solid growth prospects.

Let's take a closer look at the business. As I mentioned, our operations broadly fall into 3 categories: publishing, digital platforms and broadcast. Together, they are the leading portfolio of media brands in the country, and make us Australia's largest media organization by advertising sales. We are the #1 in newspaper circulation, the #1 subscription television provider, the #1 in sports programming, the #1 in online real estate, and we are category leaders in food, parenting, style, health and premium business. I'll first describe our publishing operations.

News is Australia's leading publishing company with many of this country's most recognized newspaper and magazine brands with healthy digital product extensions. We publish over 17 million print copies of over 120 national, regional and community newspapers every week. Around 10.5 million of those are paid for copies, representing a 63% share of all paid circulation, the balance of our free community titles, which operate in the suburbs of Sydney, Melbourne, Adelaide, Brisbane and Perth. We publish the only nationally distributed broadsheet newspaper, The Australian. We publish a Metropolitan newspaper in each of the state capital cities of Sydney, Melbourne, Brisbane, Adelaide, Perth, Hobart and Darwin, as well as in the key regional cities of Cairns, Townsville, the Gold Coast and Geelong. We publish the biggest selling weekday newspaper in the country, Melbourne's Herald Sun, and the biggest selling newspaper of all, Sydney's Sunday Telegraph.

In total, our Sunday printed newspaper network reaches 4.7 million Australians every week, the largest single audience in Australia in any medium.

We also publish 12 leading magazine titles, including Vogue, GQ, Donna Hay and delicious.. Together, they are read by over 2.5 million Australians every month. In addition, we publish 11 newspaper insert magazines across the country, which are read by around 5 million Australians every month. This unrivaled portfolio of respected media brands is thriving in the digital world, and together with some digital pure play assets we own, makes us leaders in the most valuable stable growth categories. We have extended these great prints and magazine assets digitally to create strong, new digital products that connect with the consumers. For instance, in news analysis and opinion, there is no better set of digital brands in the country. We now have a total of around 6.7 million Australians visiting our digital network every month in many instances, on many, many occasions.

I'm delighted to say that our digital-only news brand, news.com.au has moved into the top spot as Australia's #1 news site, according to the most recent Nielsen online ratings for April 2013. It's consistently been #1 in the 18 to 34 audience, but thanks to year-on-year growth of 16.5%, it has now taken the overall #1 position. news.com.au will play a key role in the future of our online ecosystem. It will continue to attract a much younger demographic and compete vigorously for advertising dollars in its market. It will also continue to play a vital role in referring traffic to the rest of our network, and act as a marketeer for our subscription offerings, on which I'll speak further shortly. We acquired the online assets Business Spectator in Eureka Report last year to bolster our business proposition. When combined with local assets such as the Australian and international products such as the Wall Street Journal, we have a powerful business proposition, which stands head and shoulders above anything else in the local market. Their combined audience stands at 1.6 million uniques, amounting to 32 million page views a month.

Our Lifestyle division, NewsLifeMedia, which houses such powerful brands as taste.com.au, kidspot, body+soul, Homelife, Best Recipes, Sunday Style, Donna Hay, and as I say mentioned before, Vogue and GQ, also offers compelling digital products. Together, these brands reach around 7.2 million Australians every month in print and digital, that 7.2 million Australians that choose to engage with their passions through our brands on multiple occasions across every month. They also confirmed category-leading positions in food, parenting, style and health. For example, taste.com.au is Australia's #1 food destination. And take kidspot, it's also a truly remarkable brand. Its online offering, along with sister site, birth.com.au, features every resource a parent needs for practical advice on raising kids, information about food and health, and an award-winning directory of services, activities, shops, education and learning. It also has an active social community with lively forums and social groups, where parents blog and discuss current issues. It's no surprise kidspot is the #1 parenting source in Australia and New Zealand. This, of course, is very attractive to advertisers who want to reach parents through display advertising and product sampling.

Take also body+soul, it is Australia's most read health and well-being publication with 6 million print and digital readers. We are strengthening body+soul's digital offering and footprints to solidify our position as Australia's biggest and most powerful source of health and well-being internationally. That completes an overview of our publishing businesses. Now I'll take you through some of our key plans to manage performance in this part of the company.

We have taken a number of initiatives to drive these businesses appropriately. They include continuing to invest in high-quality premium content, leveraging our brands to expand content across new digital products and platforms, integrating our media offerings to strengthen category leadership positions, improving operating results through advertising integration and operational efficiencies and increasingly supplementing advertising with subscription revenue and fresh revenues from product offers, including e-commerce.

I'll now go into a little detail on each of these points. We will continue to invest in high-quality products and content. This includes investing in the platforms that enable us to provide this content. We're currently completing the rollout of a new $60 million digital journalism management system, Eidos' Méthode. This enables news to even better utilize our workforce and service our customers by creating once, publishing many times, across all platforms, prints, online, mobile, and tablet. It will allow us to both create better journalism products, and also to allow us to showcase and exhibit our existing content across a very wide range of devices. We accelerated the delivery of this new system from the original 3-year timetable to around 12 months. By the end of June, we will have 90 titles using the technology. Our key metro titles will go live in July and August.

Last year, we acquired the business spectator and Eureka report, which as I noted earlier, has consolidated our position as the leading Australian publisher of online business news and analysis. With the acquisition of the Packer-controlled Consolidated Media Holdings in November of 2012. We achieved 100% ownership of FOX Sports and doubled our stake in FOXTEL to 50%, which are both powerhouse content businesses. Full ownership of FOX Sports gives us 100% of a business with extremely strong sports rights, some of the best sports channels in the world and a depth of programming talents. I'll talk more about these terrific businesses in the next section of this presentation.

Second, we are leveraging our brands, expanding content with new digital products and reaching consumers across multiple platforms. Last month, we began the rollout of a new set of websites and m-sites for our metro newspaper titles. The designs have been thoroughly market-tested with thousands of consumers. They are fresh and contemporary and have been specifically tailored for each user platform. Our mobile sites have also been refreshed, and are now faster and much easier to navigate. We've also optimized the websites for tablet viewing from the get-go. For advertisers, we now offer consistency across our network in ad placements and shapes, driving down production costs and ease of transacting with our networks. The new sites also drive deeper user engagement and the subscription environment we are introducing offer many premium advertising opportunities, and we now provide great broadcast style advertising possibilities to online and mobile delivery equally.

Third, we are leveraging our brands to consolidate our leadership positions in key categories. For instance, this slide shows that combining FOX Sports digital numbers with the digital numbers to the sports sections of our mastheads with the millions of people who watch FOX Sports and visit its website, makes us easily #1 in the sport category by a large margin. We're also offering integrated advertising packages across these assets, including, of course, broadcasting. Similarly, the integrated digital business offerings of the Australian business spectator, the Wall Street Journal and Dow Jones, make us the #1 business destination. kidspot, taste.com.au and Vogue, makes us the #1 destination in parenting, food and style categories.

Fourth, in terms of key initiatives, we are driving integration and operational efficiencies to prudently manage costs. Already, we have streamlined the business, moving from 19 divisions to a slender new divisional structure built on geography, and product. We're rolling out shared services across all support areas in the technology, finance and HR, and from that, have identified and implemented a number of operational improvements throughout the enterprise. We've made fundamental changes to our editorial operations, ensuring we have strong customer focus for our journalism. For example, we've introduced integrated 7-day newsrooms with new super news desks, which cover major capital cities and states. This enhances editorial coordination and provides greater flexibility for editorial teams with a consumer-first publishing priority. We're also completing an extensive ad sales transformation, resulting in a leaner, more client responsive, customer-focused approach.

Finally, in terms of key initiatives, we are driving direct revenue by energetically promoting subscription products across the group. As you can see from this slide, we have many sources of strong subscription revenues. Already, our businesses and investments drive over 2.7 billion in subscription revenues from FOXTEL, FOX Sports and digital offers through REA, the Eureka Report, The Australian, the Daily Telegraph, The Courier-Mail, the Herald Sun and Diverse Magazine digital apps. We also drive large subscriber revenues of close to a couple of hundred million in our print products.

In our mastheads, The Australian now has over 50,000 digital subscribers, which is a remarkable achievement, given its Monday to Friday circulation is around 120,000. It's been growing strongly quarter-on-quarter. And last month, we launched our new digital subscriptions brand, News+, for Sydney's The Daily Telegraph and Melbourne's Herald Sun. This supports our new mated model for our metro titles and their progressive movements into the digital subscription domain. On Monday of this week, we launched Brisbane's Courier-Mail, and later this month, we will launch the Adelaide advertisers, and in Perth now, our digital subscription products. Thereafter, other titles than across our extensive network will follow. News+ offers a compelling example of an integrated media offering, driving both print and digital subscriptions. We combine the popularity of our mastheads with compelling sports, lifestyle and other content and our scale to create a unique and compelling consumer proposition. The News+ brand brings together the power of our unrivaled national coverage and distinct focused localism in bright, innovative ways to capture consumer attention. Subscribers to News+ get access to our great mastheads, which publish over 2.5 million stories each and every year. The content reflects the best news, analysis and opinion from some of Australia's most loved and respected journalists. It's the only truly national commercial news network. We have the best sporting coverage, bar none, and we have a wide range of exclusive content in a wide variety of lifestyle and entertainment segments. We'll continue to enhance the value of News+ by progressively launching exclusive content, products and offers firmly targeted at making consumers aspirations and needs. As well as the revenue we derive from our subscription products, we will of course be collecting a large amount of highly valuable data. We're creating a national database, which will have more demographic and behavioral data about our consumers than we've ever had before. It will enable us to meet the demands of contemporary advertising briefs, which require rich segmentation and the ability to purchase by audience, not by a product or platform. Having such insight into our consumers and their behaviors will also enable us to iterate our products more quickly to meet consumer's identified needs.

We're also looking forward to the launch of the Readership Work new reporting product for accurately measuring consumption and engagement across all delivery platforms. It has been composed after extensive research and testing by the internationally respected research company, Ipsos. It will launch in the first quarter of the next financial year. This new methodology will capture the true picture of media consumption across news media and magazine, prints and digital platforms. It will also provide details on engagements and consumption comprehensively on a monthly basis rather than the current outmoded quarterly reporting timetable. It will start to demonstrate the areas and inconsistencies with other reporting approaches. The data that will be available is deeper with rich insight bringing information about publishers' products and their close connection with consumers. It will provide advertisers better opportunities to engage audiences with more creative, innovative solutions, backed with comprehensive, accountable data. This rich data set will be provided to facilitate informed decisions on campaign planning and better validation of performance delivery.

In summary then, as in other countries, we're seeing a shift in audiences from print to multi-platform consumption. Advertising is following consumers. We are proactively managing and transforming our business, addressing these movements in technology and responsive consumer behavior. We are investing and innovating in our existing publications, platforms and processes. We are integrating them so they work well to deliver for our customers, and we're launching new products. We're doing all of these to better serve our consumers and advertisers equally, whilst driving ever better efficiencies.

I'll turn now to broadcasting and television. As in other markets, digital technology and changing consumer expectations have driven significant changes to the landscape in recent years. Compared with even 5 years ago, there are more free-to-air networks and more subscription television channels. Consumers are also rapidly moving to IPTV and tablets, and there is an active on-demand environment. I think the landscape is one with which most here are very familiar. Australian consumers now expect to consume what they want, when they want over the device of their choice. Both FOXTEL, this country's leading subscription television provider and FOX Sports, the leading sports broadcaster, had been fundamental in driving and meeting this evolution in consumer aspiration and expectation. They are both outstanding businesses. This is why in November 2012, News Corp., with the CMH transaction, increased its holdings in both businesses. Post the transaction, News holds 50% of FOXTEL, our partner in FOXTEL is, of course, Telstra. We similarly increased our shareholding in FOX Sports, where we now hold 100%. In making these acquisitions, we have not only acquired 2 highly innovative and financially strong businesses, but businesses that allow us to provide customers with integrated products, which leverage our scale and extend our offering range.

I'll talk first to FOXTEL. As I said, FOXTEL is Australia's leading pay television provider. FOXTEL provides services to over 2.3 million households or around 30% of occupied homes, following its 2012 successful acquisition of All-Star, which was formerly majority controlled by Liberty Global Media. FOXTEL distributes across a wide range of platforms, including satellites, cable, IPTV, and mobile networks to a wide range of devices, including televisions, personal computers, mobile phones and tablets. It has strong ARPU at USD 99 per month per customer household and comparatively low churn of around 14% over the last 9 months. One of the key reasons that FOXTEL has performed so strongly is that it has invested and innovated, always moving with consumer trends. Prior to going digital in 2004, FOXTEL offered 46 analog channels over cable and satellite as many of you will know.

Fast forward to 2013 and it hovers over 200 channels across multiple platforms and to multiple devices. It is the digital consumer innovator in Australian television and has chalked up a series of firsts. FOXTEL was the first Australian media company to broadcast fully digital and interactive services to all of its customer base. It was the first Australian media company to offer its customers a personal digital recorder with a simple intuitive electronic programming guide, transforming the experience of television for Australians. The PVR now enjoys 80% customer uptake. FOXTEL was the first Australian media company to broadcast every game, every week of the highly popular Australian Football League, live, uninterrupted buy ads and in HD. It was the first company to broadcast a 3D sports match in Australia. It was also the first Australian media company to offer a wide suite of channels across mobiles phones and then other tablet devices. You get the message, it is the innovator in Australian television. FOXTEL has always invested sensibly in strong programming and is the premier place for most movies, premium sport and live event programming in Australia. It holds the rights to a wide range of compelling shows, series and sports. Outside of sports, this includes quality international dramas such as Game of Thrones and House of Cards, highly popular international franchises such as Selling Houses and Australia's Next Top Model, which FOXTEL commissions and makes, and locally produced shows such as River Cottage Australia and Aussie Pickers that resonates strongly with domestic audiences. It has most of the major channel and entertainment brands known and appreciated worldwide. The strong history of innovation, the quality of FOXTEL's programming and the choice it offers to customers means that FOXTEL connects strongly with its audiences. As this slide illustrates, FOXTEL is the highest rating television provider when compared with the commercial FTA networks and their channels in the major capital cities. FOXTEL ended 2012 with a 23.2% share of viewing in all Metropolitan homes. This was FOXTEL's highest viewing share ever. It was 1.6 share points above its nearest rival, the Seven Network, which had a 21.6% share across its 3 channels.

Investments, innovation, great shows and catering directly to consumer needs have all delivered strong financial results for the company. In the 9 months to March 31, 2013, FOXTEL generated USD 2.4 billion in revenue, with EBITDA of USD 675 million. This was driven by strong ARPU, and when compared with U.S. counterparts, comparatively low churn of 14% average across the 9 months to March. The external company debt stands at USD 2.1 billion, which has been driven principally by the All-Star transaction. Debt to EBITDA ratios are well within a comfortable range. Overall, there's strong financial results.

The company is not resting on its laurels. It is continuing to innovate to acquire strong content and to cater to changing customer needs. For example, late last year, FOXTEL acquired exclusive access to new HBO series, miniseries, comedy specials and documentaries. FOXTEL recently acquired the exclusive rights to BBC premium drama and comedy programs that were traditionally shown first on the government broadcaster, the ABC. This gives FOXTEL access to almost all the BBC's output exclusively for 12 months before it's available anywhere else. FOXTEL also continues to invest in new ways that consumers can enjoy its product. For instance, last year, we've launched FOXTEL Go, which allows subscriber to watch their favorite shows on tablets, to name but one, of the company's many recent innovations.

In summary, FOXTEL is a strong subscription television business. It generates good ARPU. Its churn is comparatively low. It has a history of building products and offering programming that connects strongly with consumers. It's a business that News Corp. built from inception, along with our partners at Telstra, and its settings are right for the time.

A key part of FOXTEL's success is the outstanding sports programming provided by FOX Sports. I'll turn now to this investment. I don't need to remind anyone here that we love sports. There are arguably 5 primary sports competitions in the country of 23 million people, as Mike Darcey mentioned, and we cover them all. AFL, NRL, soccer, Rugby Union, and cricket. FOX Sports is Australia's leading sports programmer. It competes with the free-to-air networks, ESPN and some telecommunications providers for programming and audiences. As I said before, in November last year, we increased our shareholding to 100% because it's a great business. It holds exclusive broadcasting rights to a wide range of highly popular sports programming. It provides more hours of sports programming than any other broadcaster in Australia, an average of 23 hours a day of live sports. It provides more sports channels than any other broadcaster, with 7 standard definition digital channels, 5 of which are also available in HD. The popularity of FOX Sports programming is also found in the fact that around 80% of the FOXTEL customer base take the sports tier. Like FOXTEL, FOX Sports has a strong history of innovation for consumers. It has been the innovator in Australian sports broadcasting from its superb new broadcasting studios to a wide range of broadcasting innovations, which bring a whole new dimension to how sports are broadcast. This reel captures some of that energy and innovation.

[Presentation]

Kim Williams

FOX Sports has a secure hold on the rights to a wide range of sports as the following examples attest. It holds live rights to every AFL game, excluding the grand final, up until the end of 2016. It holds the rights to all Rugby League games, including exclusive live rights to 5 games out of the 8 games played each week. These rights are secured until the end of 2017. It holds the rights to every game of the Hyundai A-League, where we have been the foundation broadcast partner since inception. FOX Sports also holds the international Australian Socceroos games and the Asian Champions League. These rights are secured until 2017. It holds the exclusive rights for the entire English Premier League. It has secured rights to the rugby union, including the premium Super Rugby between teams from Australia, New Zealand and South Africa. It also has rights to a wide number of other key sports, including, importantly, cricket, tennis, motor sports and netball to name but a few.

The popularity of our sports programming and strong take-up of the sports tier on FOXTEL combine to generate strong revenue and good EBITDA margins. For instance, FOX Sports had revenue growth of 19% between 2010 and FY 2011. It showed growth between FY 2011 and 2012 of 9%. It has continued to enjoy good revenue growth this financial year, with growth of 5.6% over the last 9 months. Notwithstanding recent competitive pressure over rights renewals, FOX Sports retained key rights. As you can see, there was a modest bottom line impact due to recent, what I might term, frisky pricing. The major rights negotiations are now complete for at least the next 3 to 4 years. We've also recently completed capital investment for the new HD state-of-the-art broadcast facilities in each of Sydney and Melbourne. The EBITDA figures for FOX Sports are strong and stand at around 30% margins across FY 2012 and FY 2013 over the last 9 months. All the key drivers of the business are strong and pointing in the right direction. We have secured programming rights. We have expanding distribution deals, and we are looking at new, innovative ways of combining the FOX Sports offering with our other digital publishing offerings to drive revenue. As I outlined earlier, we offer a wide range of premium FOX Sports content with News+ in our digital newspaper offering.

In summary, FOX Sports is a great business. It has strong programming rights, a long history of innovation and a large and dedicated customer base. We're increasingly integrating its offerings with our publishing products to create compelling new products for consumers that will drive subscription revenue and competitive differentiation. Like FOXTEL, it is also a business that News Corp. has built from inception against very strong opposition from both the incumbent broadcasters and some unfavorable domestic policy settings. But as with other News Corp. businesses around the world, we've been able to build a great business in the face of opposition.

In conclusion then, the Australian operations hold a series of strong print, digital and television assets. The company is continuing to invest and innovate. It holds a leadership position across key categories and offers integrated products and has many sources of subscription revenue. Its financial performance as a whole is strong, and it retains a laser-like focus on profitability, growth and operating the businesses efficiently. A part of this story is REA. And in completing the Australian section of the presentation, I'll now pass over to the REA CEO, Greg Ellis, who'll provide an overview on REA.

Greg Ellis

Thank you, Kim. Good afternoon, everyone. It's a great opportunity for REA to be part of the New Newscorp's presentation today. Just a quick bit of history. I'm not sure whether you know about News' involvement with REA. They expected 2000. Lachlan Murdoch was the sponsor at that time, and he showed a high degree of courage, I suspect, Lachlan, because it wasn't profitable at that time in innovation to invest in REA. Let me also quickly acknowledge my Chairman, Hamish McLellan; 3 of the directors, Richard Freudenstein, Stephen Rue and John Pittard; and my CFO, Jenny Macdonald.

REA is a digital business. We operate in the real estate section, and we operate in 4 countries across the world: Australia, Hong Kong, Italy and Luxembourg. Australia is by far the biggest business, generating about 90% of revenue and 10%, obviously, coming from the other 3.

In terms of our Australian franchise, these statistics behind me are desktop statistics. They summarize all of our domains in Australia. You can see that we have a material lead over our biggest competitor, 2.5x approximately on visits, 4x on minutes of use. Interestingly, of all websites visited by Australian users looking at real estate, 75% of total minutes comes to REA. And on average, they spend 9 minutes a session.

I'd like to talk a little bit about where we're taking the company, and the next 2 slides will take most of the presentation time I have. REA has centered itself in being a purpose-driven company, the purpose of being is to make the property process simple, efficient and stress-free. Property is one of the -- or seeking property for where you live and where you run your business is one of the most stressful experiences human beings can have. The others are getting married, having kids, changing your job and, unfortunately, when someone close to you dies. Now to make the property process simple, efficient and stress-free, we've had to focus on 3 market constituents that make up the real estate business, which is consumers, the people to looking to buy and lease property; customers which are real estate agents and developers; and, of course, the property owners.

In Australia alone, there's about $1 billion a year spent advertising property. Digital has only just recently gone past 50% of their total market of $1 billion. The other 3 markets that we operate in also represent close to $1 billion of Australian dollars in revenue. And digital only represents about 15% of that $1 billion opportunity in markets outside of Australia. So we're seeing material growth prospects for our core advertising business. Supplementing that, if I look at what we call a value chain associated with the movement when people move property -- so I'm talking about the things that once you find the house, you have to finance it, you have to connect telecommunications, you have to connect energy, insurance services and the like. In Australia alone, the value chain associated with the movement of property is worth $250 billion a year. If we would have baked a 5% improvement with various partners across the marketplace, we would add about $12.5 billion of efficiency back to the Australian economy. So we see our job as a purpose-driven company, which is to make the property process, as I said, simple, efficient and stress-free. And over the next 3 or 4 years, we'll make the predominance of that money out of advertising, but we certainly intend to make some money from a leads generation business as we help people connect energy, telecommunications, entertainment and the like.

We have an ability to leverage that position today. We already participate extensively across the property cycle. We offer buy and lease services. We offer new property for major developers. We've recently introduced a renovation section within our site called Home Ideas. Our biggest single customer by dollar value is one of the major Australia trading bank. So we're already participating with those financial institutions.

I'd like to focus a little bit on the data and analytics. The way we make our money is advertising, but the core competency of the company is collection, management and interpretation of data. When I joined the company, we had 3 measurement points of data: unique browsers, email leads and page impression. We now have 22 points of measurement. Today, we can tell you how many listings are on the market by suburb, by property type, how many levels of inquiry being achieved for those particular properties. They are examples of data analytics. We can tell our customers how their performance is by suburb against the other real estate agent competitors.

On the chart behind me lists the URLs of the lines of business in our language internally: realestate.com.au; realcommercial; REA Media, which focuses on the developer and media business; casa.it is the Italian URL; squarefoot is, obviously, Hong Kong; and atHome is the Luxembourg business. Most significantly, over the last 4 years, we've moved the business from being a subscriptions prime business. So when I joined the company, it was about 60% subscription and it was principally focused on the residential business in Australia. We've progressively moved the majority of our revenue to be on listings and the display revenue. The reason that we focused on that is the property actually seen is on the listing. And once you measure the listing, you can actually understand what's happening in the market. Once you have more information about the market, you can monetize that, as Lex was talking about in some of The Wall Street Journal examples that he was providing. Information -- velocity of information increases. As it increases, monetization opportunities go up.

In terms of our financial performance over the last 3 years, we've had a CAGR of 18% on revenue. And all of the financials I'm going to show you are in U.S. dollars, with USD 286 million at FY '12. We had a 24% CAGR on EBITDA, generating $129 million of EBITDA.

In terms of the focus for the company, it comes down to 6 things. We are extremely focused on innovation. We run an agile methodology across the company. That's where people from product, sales, IT, HR, finance all sit in permanent collaboration teams. They sit by floor, by line of business. We release product initiatives, which is -- or the new initiatives or update to initiatives every 30 days. That's been a mantra of the company, and we'll continue to be a flow-through as we continue to execute on the strategies that I've outlined. Our ARPU growth will be driven by price and by selling extra product volume. We have an extensive focus on mobility. We would expect by the end of this calendar year that we would have 60%, 6-0, of our audience to be coming from mobile prime devices. Just before March this calendar year, in Australia alone, we recorded 2 million downloads of the iOS application for realestate.com.au. We certainly intend to take our customers on the journey. We spend a significant amount of money helping the real estate agents transition their businesses into the digital economy, and that will continue to be a focus. We're moving the business from a subscriptions business to a listings business and, eventually, to a daily business, where we can publish information, pricing and product changes per day. That does require investment. But as we've demonstrated over the last 5 years with 11 halves of both revenue growth, profit growth and margin expansion, we will continue that operational excellence as we build ourselves into a daily business. And certainly, after a lot of effort, we've been able to generate a positive EBITDA contribution from our overseas businesses.

In summary, our focus comes down to Australia is well positioned with the move that we've made to be a purpose-driven company, to move ourselves from a subscriptions business to a listings business on the path to being a business that can help the property process be simple, efficient and stress-free. There is also opportunities for us to leverage the experience and capabilities that we've got as Robert and the team push out into new ventures within the classified space. And as clearly stated, profitable growth is the #1 mantra for REA, as well as the other News businesses.

So that's my time with you. I'd like to introduce the CEO of HarperCollins, Bill (sic) [Brian] Murray.

Brian Murray

Thanks, Greg. Good evening. Well, it's Brian Murray, but it was close, Greg. So we just met earlier today. So earlier today, you've heard about the digital transformation of our other publishing businesses. And now I'd like to tell you about the digital transition of the consumer book business. By the end of this presentation, I know you'll agree with me that the book industry is on solid ground and, specifically, that HarperCollins is ideally positioned to excel as a digital and profitable leader in the book business. There is 2 clear themes that are going to run through my presentation today that give me tremendous confidence and excitement about the future: Number one, there is increasing demand for and consumption of books. And number two digital leads to improving margins, cash flow and sources of working capital. But more on all of that later.

So who is HarperCollins? We are the second largest English language book publishing company in the world. We have wholly-owned publishing operations in the U.S., Canada, U.K., Australia and India. We hold leadership positions in many popular categories including Christian and children's. In fact, we're the #1 Christian publisher based on revenues, and we're the #1 children's publisher based on the number of best sellers charted each year. We generate over $1 billion in revenues. And we have a large and diverse catalog of print and e-books over 100,000. Each year, we publish more than 200 best sellers and win dozens of literary prizes. And we're a first mover and leader in digital innovation. And as of last year, Robert mentioned, 20% of our revenue is digital, and it continues to grow.

So with nearly 200 years of literary heritage, we pride ourselves as the house of Mark Twain, Charles Dickens and Herman Melville. We hold exclusive rights today to publish some of the world's most popular books, from literary works to commercial fiction to narrative nonfiction and self-help titles. And we publish over 3,000 new titles every year across the English language markets. Some of our best-known contemporary authors are listed here and include Paulo Coelho, one of the world's most widely read authors; George R.R. Martin, author of the Game of Thrones series; and leading business writers of the 20th and 21st century, Peter Drucker and Jim Collins. And we have numerous #1 best sellers, including Bernard Conwell, Daniel Silva and Hillary Mantel.

For 12 consecutive years, HarperCollins has published more best sellers than any other children's publisher. Our team has honed their editorial and marketing processes to identify new talent and launch new book brands consistently in the children's space. No other publishing company comes close to achieving these kinds of consistent results. Some of our best selling children's books are listed here, and many of these books are classics that are given as gifts across generations and therefore sell year in and year out. But the most exciting potential of our list is how books are often translated into TV or film properties. Examples include The Last Apprentice book series, which will be a Warner Bros. film later this year called The Seventh Son; or Veronica Roth's Divergent, which is the hottest teen property in the market right now, which will be a major motion picture in 2014. And we have television series, book tie-ins, Pretty Little Liars and The Vampire Diaries are just a few examples. In a few minutes, I'll discuss how we're going to grow our children's business in new and exciting ways.

The other segment I wanted to mention is our children's business -- I'm sorry, our Christian business. HarperCollins is now the largest Christian publisher in the world. It's comprised of the Zondervan and Thomas Nelson brands. We acquired Thomas Nelson in 2012 for $200 million in cash. And following this acquisition, we formed a new Christian publishing division with a strong and respected management team to focus on all the opportunities in this space. Our Christian division is extremely well positioned. It is the world's largest Bible publisher, selling more than 10 million units every year across 16 different translations. That's English translations of the Bible. We also own the world's largest Christian website called BibleGateway.com, with 18 million unique visitors and more than 140 million page views delivered each month. We are the #1 Christian book publisher, which includes consumer books, inspirational books, academic books, curriculum and other digital content. And we maintain unrivaled sales channels into the Christian bookstores in the U.S. and around the world and as well as direct-to-church channels, selling directly to pastors and church leaders. Some of our leading Christian authors and books are included here, and a few of these have sold millions and millions of units, notably Rick Warren's The Purpose Driven Life which sold 30 million copies; and Sarah Young, which is -- who is the author of Jesus Calling, which is approaching 10 million copies; as well as Heaven is for Real by Todd Burpo, which will be a movie next year released by Sony. And strategically, this Christian category is very important to us. It's less reliant on e-books and online sales, which in some ways benefit HarperCollins globally by diversifying our revenues beyond our Top 2 or 3 retailers.

Now let's talk about some of the trends the industry is experiencing. Thanks to digital technology, overall book consumption is up. The number of books purchased and consumed is increasing in the U.S. and on a global basis. E-book growth rates are very high and are offsetting declines in print sales. The result is top line revenue projections for total growth and digital sales that are steady and growing. From a financials perspective, this means that while revenues are steady, overall profitability is increasing based on more attractive unit economics of digital publishing, which I'll get into in a minute.

Our industry is going through a massive transformation right now. E-readers, tablets, smartphones have led to a new wave of global distribution channels for books. The 5 major global e-book players, Amazon, Apple, Barnes & Noble's NOOK, Google and Kobo, have hundreds of millions of customer accounts that allow for one-click purchasing of e-books. Growth is coming from these global tech companies at the expense of less efficient traditional booksellers. Borders would be an example. As a result of this tech trend, every consumer with a smartphone or a tablet has a bookstore and e-reader in their pocket, and an impulse purchase is only a click away. All of them are competing aggressively for the consumers' dollars. This digital ecosystem is very good news for publishers. The fact that these competitive e-book storefronts are all only inches away from one another, on the second screen, gives us more opportunities to promote our books and greater leverage in negotiations. Over the last 2 years, e-book sales have grown 350%, and U.S. tablet users have grown 500%. Looking forward, the number of e-book storefronts with local pricing, local merchandising are expected to double from 70 today to 150, reaching underserved markets around the world. These tech trends create solid tailwinds for global publishers like HarperCollins.

So as you can see from the chart, the projections for the global market for consumer books is to remain steady and growing, but with a continued transition away from print and towards digital. At this stage in the digital transition of books, it's very clear to us that the book industry is not going the way of the music industry, where digital consumption of $0.99 music tracks cannibalized higher-priced physical CDs. If that were true, we would have seen significant erosion by 2012. And that clearly isn't what is happening with books. So how well this tech disruption in our industry impact all the stakeholders in the book business? Well, for publishers, we see more books being published, reaching more global readers more efficiently than we ever could in print. And we have new digital product opportunities with interactive tech-enabled e-books. For authors, this is also a win. Across print, the print formats, royalties tend to represent about 18% of our revenues. Whereas on the digital side, royalties represent 25% of our revenues. So their piece of the pie is growing. And for readers, there is greater choices with more functionality, access to e-books faster, cheaper and more conveniently. For brick-and-mortar retailers, well, it's not without their challenges, but even they, too, are finding some opportunities. Look at the NOOK that was launched from Barnes & Noble. Or in the U.S., independents are growing for the second straight year. So our view is that physical retail of books will stabilize, and print will eventually coexist with e-books. So we project a very favorable transition for global publishers going forward.

So HarperCollins is well positioned to capitalize on the evolving publishing landscape. We were the first digital publisher -- we were the first publisher to digitize our content and the first to develop new capabilities like dynamic pricing for e-books. Our leadership positions across many segments and geographies provide authors with a seasoned and trusted partner. Self-publishing models are emerging, but our experience is that authors choose HarperCollins because they benefit from a brand and professional resources to promote market and publish and help monetize their content before and after a book is published. We also have relationships with a broad range of distribution partners, with little concentration across any given partner. For example, our Top 15 customers account for only 56% of revenues. And we sell books and license foreign translations to over 100 countries each year. So as much as Amazon is an important partner for us, we believe we are less dependent on Amazon than our competitors because of the size of our Christian publishing division, which is less consumed through electronic formats.

So what are our core strategies? We have 4 pillars of our growth plan: One is to focus our publishing programs on the growing areas of children's, Christian and fiction. Two is to drive growth through the rapid digital transition. Three is to expand print and digital revenues internationally. And four is to drive profitability in our print business through a focus on cost efficiencies.

So as discussed earlier, we believe there are tremendous opportunities in the categories in which we focus. As you know, some children's book properties have become billion-dollar entertainment brands that transcend the book publishing category. At HarperCollins, we introduced the new business model recently that involves the creation and exploitation of Harper developed and owned intellectual property. A staff of editors is devoted full time to creating story concepts. And we partner with new and experienced writers to develop concepts into books and related digital media. This is more of a Hollywood film and television model than the traditional literary publishing model. Currently, we have 100, what we call, IP titles signed and soon to be published. The first book series has already reached -- sorry, become a New York Times best seller. And 3 properties have already been licensed for film and television development. If these series work, the upside is much bigger than the typical book because of the broad rights that we own. In the Christian category, we're very focused on seeing through the integration of the acquisition of Thomas Nelson that occurred last July. This acquisition has exceeded our expectations. We've realized more than $22 million in cost synergies, while maintaining editorial differentiation between Zondervan publishing into the evangelical market in the U.S. and Thomas Nelson publishing more broadly. The focus now is on taking full advantage of revenue synergies, such as selling Thomas Nelson product through Zondervan's direct-to-church sales channel. And we have an opportunity to build on our digital assets and convert our traffic into digital revenues. This Thomas Nelson acquisition proves that tremendous operating synergies can be realized when the right publishing assets are combined, and our team knows how to deliver results. And lastly, in fiction publishing. This is the largest market segment and it's increasingly digital and global, which suits HarperCollins. We continue to build house authors using our digital expertise in pricing and promotion, and we're attracting and signing #1 best sellers. Most recently, we signed Mitch Albom, Amy Tan and Wilbur Smith, all of who have published #1 best sellers to become house authors at HarperCollins.

The second pillar of our growth strategy is to drive growth through digital transformation. This is an area of tremendous focus for HarperCollins. It's incredibly exciting. I could speak for an hour on this topic alone. I'm only going to mention a few things that I'm very excited about. First up is our digital first publishing program, which we branded Impulse. This program is designed to allow us to partner with and publish thousands of new authors to try to build their audiences first with e-books. As we achieve digital success with an author, then we migrate their books into our traditional publishing program. This is a much more cost-effective way to invest in writers and in new fiction, and it takes full advantage of the digital platforms, like Kindle, NOOK or the iBooks platform. This strategy and program, in some ways, is our answer to self-publishing. Another second point is that our global e-book catalog is 40,000 title strong and continues to grow. One of the most exciting new capabilities HarperCollins has developed is industry-leading dynamic pricing of our e-books. By applying the latest data and analytics technology across our global e-book catalog, we've learned dozens of techniques to adjust the prices of our titles over time to increase revenues, as well as author royalties and the reach for their work. This deep understanding of digital pricing has led us to successfully negotiate increased wholesale prices of our new releases with all of our major e-book retailers, proving that pricing power of exclusive quality content still rests with the publisher. And third, the last point I wanted to mention on driving growth through digital transformation is that our creative and digital teams are dreaming up new products every day, including enhanced or interactive e-books and apps based on our books and our authors' works. And here's a video that shows some of the digital innovation that's taking hold at HarperCollins.

[Presentation]

Brian Murray

So I invite you afterwards to take a look at our kiosk to see some of these products. But you can see why we're excited about innovation at HarperCollins. But we're also excited because the financial profile of the book business is changing for the better as a result of digital. This illustration of a new hardcover book shows that as e-book units replace print units, the financial returns for publishers improve. Specifically, revenues will slightly decline on a title-by-title basis. However, margins and profits increase significantly. So here's an example of a $28 hardcover book. This is how it would be priced in the U.S., where the publisher share is about 50%. So the publisher's take is just under $14. Manufacturing costs can be about $2. And returns, in the U.S., about half the books, the new books that we print are shipped out and then are returned to the publisher at our cost. So there's a little over $1 of expense in returns and just under $1 in distribution and freight costs, leaving about $5.60 contribution profit or about a 41% contribution margin. Well, that book, when it's brand new, would be priced at $14.99, or even a best seller would be $17.99. But I have $14.99 up here as an example for a typical book. In this case, the publisher share of the e-book is 70%. It's 20 points higher than it is in the print world. And you can see that the manufacturing costs, returns, distribution, warehousing, freight, all of those costs go away, leaving close to $8 as contribution profit. This is a 40% increase in contribution per unit. And our contribution margin increases from 40% to 75%. Now let's assume the book is fully earned out. Obviously, with new books, we would write in advance. So you have to allocate royalties. But nevertheless, the contribution from the e-books and this new value chain that's being established is very good for us. And additionally, our working capital needs are declining because we get paid more quickly. We get paid 30 days for e-books compared to 90 days for print. And we have less inventory that we have to keep on hands in order to support the print business. So you can see that while some observers see digital and self-publishing as a threat to companies like HarperCollins, we see big opportunities. And we're already executing and growing our business in new ways, while many of these observers just keep talking. And financially, we're transitioning from a very inefficient print value chain to a far more efficient digital value chain and maintaining the value of our content in the process. So HarperCollins' size and scale positions us to win in this digital transition.

The third pillar of our growth strategy is to expand internationally. With the new News Corporation's already expansive and solid international presence, we plan to leverage both our own experience globally, as well as those of our other businesses, to continue to build our business. For example, in India, we've recently acquired the 60% of the business that we don't own. So we now own 100% of our business. In India, this allows us to take full advantage of our expertise in the U.S. and the U.K. and also to take advantage of the Indian book market, which is growing over 10% per year. And we're looking to build on resources and minority investments in Mexico and in Brazil. And we're also working with The Wall Street Journal to expand internationally. We are developing a business English product, as Robert mentioned earlier today, that leverages our Collins languages content. And we're working with The Wall Street Journal's local language sites to promote our e-books in their markets.

And our fourth and final strategy is to drive profitability in our core print business as we expect a continued decline in print volumes. We've realized over $10 million in warehouse efficiencies and rent reductions by reducing the number of book warehouses that we own and run. And in each region, we're deploying print on demand or short print run capabilities to allow us to hold less inventory but still print to order when booksellers place an order for books in our deep catalog. We want our investment dollars to go into talent, acquisition of content, editorial and marketing and not into physical infrastructure that supports declining print volumes.

So we feel really good about our success to date and our momentum going forward both in moving first in digital and second in managing the cost structure across all of our businesses. You'll see that our revenue increased over the last 9 months year-over-year due to the acquisition of Thomas Nelson. As mentioned, revenue is slightly declining as the contribution from digital book sales increases, which is apparent in our annual revenue from 2010 to 2012. You'll also remember that we said digital would help margins increase. Excluding the impact of litigation settlements, we have more than doubled our EBITDA margins between 2010 and the 9 months ended March 31, 2013. We expect this trend to continue as we accelerate our digital strategy, invest in categories where we have leadership positions, develop new digital capabilities and products and lower our manufacturing and returns costs. We also expect to improve on working capital dynamics as a result. So over 5 years as CEO and 16 at HarperCollins, I've never felt better or been more excited about the long-term prospects of HarperCollins than I do now.

So at this point, I'd like to invite all of you to take a second short break. And after the break, Joel Klein, my colleague and CEO of Amplify, will be back to take the stage. Thank you.

[Break]

Michael Florin

Okay. If we could all take our seats. Okay. Well, I guess it's now time to learn a little bit about education. I think you'll find the next presentation to be fascinating. And we have Amplify's CEO, Joel Klein.

Joel I. Klein

Thanks a lot, Mike. And thank you, all, ladies and gentlemen. You've been enormously patient, and I appreciate the opportunity to talk to you today about education. When Kim Williams, my friend, was talking before, he said he was going to talk to you about a series of businesses that you're familiar with. I've got exactly the opposite challenge. I'm going to talk to you about a business that I suspect you know very little about. But I hope in the next 20 minutes, I can persuade you not just that Amplify is a sound investment for the New Newscorp, but that over the middle and long run, we stand to become a major driver at the success of that company. Until now, we've heard from a series of businesses, the traditional venerable businesses that have had to deal with the opportunities and challenges presented by new technologies. And what's interesting is the one area, which is a major area throughout the world that's basically been immune from technological revolution and from disruption and disintermediation has been education. But that's going to change. Right now, certainly in the U.S. and from the people I've talked to here, you'll start to hear more and more about in the college and university world these massive open online courses that people are now taking. Just recently in America, get your head around this, Georgia Tech, one of the leading schools for computer science, announced for $7,000, you can get an online masters degree, fully credentialed just like it was an on-campus masters degree that would cost you at least 5, 7, 10x as much to get. Now we think the same kind of disruption. It doesn't happen overnight. But the same kind of disruption is going to come to K-12 in the U.S. and throughout the world. And what the good news for us is Amplify is, in this one, going to be at the cutting edge. We don't have a legacy business to disrupt. We are going to create this field, take advantage of it. In the U.S. alone, we're talking about over 15 million kids in the K-12 system. And we have got a play that we think can radically transform that system.

Now I want to start -- we'll talk about other countries, but I want to really start with the U.S. because this is where our focus is. And you know what they say, "If you can make it there, you can make it anywhere." And if you look at the U.S., this is as powerful a chart about educational failure as you will find. Look at this, that orange line that's going up from about $4,000 to close to $12,000 per pupil a year, those are fixed dollars. That's what the U.S. spend has been in K-12, all right. In the meantime, on our national tests, and these are credible, well-respected tests, you're looking at a flat line for our 12th graders or high school kids in math and reading. If that were a business, you would have shut it down so long ago. But because it's a government monopoly, in effect, it perpetuates itself even though it doesn't perform. I submit that, that is unsustainable and will have to change. But while the results have been flat, the classroom has been identical. We have a simple model, one teacher and, in fact, we've been lowering class size consistently. A large part of that growth and cost has been moving from 1 teacher to every 26 kids to 1 teacher to every 15 kids. It's enormous change in human capital without results. But that's because I think the delivery system is broken and hasn't changed over the period from 1900 to 2000.

Now people ask me, "What's the kind of market we're talking about here?" So let me just give you a couple of key numbers. We're dealing with a $673 billion market overall in K-12. Of that, about $40 billion are on purchased products and services and somewhere around $17 billion on instructional materials and technology. So at its narrowest, that's that market, the $17 billion, we're going after. But very wise analysts, including the Parthenon Group, have now analyzed this and shown that in fact, if you take $10,000 per student and use technology effectively, you could basically reduce by -- to $8,900 a student and create an $1,100 flexible set of dollars. So you could get the same kind of models once you blend them with human and technological capital. If 50% of that shift would show up in our market, we would jump from $17 billion to $44 billion. So we think we're already attacking a large market, but that it's a market that stands to grow just by nature of the attack and the effective integration of human and technological capital.

Now people always say to me, "Well, why now?" I mean, after all, technology has really been resisted by education throughout the world in significant measure. And I think there are a couple of reasons, 2 of which I want to talk about and then say how we are positioned. But first of all, in the U.S., this is dramatic. For the first time, we're moving towards, in effect, national standards or called Common Core Standards. This means that we can do our technological play essentially across the whole country, not just do it state by state. That gives us enormous economies and efficiencies that we can deal with. But more importantly, these are very different, new, rigorous standards. And for the first time, we will be able to leapfrog the field by developing content aligned with them, while other people will have to deal with all the legacy publishing and other issues they have. We will get ahead of the path by being able to design to this new common core. And literally, just last week, the New York Times wrote that common core will require states to change just about everything, curriculum, principal and teacher training and textbooks. Those are the areas we're going to be deeply immersed in, and we'll be immersed in them at the cutting edge, not trying to readjust a legacy product. In addition, in the U.S., what we're seeing is a significant change in our teaching force. The greening and graying simultaneously that's taking place is going to mean that we're going to have a whole bunch of new millennials coming into the classroom eager to be able to take advantage of the products that we're bringing to the market, people who grew up with these products.

So we think these forces are convergent, but there's a larger principle. And that principle is, until now, the recent technology hasn't succeeded in K-12 because it hasn't understood the enterprise. The thought was if you give kids a computer, somehow, that will change the educational experience. This is not about hardware. This is not about computers, and it's not about tech for tech's sake. This is about changing the teaching and learning equation because if you don't change that, you're not going to change the outcomes. And if you don't change the outcomes, you can't drive a digital revolution in K-12. And that's what Amplify is all about. Amplify is a 3-part play, and I'll go through each of the parts.

Amplify Insight is a company that we bought, called Wireless Generation, just at the onset when we started to move. This is a company, which you'll see already at the top. It has a 12-year old business model. It was known, from the beginning, as a cutting-edge tech player in K-12. It's already serving 40% of the top school districts. So these are people we have commercial relationships with already and an opportunity to bring them along with us in the digital revolution. This is all about analytics, data and assessment, making education smart. Everybody here understands the power of what Google has done or what Amazon has done. We can do that in K-12. We're already doing it, and I'll show you examples of it. But unless we get smarter about our kids, smarter about what's working, customizing it -- so if you're having trouble with fractions and he's having trouble with decimals, there is no purpose trying to have you both work on the same set of problems. We can customize. We can differentiate. We can accelerate those who need to accelerate, and we can remediate those who need to be remediated. And that's what our assessment and analytics business has already been doing. And as I say, I'll say a little more about that. That is the foundation we build on. Everything we do at Amplify is built on getting smarter about kids on what's working and how to differentiate. Our second area, Amplify Learning, is going to be our core curriculum play. This is a leapfrog play. We're not going to do digital textbooks. We're doing integrated curriculum, a classroom experience second to none that's going to be highly immersive, that's got games that are aligned with it, that's going to deal with the kid in the classroom, as well as the kid after the classroom. It's very visual and very powerful. And we're doing this K-12 in 3 subjects: math, science and English language arts. And then our third division is Amplify Access. And that's basically our platform play that's going to be a tablet that we've optimized for K-12. And remember, it's not about tablets. That is a learning platform that will change the way people instruct. I have seen this thing demo-ed in schools. And when you get a glimpse of them -- I hope you had an opportunity to see them outside in our kiosk. But let me show you just a brief video, explaining those 3 products, and then I'll come back and discuss them in detail.

[Presentation]

Joel I. Klein

So that gives you, I hope, some sense of the 3 dimensions in the areas we're in. And now I wanted to just go through and unpack a little bit about each one. The first area, the one that I say is the foundation, the pillar on which we're going to build the other businesses was called Wireless Generation. It started in 2000, and News Corporation acquired it in 2011 for $390 million. It was then and remains one of the market leaders in educational analytics and assessment and, right now, currently serves over 3 million students. We're in 3 core product areas. One is the whole assessment and analytics business. And you've got that sense, from those hexagons we showed you, the way we work. And we give teachers and students feedback. We give them resources aligned with what the kid needs, customize the experience. We learn, for example, which ways kids learn better, how to sequence learning and so forth. We've got literally millions and millions of data points already that we're building on. That assessment and analytics business is basically a software licensing business that would go directly to school districts itself. Second business is enterprise data system. We build the largest ones for school data. We just finished one for the Gates Foundation that we build for them for a multistate data system so that the kids who move from state to state and place to place, we can follow on. And as we move towards these national Common Core Standards, we'll be able to make comparisons, what it means to be proficient in math in one state versus another and how the data can follow you. And the third thing that we're very big on and becomes a key part of everything we do is our professional services. We have people, right now, for example, who are the data coaches in various states, working with the teachers, working with the administrators to improve the use of data, which, again, we think if you just drop these things in and don't bring in the human support forum, they're not going to work. And those 3 packages together comprise what we now call Amplify Insight, and we will build on them as we go.

The second thing is the Amplify Learning. And this is, again, a major core investment that we are making. We are taking information, repackaging it, repurchasing it, integrating the textbook experience with the classroom experience, gamefying it to reinforce it. We already know, for example, if the kids play certain games, science games while they're studying in that area in a curriculum, their comprehension improves, their retention improves, their test scores improve. We're already doing data and analysis in these areas. We have, really, world-class experts working with us. So we know that the content will be rich, immersive and engaging. We will learn, as the kids use it, which parts they think are really effective, which moves them more fast, which moves them quicker, which moves them more slowly and so forth. And all of that will become a positive feedback loop for us. So it's a system built on a platform that is going to be multiple grades and multiple subjects and, increasingly, will empower teachers. I've seen this demo-ed in schools with kids and with teachers, and the response is enormously powerful. When we remove our pilots, the kids literally write us to ask us can we reinstall them because they found the experience so powerful. And again, this is the kind of thing -- if you get a chance to see it in the back at the end of the meeting, it's really worth taking to look at to see what we're doing.

And then the third one is Amplify Access. And this, again, is the platform play. This is an open platform in which not just our content, but content from all the other publishers. And this is really distinguished in several ways. It's designed not as a consumer tablet. It's designed as a classroom learning platform. It's organized by notebook and subject matter. It comes preloaded with some core content. Many of you have heard about Sal Khan and the Khan Academy. That's already preloaded so the kid doesn't have to download anything. That Encyclopaedia Britannica -- every kid who gets one of this tablet has Encyclopaedia Britannica and a Merriam-Webster dictionary built in there. We've got other core tools and functionalities that teaches one lesson and building capacity. So they can take down learning objects from the Web and build them into lessons and drive them to kids in groups as an entire class. And again, you saw from a couple of teachers who are in Fulton County, Georgia, where we had a pilot. I was just down there. And the power of this experience, where the teacher can tell from one quick poll whether the kids or getting it or not, which ones didn't get it and will need remediation after class, how you can tell them, you ought to be looking at these learning objects further. The power of this thing is enormous. And just recently, Robert mentioned right after we announced this in South by Southwest, school districts often hold what they called a request for proposals in which various people have to bid. And this one was for about 20,000 tablets that they want to buy in North Carolina, which means every kid in the middle schools in this district in Greensboro, North Carolina, Guilford County, every middle school kid will now be moving to a tablet experience as part of his K-12. And think about it at multiple levels. In that bid, we were evaluated at 84. Our next closest competitor was evaluated at 35. It gives you some sense of how we're not doing a consumer play. We're doing an educational play. And I'll give you a couple of instances of how things that we didn't -- even didn't predict. A couple of times, kids were sick and they were at home. They could dial in to the classroom. Think of all of the time they are sick. We even had a teacher who was sick and from home, she dialed in and taught her class on the tablet that way. So having won that one, we're now in negotiations with other school districts for additional tablets that they want to purchase from us. And we will continue to move that out even as we improve the tablet. But this rollout in North Carolina, where we'll have some 20,000 tablets over the next year, we're now working with their teachers. We get there ahead of time, prepare the teachers, get them comfortable with it. And if we were in the U.S., I would invite you all to come down and visit and see this in action in the classroom so you can get some sense of both the excitement with the learning power of it.

Now here's our progress today, just as a simple, little primer on this. Basically, in Access, which is that tablet, we really launched this product-defining tablet at South by Southwest.

We've already piloted it with 2,500 users. We have a major agreement with AT&T. What's important about that is we preload this with 4G and those school districts that want to pay for it. And we've got it at a good price. And this means you can now have any time, anywhere learning. You can have the kids take the tablet home, work from home. They can work in groups, you can get them in social networks. Teacher can actually be doing some grading and feedback while the kid is at home. We're going to great services for tutors to come in behind teachers to be able to connect up with the kids any time, anywhere. So that's a major set of opportunities.

On Amplify Learning, again, we've piloted our content with about 2,500 users, and we've already developed some key elements that we are now demoing. That progress is, I'll say in 1 minute, is we're going to push in the next quarter, so that by the end of Spring of 2014 -- in other words, towards the end of the next school year, we can actually have 3 courses fully developed that we'll bring to market for middle schools and English language arts and Science.

And in Amplify Insight, we had multiple-state deals that we're now doing or from data coaching, professional development to assessments, to analytics, and so forth. And we'll continue to develop that business. We also got to make sure we align everything we're doing with the common core standards. Our key initiatives for the next year are one, we're supposed to deliver service to 20,000 subscribers. We've already got that done, we'll exceed that. We already got that done in that contract in North Carolina. We'll scale our platform and our business model on the tablet.

On Learning, as I said, we've got to scale our technology, launch our product. We bring to market 3 paradigm shifting digital courses in English and Science. And in Amplify Insight, we've got to deliver on our key customer contracts and do the alignment with common core. All of that is ongoing right now.

Let me just say a couple of words about historical financials and then the investment we're going to make. Right now, we're a business that's got about $100 million in revenues, and our growth from 2006 to 2012 are -- our overall in revenue has been about 22% average growth over the past 5 years. We think we'll continue on that trajectory as we also continue to invest in our infrastructure and new offerings. So right now, again, this is important. We have enormous relationships with school districts. School districts that have been renewing our products year after year, and we're going to use those relationships obviously in order to bring new product and new opportunities to the school districts. But this is not something where, this is the first time we're doing this. We've got deep and consistent involvement with many, many players in the field.

Now, let me say something about the investment because I know people are focused on this. This year, we have approximately $180 million investment shows up as operating loss for the year. Next year, we're going to have that kind of investment again. And I want to make clear that while it's obviously significant, I think it's absolutely essential. This is not a market you're going to disrupt, which is as I said, a $17 billion market that's built on textbooks and traditional consumer electronic products. It's not going to be disrupted for a digital revolution, unless you're willing to put in the resources. And one of the great things about News Corp., it's always been a visionary company willing to take on the tough challenges. And this is one where I think, in the long run, we're going to look back on this and say, it was transformative, it was powerful and it was successful. But we're committed to do that. Now, it's a benchmark, we're not going to do this in an irresponsible way. We've got all sorts of benchmarks and goal posts that we have to meet. We've already, as I said, exceeded those for this year by the sale of the 20,000 in Guilford County. We'll continue to check that as we move forward, where our particular strengths are and double down in those areas.

We'll invest in our analytics and assessment business. We'll invest in our tablet business, but our major investment over the next several years is going to be developing the digital curriculum. Because we think that has the greatest potential to change the teaching and learning experience. These other things matter. But in the end, if we don't improve the quality of classroom instruction to the work we're doing, then this whole thing is not going to have the impact that we think we can have and should have.

In a nutshell, why Amplify? And I think this is important. I like to put it this way, and then I can go to -- I think Amplify is the education company that has the best technologists in the United States, and it's the technology company that has the best education people in the United States. What we've married our groups of people, who are strong in curriculum, strong in classroom, people like myself who spent almost 10 years running the schools in New York City, along with people like our Chief Products Officer, so Laurence Holt is manning our booth back there, who's really been a leading cutting edge product tech guy in the educational space, marrying those people with the creatives, bringing the discipline we need to this process is going to give us, I think, the opportunity to really lead and disrupt this field. The advantages we have in addition to our personnel, and as I say, a dozen years in the field and the relationship we've built, we've also got the advantage of not having any legacy business that we need to disrupt or cannibalize. And I think that gives us a maximum degree of flexibility, which is critical in this space. And in the long-term, what I suggest to you is the first chart I showed you, proves everything you need to know -- and it's not unique to America, which is we're investing in a broken delivery system. It's a system in which we thought, if we bought in more human capital and we increased the value of the human capital by paying it more, we would somehow break the nut. And we have not done that, not remotely done it. And in a time where the skills demanded by the 21st century of our kids, it's going to increase dramatically. So the kids who would have been competitive in the 1950s and 1980s won't be competitive in the 21st century. You're going to need a new and different delivery system. The market is going to demand it and insist on it.

When we announced our tablet in South by Southwest, we've got inquiries from companies all over the world about partnering with them. We're a focused company. We think the U.S. is our first opportunity. We plan to build on that as we learn and go forward.

Thank you very much for your attention. Now it's my privilege to introduce the CFO of Amplify -- who's CFO of the new News Corp., Bedi Singh. Bedi?

Bedi Ajay Singh

Happy to be the CFO anytime. Well, thanks, and good afternoon, everyone. It's the home stretch, the last presentation. So as you've heard this afternoon from our business leaders, we're very excited about our portfolio of assets, our digital and global initiatives, and the opportunities in front of the new News Corp. as an independent entity.

So my initial work experience in the 90s was with News Corporation's publishing and entertainment assets and having spent a number of years away from the company, most recently as CFO at Gemstar-TV Guide and MGM Studios, I'm very excited to be back with the team for the next phase of the story at the new News Corp.

So hopefully, by now you have a better understanding of the distinctive nature of our portfolio and various businesses and investments. We've talked about the benefits of owning these assets together and the opportunities ahead to lead the digital transformation across the news information services and education sectors. News Corp. is distinct from other global media and information service companies given its global footprint, strong Australian presence and its scale and diversification across geographies and businesses.

Our consolidated businesses generated substantial EBITDA of over $1 billion and available free cash flow, as we define it, of over $400 million in fiscal '12 on $9 billion plus of revenues. And I'll discuss more about cash flow shortly. We believe News Corp. is capitalized to succeed with $2.6 billion of cash expected at separation and no bank debt.

So the key points to take away from here are that we have scale and diversification, which we think positions us well to capitalize on digital transformation. We have substantial free cash flow generation, which will give us flexibility to invest in high-growth opportunities, both organically and through disciplined acquisitions. We have a debt-free balance sheet and multiple catalysts to drive value, which I'll go through shortly.

So when you take a look at our segments and investments, you get a good sense of both the diversity of the asset mix and the valuation contribution across the portfolio. While almost 70% of our fiscal '12 revenues and the majority of our EBITDA are derived from news and information services, a very significant percentage of the approximate value and future growth is coming from other assets, namely REA, Fox Sports Australia and FOXTEL, which we capture through equity earnings.

Our cable network business, which comprises Fox Sports Australia, is predominantly a subscription-based business, not unlike U.S. sports networks and is our second largest business in EBITDA. It has most of the attractive sports rights the Australian market over the near term, as Kim already mentioned. REA, as you guys know, have a total market capitalization currently of approximately, $3.7 billion, 61.6% of which is attributable to News Corp. And last quarter, REA grew its revenues 20%, its EBITDA over 30%. It has margins nearing 50% and pays a healthy dividend, which should grow over time.

Our Book Publishing business has become one of our star performers, becoming increasingly digital and showing great margin improvement as a result. Regarding our 50% stake in FOXTEL, which we account for under the equity method, here, our proportional share of EBITDA would have been approximately $340 million for the 9 months ended 31st March 2013, assuming we had owned 50% of FOXTEL for the entire period. And as I mentioned, we expect to have $2.6 billion of cash at hand and no funded debt, which we view as a major positive and a key differentiator versus our industry peers.

So this chart illustrates our view of the long-term revenue and margin potential in each of our business segments. As you've seen, we have businesses at different stages of their growth cycle. We see 3 major categories: firstly, growth in digital businesses, which includes REA, Fox Sports Australia and FOXTEL; second, businesses undergoing digital transformation, news and information services and Book Publishing, with HarperCollins seeing real benefits through lower operating expenses and working capital and newspapers as you've heard at an early stage. And thirdly, Amplify, which is in its start-up phase, which we view is, hopefully, an open-ended growth opportunity.

We're the largest news and information services provider throughout the English-speaking world, generating $7 billion plus in revenue worldwide in fiscal '12 and EBITDA of approximately $940 million in the segment. And while we expect relatively modest revenue increases in the long term, we expect, as you saw from the earlier presentations, to drive margin expansion by increasing subscriptions and revenues via paywalls and by further extracting cost efficiencies and rightsizing the business, our success at the Wall Street Journal being a testament to that strategy.

You also saw in Kim's presentation that at Fox Sports Australia, we will continue to extend the leading sports programming provider to new digital products and platforms. We see strong revenue and margins flat to hopefully up. At REA, as Greg explained, we're focused on finding new and valuable products to improve monetization of mobile, layering in value-added products, extending our global footprint. We see revenues and margins continuing to move higher here.

And at HarperCollins, as Brian mentioned, we'll continue to invest in high-quality and compelling content to maintain our leadership position in the fiction, children's and Christian categories. We've been successful in transforming our traditional print publishing business to e-books, generating almost 20% of our revenue from digital and expect this to continue growing. We expect to continue improving margins, having increased these from 5.8% in fiscal '10 to 11.5% in the first 9 months of fiscal '13.

Our other segment includes Amplify and corporate expenses. So on Amplify, as you can tell, we're excited about the potential growth opportunity. The education sector is one of the last few industries to benefit from technological innovation. And we see this as a $17 billion plus market opportunity, as Joel mentioned. We also recognized that Amplify will continue to need funding in the near term at a level similar to fiscal '13, as a common core curriculum is developed and rolled out. But we'll be very disciplined, and we'll focus on specific milestones. And we will communicate our progress to you in the coming quarters.

Just touching on corporate expenses. So we have 2 types of costs here: Firstly, general corporate overhead needed to run a separate large global public company. And we expect that this will be in the range of $140 million to $160 million annually from fiscal '14 onwards. And secondly, we also have, an addition, a separate corporate strategy and creative group to identify new products and services across all our businesses where we intend to invest moderately with the expectation of new revenues and a healthy path for profitability and ROI going forward.

You've also seen that we are a truly diversified global business, with a broad diversity of revenues across type and geographies. We are far more diverse than most media companies, with roughly 40% of revenues in the U.S. and Canada and the rest split between Australia, Asia and Europe. So advertising is just over 50% of our revenues comparing very favorably with most of our media peers, and thus, before taking account of our FOXTEL stake. So on an economic basis, including FOXTEL, advertising would be an even lower proportion of our revenues than reported. Our content is increasingly being distributed across the globe and likely will be at an accelerated rate going forward. We've already demonstrated the global presence of the Wall Street Journal, HarperCollins and the REA Group and expect further global growth to be one of our core strategies for new News Corp.

So this slide here further illustrates our financial strength driven by the strong brands with leading market share positions. As you see on the right-hand side of the slide, we generated $1.1 billion of EBITDA for the year ended 30th of June 2012 and $756 million for the 9 months ended 31 March 2013 on a pro forma basis. So we consider EBITDA to be an appropriate measure for evaluating the performance of our business segments and also allows our investors and equity analysts to compare operating performance against historical and competitive data.

Now what you also see at the bottom of the slide is the EBITDA that FOXTEL generates, which of course, we don't consolidate. Our 50% proportional share of FOXTEL EBITDA would have been $338 million for the 9 months ended March 31, 2013, which was just under half the amount of the total EBITDA generated by our consolidated businesses. Margins in this business are around 30%, and we have a strong partner in Telstra, who holds the other 50%. And together with News Corp., it's excited about the further growth potential of FOXTEL.

So whilst EBITDA is our key measure for operational performance, we're equally, if not, more focused on available free cash flow, which we believe to be the key measure of our success to generate shareholder value. This page illustrates the key inflows and outflows driving our fiscal '12 cash flows and shows a more conservative view of our available free cash flow than simply cash from operations less CapEx.

So the top line, which is our free cash flow from operations, includes news and information services, Fox Sports Australia, REA, HarperCollins, Amplify, corporate costs, as well as cash distributions we get and interest we receive from FOXTEL.

We then deduct CapEx to get the free cash flow. However, given we only own 61% of REA would consolidate the business, we further adjust the consolidated cash flow to include only the cash dividends that REA pays to us. But over time, as REA continues to expand, we would expect it to consider the potential for future increases in its dividend payouts. With this adjustment, we then come to our free cash flow available for further potential investments, M&A and capital returns, including any dividends. We will remain very focused on growing available free cash flow, driven by a combination of margin expansion, improving working capital dynamics, stable capital spending and increasing contributions from our affiliates as they continue to grow.

So with the respect to our capital needs going forward, as we further transform our publishing business and some heavy lifting has already been done, you see on the left-hand side of the slide that our CapEx has reduced from $549 million in fiscal '11, which was mostly for printing facilities and equipment, down to $375 million last year. And we expect that this should be fairly stable at that level going forward. We also expect that 80% of our capital investments going forward will be focused on technology and information systems to further digitalize our product offerings and create further operating efficiencies. And as you can see in the second box on this slide since the beginning of fiscal '09, we have incurred just over $500 million in restructuring charges, related mainly to our newspaper operations. And we will continue to extract efficiencies going forward.

We also have a well-capitalized balance sheet, giving us tremendous strategic and financial flexibility. In addition to the cash balance of $2.6 billion expected at separation, we have another $460 million due from a long-term FOXTEL note receivable. And further, there is an approximately $150 million long-term secured note related to the sale of our U.K. print facilities in May 2012. And this loan is repayable in 4 equal installments by May 2017.

As of March 31, 2013, we had almost $6 billion of goodwill and intangibles on our balance sheet. This balance is expected to be lower at 30th of June 2013, as News Corporation issued an 8-K 1 week ago, indicating that we are considering a range of $1.2 billion to $1.4 billion in noncash impairment charges against those balances in our fourth quarter. And these relate mostly to the performance of our Australian publishing assets.

As part of the separation and distribution agreement, 21st Century Fox Group has agreed to indemnify us for payments made after the distribution date, arising out of civil claims and investigations, relating to the U.K. newspaper matters, as well as legal and professional fees and expenses paid in connection with criminal matters for directors, officers and certain designated employees. News Corp. will not be indemnified by 21st Century Fox for any corporate criminal fines and penalties.

Through the 9 months ended March 31, 2013, new News Corp. incurred $144 million in expenses related to the U.K. newspaper matters, of which $132 million would have been eligible on an aftertax basis for indemnification had we been a separate company. And finally, as of the last fiscal year end, the funded status of the company's U.K. and U.S. pension and postretirement medical plans with a net liability of $497 million. As you are aware, consistently low interest rates have increased the present value of all pension obligations, more than offsetting the increased return on equities that have benefited these assets. It's not worthy, however, but based on present assumptions, actual required cash payments into these plans are expected to be relatively modest going forward.

So finally, as you've heard today, we're focused on both investing for future growth as well as returning capital to shareholders. We recognize that some of our businesses face significant headwinds in the near term, and improvements will take time and effort. But we believe the combination of our leading brands, new products, geographic diversification, positive cash flow and strong balance sheet, as well as an experienced and talented management team, positions us well for long-term success.

Additionally, as we've discussed, we believe that we have substantial opportunities to deploy capital into existing businesses to continue their leadership in the digital age. So our leadership in the market, coupled with the strong balance sheet gives us the ability to be opportunistic during periods of disruption in acquiring attractive assets, while taking a disciplined approach towards potential strategic opportunities.

In addition, as stated in our Form 10, it is our expectation that we will pay a dividend. However, the amount and timing will be determined going forward by our board. In addition, as you may have seen in our press release last week, we also have in place a $500 million board authorization for buybacks of our nonvoting shares and have put in place the appropriate measures to be able to use this authority, if necessary, in a disciplined and opportunistic fashion, especially in the period following our listing on NASDAQ and the ASX over here.

So with that, thank you very much for your time. And I'll now have all my colleagues come up on the stage to join me, and then we'll commence our Q&A session. Thank you.

Question-and-Answer Session

Michael Florin

I just want to go over some of the ground rules for the Q&A session: 1, there's mics all over, so just wait for the mic before you ask the question, I'll call on you. Number 2, please state your name and where you work. And number 3, I'm a former analyst, I know this is the hardest thing in the world, but please limit to 1 question. This is very similar to a Broadway show. Okay, why don't we get started. Number 4, over here.

Vikas Gour - Deutsche Bank AG, Research Division

Vikas Gour, Deutsche Bank. Just wanted to focus on FOXTEL. Obviously, penetration's been pretty stagnant, I heard about 30% for the last few years. Obviously, if you're looking to leverage the BSkyB experience, how would you be doing that, and how do you expect Telstra to respond in turn?

Michael Florin

Obviously, Kim? Kim and Rupert?

Rupert Murdoch

I'm sure Kim [indiscernible] speaking with Telstra and with David Thodey. And he visualized that we should be more aggressive in expanding. So you'll see, I think a lot of new efforts there. We're certainly not satisfied with 30% of the profit.

Kim Williams

I think David Thodey has already made public comments about the fact that he is supportive of FOXTEL entering into a triple play, and that's an issue that's currently being resolved between Telstra and FOXTEL. Moreover, Richard Freudenstein the CEO of FOXTEL, has already made an announcement as to an IPTV product called, FOXTEL Play, which will be launched in the new financial year, which is geared at a lower entry level for us. And to actually think, I -- what Marvi [ph] described as a less expensive and cheerful product, not with all of the functionality of the mainstream broadcast product. And then of course, there is organic growth and the possibilities from subscription video-on-demand, which FOXTEL is also about to make an announcement about.

Vikas Gour - Deutsche Bank AG, Research Division

Mike, you might tell us from your experience at Sky in the U.K., the importance of Triple Play?

Mike Darcey

I think the general story of a pay television has been one in which that the product and the proposition is continually being reinvented and represented as time has gone by. People who've tended to think of penetration that's top down. I think you've failed to understand the capability to evolve the proposition and big, a big piece of that story in the U.K. was the introduction of broadband. And it gave a lot of additional momentum to the business over the last 5 or 6 years, I don't see that sort of effect here.

Michael Florin

Okay. Number 2?

Mark McDonnell - BBY Limited, Research Division

Mark McDonnell from BBY. Mr. Murdoch, we have -- we, on the sell side have to carve out the value attribution of the integrated business into 2 components. I'm wondering how you see the time and intensity issue from your point of view. How much time would you expect to devote as Chairman of the new News Corp., given that you're CEO and Chairman of FOX? And of the intensity side, what's the difference in terms of the scope of decision making now that you are not the CEO or not be the CEO of the new News Corp.?

Rupert Murdoch

I think I'll be dividing my time pretty equally between the 2 companies. And I think Kim and Robert here are -- what I've noticed is all the assets we've talked about today, getting a lot more progressed management attention in the bigger company. And I think that's true also in what would be 21st Century Fox. We have also great plans for expansion. So I think you'll see both companies, growing very, very well and I'll be Chairman of both. The -- technically, a CEO of FOX, and I am. And I'm involved with sort of major decisions there. But we've got a fantastic Chief Operating Officer, aided by assistant, Janet Murdoch [ph], but [indiscernible], one of the most respected executives in America, have -- we're in pretty good shape.

Unknown Executive

On issue of intensity, I can assure you, there's nothing lacking in Rupert's intensity.

Michael Florin

Okay. Right over here?

Fraser McLeish - CIMB Research

Fraser McLeish from CIMB. It's -- Joel, on Amplify, sounds pretty compelling, the proposition there. I'm just wondering what are some of the main barriers you come up against when you're trying to get uptake, and what could cause it to [ph] quite a lot longer potentially than you expect to get uptick?

Joel I. Klein

Sure. I think probably, there's a couple of barriers. One, is just the newness and school districts are by design at the cutting edge of innovative thinking. And so I think people want to try stuff, pilot stuff, just take it at a smaller level. However, there's been several districts that are moving in the opposite direction, much more aggressively that gives me hope. Second, which worries me as you start to roll things out, issues of broadband and capacities, and so that's one of the reasons why I think our partnership with AT&T was really important to what we were doing because we have a solution. But we're also working with the federal government in the U.S. and with the various states and school districts to deal with those issues. And then the third issue was just where I think it's actually hit our sweet spot because we've done it for a decade or so. If you don't put this human capital in professional development into it, I think you'll start to see assistances in the process, because not every teacher is familiar with the digital revolution themselves, and so if you don't give them the support. So I think they are all -- there are challenges, but I do think there are ways to effectively manage through these challenges.

Michael Florin

Sameer?

Sameer Chopra - BofA Merrill Lynch, Research Division

Sameer Chopra from Bank of America Merrill Lynch. I have a question about -- to you, Rupert, one of the things that came out of the multiple presentations was around this big data monetization. And I was wondering, could you elaborate more about that? Is that primarily about financing CPMs and advertising or is there a whole new pot of gold that the market hasn't understood?

Keith Rupert Murdoch

Well, that's a really good question, and there's so much said about data. I mean, going back to the early days of the Internet, I remember, frankly working, setting up F2.com [ph] in the states, the word that we still use, and you recall it was eyeballs. And eyeballs have become discredited and I think we have to be careful of what is now called Big Data. It is not just another word for enormous eyeballs. The real issue with data is, obviously, the quality of it and what we have with premium products, with premium audiences that we know that advertisers want to attract at one end, and two, that we want to monetize with customized content at the other. And so the sort of work that really every company here is doing is towards that end, and also sharing the lessons about aggregating and refining data so that it's useful data and not just data for the sake of data. And I think what you will see as part of the e evolution of data is that we are making a distinction between the qualitative data and our clients and customers also will make that distinction. There will be valuable data, and frankly, there will be trash data .

Michael Florin

Okay, Alice?

Alice Bennett - Commonwealth Bank of Australia, Research Division

Alice Bennett from CBA Equities. Have a few questions around the Australian newspapers, Kim. Just wondering if you could, firstly, give us a sense of how much costs you've taken out of the business. I guess, just the potential going forward, given the revenue trends here are so much worse than you're seeing in other parts of the world [ph] space. And I guess, along with that, if you can give us a sense of a cash restructuring costs still to come over the next year? And then, just lastly, it would be very, very helpful if you could give us a sense of the breakdown of the revenues here. I mean, how much is metro versus regional and digital would be fantastic.

Kim Williams

We won't be providing a dissection on those revenues. It won't surprise you, Alice. In terms of our transformation initiatives, we have active programs affecting efficiencies on a durable basis in our journalism, in our ad sales and all of the systems that support ad sales on our information systems and backroom systems that support the business, and finally, in terms of our manufacturing efficiencies. With manufacturing efficiencies, we have closed 2 print plants and reduced press batteries in several other sites. In terms of our shared services across finance, human resources, and information services, we have virtually completed the primary part of that program and we have collapsed our operating divisions from 19 into a much slender, more-focused operation by product and geography. We are satisfied with our progress on that. We have no stage [ph] have taken an approach that others might have taken in terms of nominating some kind of public score card, which, frankly, I don't think helps matters particularly, particularly in relation to human resources. It doesn't make any one wiser or able to analyze performance better. When I spoke about the subdued nature of the consumer economy in the Australia, I wasn't saying that for anything other than a recital of that, which is accurate at that, the current economic settings in this country, they're very difficult. And I think it's important that we -- I don't think any of us have a ball that can actually give us the kind of insight that can separate what is happening in terms of the structural change as opposed to the actual economic settings in terms of the consumer attitude and process and the way in which that has translated into pronounced behaviors from advertisers themselves. And that's across all media in this country.

Unknown Executive

Obviously, there are unique [ph] condition in each country. But the focus of the new News is enabling us to share lessons on costs in a meaningful way, whether it's the common publishing system which was initially rolled out at Dow Jones and is now being rolled out for international and here. True to making sure that when we're negotiating agency contracts that we're doing it at a -- at scale, and getting the discounts that frankly, we deserve.

Michael Florin

Let's take 1 question from 2, please.

Unknown Attendee

Just looking at one of the big issues of the new News Corp. is the transition of publishing revenues from publishing businesses to digital. You've had 2 fairly significant declines in revenue over the past 2 years, just wondering -- I mean, Rupert, where do you see is the inflection point? How far away do think that is considering that payrolls aren't fully rolled out in the U.K. or Australia yet?

Keith Rupert Murdoch

Look,we're using the T word [ph] a lot for a recent transformation. We're clearly in the middle of that transition that you so accurately described. And each of the companies is in a different phase of that evolution. But I think what you're seeing more generally, one is that we've got through the decades, a tremendous assets with great brands, great content had been accumulated; and two, the lessons that we're learning whether it be in the book business or the newspaper business is the people are increasingly paying for content. That changes the formula. It changes the character of the equation. And I think it changes that both, clearly, on the subscription side, but I think longer term on the advertising side because you will have a more discreet, defined, discerning audience that advertisers will be attracted to. So there are all sorts of variables in motion. Wish I could be a safe [ph] and tell you, "Look, it'll be done in 11 month's time." That's clearly not the case, but the conditions we have in place and the companies we have at this table mean that really the environment is quite auspicious for that transition.

Michael Florin

Okay. Number 4, please?

Unknown Attendee

Justin [ph] from Citi. I guess this question is for Mr. Murdoch. There's been a lot of reporting that this is going to be very a cash-generative business and it's going to be able to pay very attractive yield to investors, more like cash spinning off. I wondered if you view this as a yield stock that's going to be paying out dividend, and whether you can frank those dividends for investors domestically here, whether you view this company as something else? I wonder if you could clear it out for us..

Keith Rupert Murdoch

Well, I think from the Australian point of view, we [ph] quite clear, unfortunately, the dividends can't be franked. So Australian investors will need to look at this company as stock -- as a growth stock. And we're not committing ourselves at all to the size of the dividend or anything yet. But News Corp. [ph] has been pretty main payer, but I think you're right. In future, as our cash flows grow and the same particularly in FOX, that you'll see pretty good movements in the dividend. I mean, not instantly, but over the years.

Michael Florin

Okay. Number 3?

Unknown Attendee

Mike Rich [ph] from the Australian Council of Superannuation Investors. My question is about the stockholder rights agreement. We note that -- we note the rate, I suppose, for the 1 year use of the stockholder rights [ph] following the split, just wondering whether, there are any plans or any circumstances in which that may be extended, and I suppose my question probably for Mr. Murdoch.

Keith Rupert Murdoch

I think -- well, I think, [indiscernible]

Unknown Executive

I mean, this is obviously a very, very unusual period, and I think you'll appreciate that.

Unknown Executive

It's quite difficult for U.S. companies to have the shareholder rights protection plan. And clearly, it's a matter for the board to decide whether this thing can either be renewed or could even be canceled earlier, if the board so chooses, so I think it will depend on the circumstances there.

Michael Florin

Okay. Number 1?

Keith Rupert Murdoch

Because it was about the [indiscernible]. I mean, it -- I know it's common in this country. It's very common in America in these situations.

Michael Florin

Richard?

Richard Eary - UBS Investment Bank, Research Division

It's Richard Eary from UBS. You mentioned earlier that we should think about it being considered the growth stock. And I think at the start of the presentation, you talked about the $2.6 billion of cash on balance sheet that you need to deploy for growth opportunities. Can you maybe expand your views on that in terms of does that mean that we should view along the existing lines of business that you operate today, or is that outside of that? And what sort of hurdle rates we should try and think about if all that $2.6 billion is to be deployed for M&A?

Keith Rupert Murdoch

Well, I think, they all would be, but we're going to be opportunistic, we're going to be very careful, very disciplined, any price, but I think you'd be looking -- we'd be looking for things that we have expertise in and would be natural sort of add-ons to what we're doing. And there are a lot of opportunities out there at the moment, but we don't know yet about prices.

Unknown Executive

I mean, exactly. I mean, extensions of expertise, not in areas that are extensions that go beyond our current realm. And you look, obviously, not being specific, but clearly, there's a lot of discussion quite frankly in the U.S. about the newspaper industry there, but I think what that sales would do is look at the potential expansion in the sort of business that Lex described, and the other areas you've seen here. Today, there's a lot of potential in these companies and so we'll be looking at opportunities and obviously and not being specific here today.

Unknown Executive

[indiscernible] specific, but if we were to think about ranking the investments across, basically, the existing pillars, where which we think about and which ones is more higher priority than the other?

I think even ranking would imply a degree of specificity that really would be inappropriate in these circumstances. Nice try.

Michael Florin

Let's take the next question. At number 4?

Unknown Analyst

Peter Short [ph], SBS Wealth Management. It's a question for Mr. Murdoch, sitting across both companies. Are there any notable areas where the 2 companies will compete, and/or are there any ways in which the 2 companies will be able to cooperate going forward? And if neither of those are function or a fact, are there any significant synergies that have been lost other than the duplication of head office?

Keith Rupert Murdoch

I don't think we've got synergies, but the work [ph] frankly, you've got a major share -- say, major shareholder in both companies, you've got the same chairman, but there are no formal non-competes. We're not contemplating at the moment doing anything [ph] to compete with FOX, nor they with us here. But there isn't a formal written noncompete.

Michael Florin

Okay. Number 3, please?

Unknown Analyst

Peter Morris [ph] from Evans and Partners. Back when News Limited was making the consolidated Media Holdings acquisition, 7 group made a proposal towards the ACCC, which they rejected and flagged concerns around earning free-to-air networks and pay TV asset. Kim, this is probably directed at you, does this totally rule out the prospect of bidding for a free-to-air network or is this something you would revisit the future in terms of acquisition opportunity?

Kim Williams

I don't think -- [ph] to the best of my knowledge, there's no current proposal for any such action. As to the -- I don't think you've quite described the ACCC's position in the CMH matter accurately. They didn't reject if they simply said there were issues that would require more extensive investigation, but their inclination was not to allow it.

Michael Florin

Okay. Take a next question. Richard, this will be the last question. We'll be here for many years for more questions.

Richard Eary - UBS Investment Bank, Research Division

It's Richard Eary, from UBS. Just a question back to Joel. You mentioned about, obviously, investment costs in terms of the curriculum business, which would obviously be the large part of the investment to this year and next year. How do we -- given obviously the potential slight curve or take up as people start to migrate towards this new model, what's the propensity to continue to invest in this for the long term? I mean, how do we think about the investment? Is this a 5-year breakeven story for Amplify or is it a 10-year breakeven story or is an earlier one?

Joel I. Klein

Well, again, without getting into specificity of years, what we will see pretty soon is, in the spring of 2014, where we bring cautious to market, we're going to start to get some market feedback. We're actually getting preliminary feedback. We've taken some of the products and started to sort of package them ad see what the response is. But then we're going to benchmark it and as base [ph] said, we will tell you how many sales, et cetera, et cetera. And I think the company will look at the pace of adoption and future investments will correlate with the pace of adoption, so that if we get good uptake early on, we'll probably put our foot on the gas, and if we don't get such good uptake, we'll have to re-evaluate.

Keith Rupert Murdoch

I think this rate of expenditure, we've got to keep up from the expenditure side as we develop the curriculum. I mean, I can not back off from that. It's going to be excellent. I'm going to keep at it. But on the other side, we'll see an increase, a good increase in revenue to put our gas to. Now we're absolutely not saying 3 years or 5 years or 10 years, because we don't really know, but that certainly won't be 10 years. Okay.

Michael Florin

Okay. Thank you for your time, and we look forward to spending lots more time with you in the coming years.

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