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News Corporation, Inc. (NASDAQ:NWS)

F4Q07 Earnings Call

August 8, 2007 4:30 pm ET

Executives

Gary Ginsberg - IR

David DeVoe - CFO

Rupert Murdoch - Chairman, CEO

Peter Chernin - President, COO

Analysts

Michael Nathanson - Bernstein

Richard Greenfield - Pali Capital

Jessica Reif-Cohen - Merrill Lynch

Anthony Noto - Goldman, Sachs

Doug Mitchelson - Deutsche Bank Securities

Jolanta Masojada - Credit Suisse

Alexander Adam - JB Were

Jonathan Jacoby - Banc of America

Alan Gould - Natexis Bleichroeder

Tuna Amobi - Standard & Poor's Equity Group

Spencer Wang - Bear Stearns

Alex Pollak - Macquarie Bank

Jason Bazinet - Citigroup

Jason Helfstein - CIBC World Markets

Fraser McLeish - ABN Amro

Anthony DiClemente - Lehman Brothers

Journalists

Ken Lee - Reuters

Miriam Steffens - Sydney Morning Herald

Aline van Duyn - Financial Times

Seth Sutel - Associated Press

Joe Menn - Los Angeles Times

Nishant Bahia - National Public Radio

Andrew Clark - The Guardian

Gillian Wee - Bloomberg

Robert MacMillan - Reuters

Georg Szalai - The Hollywood Reporter

Max Bowie - Inside Market Data

Staci Kramer - Paidcontent.org

TRANSCRIPT SPONSOR
Wall Street Breakfast

Operator

Ladies and gentlemen, thank you very much for standing by and good morning, good afternoon and good evening to our global audience today. Welcome to News Corp announcing their fourth quarter 2007 earnings release. (Operator Instructions) With us today, we have Mr. Dave DeVoe, Chief Financial Officer; we have Peter Chernin, President and Chief Operating Officer; and of course, Mr. Rupert Murdoch, Chairman and CEO.

Here with our opening remarks is Executive Vice President of Investor Relations, Mr. Gary Ginsberg. Good afternoon, Gary, and please go ahead, sir.

Gary Ginsberg

Good afternoon, Brent, nice to have you back with us. Good afternoon, everyone. Thank you for joining us to discuss our fourth quarter and fiscal year end operating results. As Brent just told you, we have Rupert Murdoch, Peter Chernin and Dave DeVoe on the call with us today. We'll begin with Dave providing some financial analysis for the quarter and for the year that may not be obvious from a reading of the results. Rupert will then talk about some of the financial and strategic highlights for the year and offer some brief remarks on the company's recently announced acquisition of Dow Jones. Peter will then give some forward perspective on the company's television, cable and film businesses, three of our biggest growth drivers. And then as Brent said, we'll go right into your questions first from the investment community and then from the press.

Today's call is of course governed by the Safe Harbor provisions. On this call, we will make statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks and uncertainties and other factors, including those described in News' public filings with the SEC that could cause actual results to materially differ from those in the forward-looking statements.

This call may contain a discussion regarding the previously announced agreement to acquire Dow Jones. We urge you to read registration statement and proxy statements to be filed by the transaction participants with the SEC when they become available as they will contain important information about the transaction. Any discussion regarding the transaction on this call does not constitute an offer or solicitation to buy or sell any securities, and any offer and securities will only be made in accordance with requirements of the Securities Act of 1933.

With all of that legalese, I will turn the call over to Dave.

David DeVoe

Gary, thank you and good afternoon everyone. As you have seen in today's earnings release, News Corporation once again posted great results with strong revenue, operating income and net income growth for both the fourth quarter and the full fiscal year, as well as record cash flows from operations and cash flow from operations plus capital expenditures, which we refer to as our free cash flow.

Let me start with our full-year results. For the year, we achieved 15% operating income growth, consistent with the financial guidance we provided you a year ago and reiterated throughout the year. This strong financial performance was driven by 13% revenue growth with Sky Italia and our Cable Networks producing the largest year-over-year gains.

Our equity earnings of affiliates also performed well with equity income for the year slightly over $1 billion, and this is also a 15% increase above last year's level and these results were lead principally by higher contributions from DirecTV.

Bottom line, the company reported full-year net income of $3.4 billion, a 22% improvement over last year’s net income from continuing operations of $2.8 billion. The related earnings per share for the year was $1.08, a 24% improvement over last year’s comparable EPS.

Now let me turn first to our fourth quarter. We enjoyed again a very strong fourth quarter with operating income of $1.22 billion. This is up 18% over the fourth quarter a year ago. The improvement for the quarter, as it was for the year, was led by considerable profit increases at the Company's Cable Networks and Sky Italia segments, but also reflects strong growth with the company's new media and also at our print businesses.

Contributions from our associates were in line with last year. Our other income and expense was unfavorable due to the mark-to-market adjustment on our exchangeable debt securities and our tax provision benefited from the resolution of various tax matters. As a result of these items, net income from continuing operations for the quarter was $890 million, a 24% improvement over last year's fourth quarter result. Earnings per share for the quarter was $0.28, up 22% over last year's EPS.

Given you all should have a copy of our earnings release, I will not review all of our business segments. However, I would like to provide context on the recent performance of two of our businesses. Let me start with the only segments which had lower earnings in the quarter: Filmed Entertainment and Television.

At our Film segment, operating income declined $94 million from the fourth quarter of a year ago, reflecting difficult theatrical comparisons to last year that included blockbusters Ice Age, The Meltdown and X-Men, The Last Stand. These two films together ultimately achieved about $1.1 billion in worldwide box office receipts. Additionally, this quarter's results included the release costs for several successful films, including the latest Die Hard and Fantastic Four films, as well as The Simpsons where the bulk of the related profit of The Simpsons will fall in fiscal 2008.

In our Television segment, fourth quarter operating profit of $385 million declined from a year ago with solid growth at our FOX-affiliated TV stations and at the FOX Broadcasting Network, offset by My Network losses and lower STAR profit contributions. The My Network losses have improved from the quarterly run rate we experienced earlier this year due to recent programming changes, and we expect that trend to continue into fiscal 2008.

Now turning to our earnings growth drivers for the fourth quarter. We were led absolute dollar terms by our cable networks. All of our major cable channels contributed, providing fourth quarter operating income growth of $90 million, or 46% over the fourth quarter a year ago. The FOX News Channel grew quarterly operating income by 41%, driven by revenue increases from the new affiliate rates with Cablevision and DirecTV, as well as higher advertising sales from stronger ratings. As we have seen all year, higher affiliate rates and subscriber increases continued to drive double-digit earnings growth at the regional sports networks.

Our International cable channels continue to grow impressively, reflecting a combination of stronger ad sales in most regions and the addition of new channels, and Peter will give you a lot more information on this business in a few minutes. FX more than doubled its year-ago profit contributions for the quarter with much of the improvement reflecting NASCAR no longer being on the channel.

Shifting to our direct to home platform in Italy, Sky Italia achieved its highest quarter of profitability ever with $155 million of operating income, an increase of $71 million from the fourth quarter a year ago. For the year, Sky delivered $221 million of operating profit, an increase of $182 million from the year-ago results. These increases were driven by net new subscribers for the year of 368,000 increasing our year-ending subscriber count to 4.2 million.

Sky achieved gross additions in the quarter of approximately 126,000, down 54,000 from the fourth with of a year ago when Sky broadcast the World Cup. This year's quarterly additions is in line with the 136,000 gross additions achieved in the fourth quarter of fiscal 2005, and this is a more comparable quarter, which also had no World Cup.

Annualized churn for the quarter was 10.6%. This is an increase from last year's 9%. This increase reflects a new Italian law introduced in April allowing subscribers to cancel at any time with just 30 days notice. As a result, net additions in the quarter were approximately 32,000. While the initial effects of the accelerated churn from the new law continue to be felt, gross additions are currently tracking well ahead of the prior year partially due to the absence of last year's soccer scandal.

SAC in the quarter averaged EUR228 per subscriber, a significant improvement from last year’s fourth quarter, and this is primarily due to last year’s marketing around the World Cup, which we did not repeat this year. ARPU for the quarter of approximately EUR46 was slightly below the EUR47 we achieved in the fourth quarter last year, and again this is due to temporary upgrades we offered as part of last year’s World Cup. Without these upgrades, ARPU would be essentially the same as it was a year ago.

Our third-largest driver of earnings in the quarter was FOX Interactive Media, which on the strength of MySpace delivered its most profitable quarter and in just its second year, reached full-year profitability. FIM’s revenues in the quarter doubled from the same quarter a year ago to over $183 million with FIM’s operating income contribution in the quarter of about $30 million. For the year, FIM’s revenues of approximately $550 million exceeded our $0.5 billion benchmark and FIM generated $10 million in profit. This is more than an $80 million earning improvement from the prior year's results. These results also include the anticipated revenues and profits associated with our deal with Google and we look forward to the ramp-up of those in fiscal '08.

Turning to our capital structure, cash flow in the quarter was strong. We generated $1.2 billion in cash flow from operations, less capital expenditures which we consider to be our free cash flow. For the year, cash flow from operations plus capital expenditure was $2.8 billion, and this is a record year of cash flow generation for the company.

We continued during the year to be active with our share buyback program, including repurchases of nearly $1.3 billion in fiscal 2007, bringing the total repurchases to more than 213 million shares for a total of nearly 3.9 billion since we started the program. We are committed to completing the remaining 2.1 billion of the buyback as we believe that it is an excellent use of our cash resources. In addition, we will be retiring approximately 16% of all our outstanding shares when the Liberty transaction is completed, and we hope this will be completed by the end of the calendar year.

Finally, let me address our guidance for fiscal 2008. Based on all of the assumptions inherent in our projections, we anticipate our operating income growth rate for fiscal 2008 to be in the low teens. This guidance excludes any impact for both the anticipated gain from the sale of property in the United Kingdom, which we certainly hope to complete in fiscal 2008, as well as the Dow Jones acquisition. Much of our earnings growth in fiscal 2008 is expected to be driven by similar fundamentals which underpin fiscal 2007's growth, namely continued growth at Sky Italia, further growth at our cable networks led by FOX News and our international channels, and improved monetization of Internet traffic, principally at MySpace.

Our expected operating income growth in fiscal 2008 also considers that we will be absorbing cost of roughly $340 million related to developing new businesses or capabilities. These include start-up losses at FOX Business and Big 10 channels, losses from the developing new Eastern European television businesses and a final incremental cost related to the United Kingdom press projects. Obviously while restraining our growth rate in fiscal 2008, each of these initiatives will contribute to our continued growth in fiscal 2009 and beyond.

With that, I would like to turn the call over to Rupert for some additional comments.

Rupert Murdoch

Thank you, Dave and good afternoon, ladies and gentlemen. As Dave has just outlined, fiscal 2007 was a very good year financially and operationally. It was a very important year for us strategically as well with the announced signing of the merger agreement between News Corp and the Dow Jones Company, our earlier deal with Liberty Media and our latest moves to divert our interest in non-core assets like Gemstar, News Outdoor and some of our smaller TV stations.

The financial success we have enjoyed should come as no surprise. It's a steady continuation of the growth we've sustained, really since 2003. In fact, over the last four years using almost any metric, few if any companies in our sector have matched our revenue, operating income or EPS growth; revenue growth of 13% a year on average, average operating income growth of 17% and earnings per year from continuing operations up 38% per year, on average.

At the same time, we have all evolved strategically through investments and divestitures to better align the company with future opportunities and to optimize its deployment of capital. Several of the changes initiated over the last few years should bear fruit in fiscal '08.

Most significantly, we expect to close on our Liberty transaction sometime before the end of this calendar year. Once completed, we will effectively lock in a tax-free gain of roughly $3.5 billion generated since we acquired our DirecTV ownership in December of 2004. As we reduce our exposure to the U.S. television market, we're also looking to penetrate new TV markets overseas that represent faster growth opportunities. It's one of the things that I think consistently separates us from our peers: our relentless focus on creating new growth opportunities globally, new growth engines and to replace our or supplement those that are maturing.

So for example, during the U.S. advertising slowdown in the early part of this decade, we invested in a Bulgarian TV station. Today, we're generating annual profits at that station far in excess of its original investment. Given that success, we're now hoping to replicate that model in other underdeveloped television markets, including in Turkey, Poland, Serbia and Indonesia. We're taking these strategic steps to better enable the company to capture the opportunities of operating in a more globalized and digitized society.

I have challenged myself and my colleagues most recently at a four-day digital conference that I hosted with our leading digital advisors to unearth, examine and implement where appropriate digital strategies that will generate new revenue and profit streams for the company. It's the single most important challenge we face today.

After two years of first steps, we're starting to make measurable progress. Today, FOX Interactive Media reported its first full year of profitability. It may not seem surprising, given MySpace's meteoric rise in that period, but it wasn't so long ago -- 24 months -- when many said we were embarking on a fool's errand. In the 12 months prior to our acquiring MySpace, the site generated $23 million in revenue. Today on the back of its durability and success, we are forecasting that MySpace alone will generate in excess of $800 million in revenue in fiscal '08. Overall, FIM in fiscal '07 generated revenues of $550 million and a profit of $10 million, even after absorbing $80 million in retention and amortization costs. We would be surprised if FIM revenues this fiscal year do not exceed $1 billion with margins well above 20%.

The traffic numbers of MySpace certainly suggest a steady continuing success. MySpace added 1.5 million unique users in June while increasing its page views by 2 billion. Just last week, MySpace had its biggest day ever with 4.3 billion page views and 7.3 billion ad impressions -- that was in one day.

Our digital successes aren't confined to MySpace alone. Our newspaper web sites in Britain, Australia, the New York Post, continue to show growth. In fiscal '07, the total number of users across all our newspaper sites grew 25% to 20 million users, generating nearly $100 million in revenue. At FOXNews.com, revenue grew about 50% and is increasing its steady profitability. At our station-owned and operated web sites, we saw a 350% increase in unique users, although from an admittedly small base. So you can see we are still in the early stages of our digital development with much room for growth.

Now this brings me to the Dow Jones Company. One of the big reasons we're so excited about our impending purchase of Dow Jones is the immediate and important lift it will give our entire company as we continue our digital transition. I don't think there's a better company to acquire in order to explore the burgeoning demand for global financial information than Dow Jones with its powerful brand names, unattainable credibility and worldwide reach. That's why we put such a premium on its value and why I spent the better part of the past three months enduring criticism normally leveled at some sort of genocidal tyrant. If I didn't think it was such a perfect fit, with such unlimited potential to grow on its own and in tandem with News Corp. assets, believe me, I would have walked away. We persevered because Dow Jones arguably the world's most prestigious powerful brand in financial services.

The Wall Street Journal is the greatest newspaper in America and one of the greatest in the world. It has tremendous journalists and excellent management. While powerful and durable, it is also a brand that could be much further exploited. Pairing it now with the marketing power, global reach and diverse media platforms of News Corporation will vastly enhance the brand and extend its reach.

We also have persevered because there's no other company that can better complement News Corp's mission. For most of our 52-year history, News Corporation has been both an information and entertainment company, producing compelling content in both areas for a growing worldwide audience. The purchase of Dow Jones with its vast newsgathering resources greatly expands the information side of our company and positions us to become the strongest company in the world in both information and entertainment.

It would be premature at this early date to go on at any length about our specific plans for the company generally, or for The Wall Street Journal. There's still much study and work to be done to better understand the opportunities and the challenges. We do see making necessary investments in Europe and Asia to better capitalize on those expanding markets. More coverage of national, international and non-business news, of course without diminishing the Journal's business focus, all to better compete with the New York Times and other national newspapers. An intensive look at achieving cost synergies through our existing brand and technology expertise and through leveraging our respective cost structures.

We'll also be diverting energy to enhancing Dow Jones' electronic assets and determining how to maximize their reach and profitability in tandem with our own assets. We're living in a time of exploding capital formations and thirst for financial and economic news. Certainly today, Dow Jones is uniquely positioned to benefit from this phenomenon given their electronic assets. There's WSJ.com, the world's biggest subscription web site, with nearly 1 million subscribers. There's MarketWatch, with more than 7 million unique users; Barrons.com, with 97,000 subscribers who are among the most affluent and influential users of the web. There's Dow Jones news wires which serve more than 435,000 financial professionals around the world; and Factiva, which enjoys vast and growing profits as it serves 1.8 million customers, including 80% of the global Fortune 500 companies.

News Corporation more than any other traditional media company has succeeded in creating new revenue streams while migrating content to the digital space. There are huge opportunities to further leverage the vast financial newsgathering capabilities of both companies and to couple the electronic assets of Dow Jones. Those brands I just mentioned as well as other valuable assets we will create. Of course, owning Dow Jones and its vast trove of financial information will be the perfect complement to our launch of the Business News Network, adding both credibility and potentially accelerated carriage. The CNBC contract is an obstacle, but we still think there are plenty of opportunities for Dow Jones and The Business Channel to mutually benefit.

We already air the top five business news programs in cable news and our extension of this strength with a 24-hour business channel is a very logical progression. The FOX Business Network will launch on October 15 with a minimum of 31.5 million subscribers, including the New York market, the largest launch of a new channel in cable history.

Some analysts have estimated that CNBC today has a valuation in excess of $4 billion. We have every expectation that the FOX Business Channel in short order will surpass that value in the same way FOX News has surpassed CNN and all other cable news operations that it competes against. As we get deeper into the Dow Jones businesses, we will have much more to say about how we plan to integrate and grow them. We're tremendously excited by the transformative potential it represents for our entire company and eager to get to work on it.

I would like to turn this call over to Peter who will talk in greater detail about the operational opportunities we see for some of our key entertainment assets, including our Cable, Television and Film units. Under Peter's expert leadership, these businesses have become the company's major profit contributors with continued strong growth ahead, as you will now hear from him.

Peter Chernin

Thank you very much, Rupert and good afternoon, ladies and gentlemen. Now that Rupert has taken you through some of our strategic initiatives and growth drivers for the upcoming year, I would like to take a few minutes to provide you with some color on a few of the other businesses that were included in the guidance that Dave provided earlier.

So let me start with our Cable Network business. I think it's a business that probably gets a little less public focus these days because of its steady and enduring growth over the past few years, but our continued investment and our continued operational momentum has given us an enormous growth driver. This past year, fiscal '07, four different areas in our Cable division each grew by more than $50 million in operating income, so our growth in this area is pretty widespread and broadly based. Those four areas were our FOX international channels, our FOX News division, our FOX sports channels and our entertainment channels, led by FX. So let me give you a little detail on each these areas to give you a sense of how much momentum we have in this segment.

Starting off with the Fox international channels, this is a business that really did not exist before 2000 and we actually have not spoken about much, and therefore has not garnered a lot of attention. Today, our international channels, and these do not include STAR, these are just the Fox international channels inside of the Cable group, these businesses today generate more than $120 million in profits and show no signs of slowing down. In fact, the business grew more than 80% between '06 and '07 and we expect it will grow another 50% in fiscal '08.

Since many of you have not been exposed to this business, let me give you just a few of the details. Inside FOX international we operate more than 80 different channels and provide services around the globe, predominately under two broad brand names; under various FOX brand names and under various National Geographic brands. We are currently the largest multichannel operator in Latin America, in Italy, and we boast channel and Internet products in most other major market of the world, including substantial operations in Asia, in Central and Eastern Europe, in Spain, in France and the UK. In the upcoming year, we expect to expand further with the launch of at least seven additional channels in places like Russia, Turkey, Latin America, Japan and Asia.

We are still in the very early stages of our development with this business and we expect revenues to ramp up quickly as we continue to grow our affiliate rates, expand geographically and increase our advertising revenues. I think the success of this group is a prime example of our ability to grow our business organically by capitalizing on underserved marketplaces.

Turning to our news business, FOX News, this will be the single biggest growth driver within cable this fiscal year, and frankly, for several years to come. There's a couple of reasons for this robust growth. First in fiscal '08, we will have the full-year effect of our recently completed FOX News affiliate negotiations with both Cablevision and DirecTV, and also one or two smaller operators. We also are going to reap the benefits of what appears to have been a very strong upfront for FOX News, which included high single-digit CPM increases. Finally, we're benefiting from our current ratings growth and what we expect will be a very strong year because of the coverage of politics. The impact of these revenue gains and a relatively stable cost base should push FOX News margins into the high 30% range as we see our revenues continue to grow.

Turning to our sports business, our RSMs delivered increased results coming off of both increased advertising, and I think there we're seeing the benefits of the appeal of live sports programming and we're the largest broadcaster of live sports programming in the world to advertisers and also, increased affiliate rates. In addition, we renewed long-term rights agreements with more than a dozen professional sports teams during fiscal '07, and this is locked in long-term stability for the business.

Moving into fiscal '08, those two areas increased, advertising revenues and increased affiliate revenues, coupled with ratings growth that we're seeing in baseball, ratings growth that we're seeing on SPEED Channel and our soccer channel should give us a very strong year going forward.

Moving to the Entertainment sector, in fiscal '07, FX delivered record affiliate and advertising revenues, coming off of its highest rated primetime season ever. This is now solid throughout the entire season with a top five basic cable network, and I think is generally regarded as the premier general entertainment service in basic cable. Our ratings momentum has already carried over into fiscal '08 with the strong debut of Damages last month, which has been our strongest premiere on FX I think in about four years since the premier of Nip/Tuck four years ago.

In that general Entertainment area, we're also seeing the growth of the Reality Channel, which is starting to turn into a real earnings powerhouse for us, and also increases in National Geographic ratings and the ad market. So, again, another area in the cable area where we expect great growth momentum for this year and years to come.

Also in the Cable area, we will continue our strategic investment to create the next generation of growth drivers as these ones provide us growth in the current period. One of the things that I think has differentiated Fox from our peers is our consistent ability to launch new cable channels. We have launched at least one new cable channel a year for the past five years and it's one of the things that allows us to maintain our growth trajectory. Fiscal '08 will be no different with the creation of I think two very important new channels: the FOX Business Channel and the Big Ten Network.

As Rupert talked about, the Business Channel will be the largest launch in the history of the cable business. It will be a reasonably modest investment. We believe the total investment should be somewhere between $150 million and $200 million, and should reach breakeven in a couple of years. The early plans led by Roger and his team I think are really exciting.

The Big Ten Channel, which will launch at the end of this month; we'll start small, but we think there's an extremely passionate audience in those Big Ten markets, and also among their alumni throughout the country that will grow over time with quality and must-see programming. On top of that, as I said, we have seven or eight new international channels on top of that. So, overall, I think that our current operating momentum in the Cable business will be added as we continue to make these kinds of investments to give us this growth driver for years to come.

Turning to the major part of our Television business, our broadcast business, we also have very high expectations for the year ahead of us. We have now enjoyed 26 straight weeks as the number one network among adults 18 to 49, every single week for the last 26 weeks, we have been number one. That is the longest streak in more than 11 years since NBC was at its prime in the mid-'90s, in fact, probably longer than many have been in the business. We have also been the number one network among adults 18 to 49 for three years running and just finished this past year with the largest margin of victory in many, many years.

Our ratings success has led to one of the strongest upfronts we have enjoyed in years with high single-digit CPM increases and mid single-digit absolute dollar increases locked in for the year ahead on FOX. We're also enjoying a very strong scatter market right now, which I think gives us great confidence for the start of broadcast season. We have what I believe is a more complete and compelling schedule than we've had in past years, a strong slate of returning shows that most of the audience is familiar with and a promising slate of new shows that will begin premiering next month, all of them coming with great momentum from our summer ratings success.

We will have far less interruption from the baseball playoffs this fall and I think should have an easier time launching our new shows. It will also give us the opportunity to achieve better continuity for our primetime lineup while still benefiting from having the World Series as an invaluable promotional platform.

Let me just take a minute to point out, I think Fox has what is arguably the single best sports lineup probably in the history of broadcasting business coming this year. Our lineup of sports events coming in the next nine or ten months includes the World Series, the national football championships, the Bowl Championship Series, the Super Bowl, the 50th anniversary of the Daytona 500, and the final All-Star Game to be played in Yankee Stadium next July, a pretty remarkable lineup. I think not to make bold predictions, but with that sports lineup coupled with our entertainment ratings momentum, we're pretty confident that we'll notch our fourth consecutive ratings victory in the upcoming season.

Obviously, we expect that success on our broadcast network to spill over to our station group with station market shares at record revenues. We should also benefit from an ad environment where I think we'll see gaining strength as political spending ramps up later in the year.

Finally, before we take your questions, I just want to touch briefly on our Film business. It's fairly obvious that 2007 was a phenomenal year at our film company. Our hit ratio, which I think is unmatched, led us to a stunning seventh consecutive year of record profits, and moreover our success was broad-based. Now, additionally, we will continue to reap the benefits of these films over the next several years.

I know many of you think that that performance in '07 is going to create some very tough comps going forward. I think if you look at a company like ours with a July 1st fiscal year, the best predictor of how the next fiscal year is going to be comes from the performance of our summer movie slate. Using that metric, I think it's safe to say that we're off to a very strong start. While I cannot guarantee that we will match last year’s operating performance, I think based on this summer's strength it feels like we're going to come awfully close if we don't match it.

Just to hit the highlights, Fantastic Four has generated almost $250 million in worldwide box office to date, Die Hard 4 has already grossed about $325 million, and The Simpsons, which opened less than two weeks ago, has already passed $325 million globally. What is important to note is that all three of these hits will go through the majority of their profit cycle in fiscal '08. They will all go through the entire world of their theatrical performance, all of them will be released globally on DVD, and most of them will be released globally, all of them will be released in the U.S. on pay TV and most of them will be released globally on pay TV. So the bulk of the ultimate benefit for all of those movies will go into our fiscal '08.

We have a strong lineup for the rest of the year and we also have very strong strength at our television studio. So, again, we're pretty optimistic that we can maintain our operating momentum there.

So a month into fiscal ’08, we have very strong operating momentum across all three of these segments, which starts us into the year with a very strong wind on our backs. Combining that with the growth engines that Rupert mentioned earlier and that Dave mentioned earlier, we think we are in a great position heading into next year.

With that, we would be happy to turn it over and answer any questions you may have.

Question-and-Answer Session

Operator

Indeed, well thank you very much Mr. Murdoch, Mr. Chernin, and our host panel, we do appreciate your time and that presentation and update today. Ladies and gentlemen, as you just heard, at this point we do welcome and encourage any questions or comments you may have. Once again, we will be taking questions first from members of the financial community, and then moving immediately to members of the press that have joined us today.

(Operator Instructions) First in queue, we go to the line of Michael Nathanson - Bernstein. Please go ahead, sir.

Michael Nathanson - Bernstein

Thanks, Brent. I have one for Dave. As part of your guidance, you just mentioned that you have about $340 million in investment spending in fiscal year '08. I wonder if you have any idea what that number would have been in fiscal year '07? Is My Network TV in those numbers for the development spending?

David DeVoe

I missed the second part of your question.

Michael Nathanson - Bernstein

The question is, do you include My Network TV in development spending when you give the total?

David DeVoe

No, My Network is not included in it. The number in fiscal '07 would have been about $180 million. Just one thing to point out, of that $340 million, roughly half of that is related to the UK print project. So in fiscal '09, that $170 million disappears.

Michael Nathanson - Bernstein

Can I just follow up on My Network TV? What where the losses this year? Can you give me a sense of what they were in fiscal year '07?

Peter Chernin

I don't think we have broken it out but look, I think it's safe to say that it has been a pretty big disappointment for us this year. Although it's also safe to say that even in the fourth quarter, our losses decreased by more than 50%. So the programming changes that we made in March which have significantly reduced our costs while at the same time improved our ratings performance should see us reduce our losses significantly in the coming year.

But let's be clear, those were not tolerable losses for us last year. We think we've taken actions to improve them dramatically, though we still have a ways to go and we're determined to get there.

Operator

Thank you very much, sir. Representing Pali Capital, we go to the line of Richard Greenfield. Please go ahead, sir.

Richard Greenfield - Pali Capital

A couple of questions, one just related to free cash flow which was quite a bit stronger than I think the expectation you had heading into the year. I wondered if you could give us a sense of what drove that free cash flow, whether there's any timing issues in there?

Also, it looks like there was a significant increase in the other investment spending in your cash flow statement. Wondering if you could just give us some visibility to what was in there? Just a separate topic on the spread between your two share classes. It has widened back out pretty substantially now to an 8% spread. Could you give us any sense of where you think the buyback goes over time and how you can close this spread and why you think the spread still exists at this level? Thanks.

David DeVoe

Rich, there was a bit of timing in the free cash flow, but not much. There was a bit of CapEx that rolled over into the current year. A good portion of that improvement was we had lower taxes than we had anticipated. We're pretty conservative when we give guidance, as you know, and we did a great job really managing our inventories and receivables over the course of the year. So we're doing a really good job on that.

In looking for next year, my guess is we're going to be a bit below that, and that's principally because next year will be probably the highest CapEx year that we're going to have as we complete the press project in the United Kingdom. Our taxes will go up somewhat, again, we will work on trying to moderate it.

I think within the investment within other, the largest single investment was our investment in Fairfax, which we sold.

Richard Greenfield - Pali Capital

And then just on the spread between the share classes?

David DeVoe

I don't even know how to address it. We have been dealing with this and trying to reduce the spread for the last two years, and one of the reasons when we relocated to the United States. I mean part of it now is technical, a little bit of it's technical because now in Australia when they decide to put us back in the index, it's indexed for the voting shares.

Operator

Next representing Merrill Lynch we go to the line of Jessica Reif-Cohen.

Jessica Reif-Cohen - Merrill Lynch

Thank you. A question for Peter and one for Rupert. Peter, on the $800 million to $1 billion targeted revenue for FIM, could you talk about the '08 drivers besides Google, whatever they are, direct advertising on new businesses?

Rupert on Dow Jones, I think you did a great job outlining the drivers and how it fits into News Corp. I was just wondering if you could be more specific in terms of the savings in dollars and what you think the revenue upside might be? If you could outline for us what rights CNBC has and how FOX Business can use The Wall Street Journal, if they can?

Peter Chernin

I will start with the FIM stuff quickly, Jessica. The expected increases in FIM should be about 50% coming off the Google deal, because not that much of the Google deal was actually in fiscal '07, and about 50% coming from rest of the business. Of the rest of the business piece, continued growth in advertising continued just from both additional page views. We are experiencing great general growth and we're also looking at SDC and improved targeting to significantly increase our ECPMs on the business.

The other area of the business that's growing healthily right now in terms of revenue is our international business. We keep launching new territories, but we're seeing some real growth coming out of the UK, Australia, Canada, Germany, Spain. Some of those bigger countries are now starting to generate some much-improved advertising economies.

So the overall revenue increase is about half Google, about half advertising, and that advertising is a function just general growth, improved targeting and monetization through the SDC and the increase of ECPMs because of it, and international growth.

Rupert Murdoch

On the CNBC contract, it's a five-year run. It's between GE and Dow Jones. As far as brand names are concerned, it's pretty all-encompassing but only covers actual news and access to reporters on business news. There's a lot of other news and a lot of other things we can do to associate ourselves.

Peter Chernin

I would add, Jessica, that we have been spending a lot of time, Rupert and I, with Roger and his team going through the plans for the Business Channel. We have enormous confidence in their ability to put together a terrific differentiated product that is really going to stand out in this market, generate ratings and consumer excitement on its own, and we'll look at anything that comes from Dow Jones as gravy as it develops.

Jessica Reif-Cohen - Merrill Lynch

Then just on the specifics of Dow Jones in terms of savings and revenue upside over the next year or so?

Rupert Murdoch

I cannot really be specific about the revenue upside because that relates to the advertising market which in print as you know, has not been good, and to where we can go with the web properties which we think is very, very considerable. In actual savings, this is a rough statement, but in operations and in cutting out a lot of the functions of Dow Jones as a public company, this is something well in excess of $50 million to be saved.

Jessica Reif-Cohen - Merrill Lynch

And then timing of the close?

Rupert Murdoch

We would have it in three months, or in two months, but let's say three to four months; by the end of the year.

Operator

Thank you very much, Ms. Reif-Cohen. Next representing Goldman Sachs we have a question from Anthony Noto. Please go ahead, sir.

Anthony Noto - Goldman Sachs

Thank you very much, a couple of questions about FIM. The 20% operating margins in 2008, does that include a loss internationally, and so the actual domestic margins are quite higher than that? If so, how much would you still be losing internationally?

Domestically, the revenue in other accelerated to 88% growth, and I know that includes another a lot of other factors besides FIM, but 88% year-over-year growth compared to 77% growth last quarter, I was wondering if you could talk about the sources of that acceleration, whether it's a benefit from profile targeting or it's Google or just better sell-through in general?

Rupert Murdoch

On the international, I don't think we expect to lose any money at all. The revenues are very good and are helping. When we said 20%, we said well above 20%. We were not specific because it depends on Google writedowns and so forth. Peter might want to add to that. Targeting is not really in force here.

Peter Chernin

What I would say is international is a rapidly evolving area. So we lose a little bit of money as we go into a territory, and then those territories mature fairly quickly. So as I said earlier, some of the bigger, well-developed economies that we've been in for more than six or nine months are actually very profitable for us. As we go into a new territory, we invest a little bit to get there. But overall, those margins are not as aggressive as our U.S. margins yet. But places like the UK are getting there pretty quickly.

We also said well above 20%, so I don't want to sort of say that that's going to be our margin, we're just trying to put a fairly conservative number in there. Look, we will continue to invest in FTC and targeting and other monetization efforts. We're also continuing to invest in new product groups and I think we are extremely proud of our achievements with the video side of MySpace, MySpace TV, which we are now a firm second place to YouTube. We're starting to see huge increases in the number videos uploaded. We've made a number of content deals with various suppliers. So we think that has been a great investment. We're investing in various apps and various widgets.

So while we have this big growth in revenue, we also think it's important that we continue to invest in the product and continue to invest in our ability to monetize the product. So we don't want to over promise and sort of choke the business on margins in the short-term because we believe that this is going to be a huge growth driver for years ahead for us, and we need to keep investing to make sure the product is great and our ability to monetize it is great.

The other improvement, just to your question about what the improvement in the other category has been. We had a big cricket investment that we had to writedown last year, and that does not recur in '08.

David DeVoe

So what you have, in the current quarter, you've got $75 million of revenues and zero earnings because we took the writedown of that contract in the third quarter.

Anthony Noto - Goldman Sachs

One other question maybe on the Wall Street Journal online. Rupert, have you thought about the strategic debate of whether or not opening up the Wall Street Journal Online to be a free service would increase the opportunity there compared to its currently closed garden approach?

Rupert Murdoch

Yes, we are currently debating that, both within Dow Jones and in News Corporation and we've certainly come to no decision yet. It would be a very, I think, an expensive thing to do in the short-term. In the long-term, it may be a wonderful thing to do. But we're looking at it closely.

Operator

Your next question comes from Doug Mitchelson - Deutsche Bank Securities.

Doug Mitchelson - Deutsche Bank Securities

Given the strength you outlined and all of the strategic moves you've already announced, I would think the best use of cash would be aggressively repurchasing shares. It looks like you will have over $5 billion of cash once all your asset sales and acquisitions are done. I think Rupert you made a comment about finishing out the current authorization, but can you give us some background as to how we should think about cash deployment looking forward?

Rupert Murdoch

Yes. We have said we will complete what we've committed to, and of course when we have done that, we'll look at it again and see what the price of the stock is, where we are, and our opportunity. We think that in terms of gross debt, if we look at that, we're at about the right level. You could borrow another $1 billion perhaps, but nothing massive. We certainly don't want to go to banks to borrow money to buy back shares. In this market, cash is going to be king.

Doug Mitchelson - Deutsche Bank Securities

I meant to be implicit in the question is since you've been so busy on the strategic side, is there anything else out there on the acquisition side that you are finding tempting?

Rupert Murdoch

We don't have anything going on at the moment at all, but we're open to ideas and open to opportunities.

Operator

Your next question comes from Jolanta Masojada - Credit Suisse.

Jolanta Masojada - Credit Suisse

I wondered if Mr. Murdoch would be kind enough to outline some of the advertising assumptions underpinning your guidance for the full year, and specifically your expectation for advertising growth in the UK, the US and Australia?

Rupert Murdoch

The advertising, of course varies widely here, and that guidance is based on the upfront, what has been booked and our early experiences operating in this year. As for Australia and Britain, they were very carefully based on estimates of those economies and how we're operating. So far, we're certainly making our numbers, or beating them in our newspapers in Australia and in Britain.

Peter Chernin

Jolanta, I would just say that our guidance assumes generally about an 8% advertising growth across the company. As Rupert said, most of that based on the upfront, and also based on the current strong -- extremely strong -- scatter across all of our television businesses in the U.S., and that feels like a good assumption right now.

Operator

Your next question comes from Adam Alexander - JB Were.

Adam Alexander - JB Were

Sky Italia, the momentum in that business appears pretty strong at the moment, just wondering the outlook for FY '08. Can we expect a similar sort of growth mid-400,000 sub adds, churn of around 10% and similar ARPU, just give us about another $200 million in operating income?

Rupert Murdoch

That's approximately our expectation, that's about it.

Adam Alexander - JB Were

When do think would be the ideal time to IPO that business?

Rupert Murdoch

Maybe never. We might take in for a small amount a good Italian partner for political reasons, but I think to have 30,000 or 40,000 shareholders there doesn't do anybody any good. It would just be a pain in the neck.

Peter Chernin

We're certainly not interested in IPO’ing it for financial reasons. We believe it's going to be a very strong growth driver for years to come, and we want to hold onto that inside the company.

Rupert Murdoch

Absolutely.

Operator

Your next question comes from Jonathan Jacoby - Banc of America.

Jonathan Jacoby - Banc of America

Again on MySpace, AOL and Yahoo! talked about display ad weakness on their prime inventory. Are you seeing that as a benefit to you right now as MySpace ramps and being able to make advertisers more comfortable with the medium?

And then on TV syndication for next year from the TV studio side, I believe King of the Hill is in the pipe. Is there anything else for FY '08?

Peter Chernin

Yes. I would say, first of all, I think one of the things, certainly our anecdotal information tells us that one of the problems that Yahoo! and AOL have been struggling with is the migration of regular advertisers to the social networks, primarily MySpace. So I think we have seen the benefit of people who wanted to reach mass audiences used to feel like the only place to do that was through the portals, and I think you've seen, particularly those people interested in reaching younger demographics, shifting their money from the portals to the social networks and particularly MySpace. So I think we have a beneficiary of that and we would expect to see that continue. We would also expect to see our monetization of those dollars improve dramatically through more targeting and through FTC.

In terms of syndication, actually King of the Hill has been in syndication for four or five years, although ironically, is having a very strong year this year. The big change in our syndication lineup in fiscal '08 is that Family Guy goes into syndication next month. So we will see that go into our fiscal '08 results.

Operator

Your next question comes from Alan Gould - Natexis Bleichroeder.

Alan Gould - Natexis Bleichroeder

Rupert, if you look out five years at your print business, not just The Journal, but your global print businesses, how much more digital are they going to be? What percent of revenue do you think will be digital as opposed to the way it is today?

Rupert Murdoch

I have no idea. It's going to be considerably more. Our revenues on our newspaper websites are doubling every year at the moment. Now the figures are small compared to what the print revenue is, but clearly it's going to get a lot better. All indications are that people who go to newspapers sites are relatively very high demographics with much more than the average web visitor. So we think they're desirable to advertisers, we can get good cost per thousands and we just have to keep improving those sites all the time so that we get more unique visitors.

Operator

Your next question comes from Tuna Amobi - Standard & Poor’s.

Tuna Amobi - Standard & Poor’s

I had one question on the guidance. It just seemed like the guidance sounds relatively cautious here, even given the investments that you spoke about, it just seems like with Sky Italia ramping up nicely, the benefit of the Google deal, the nice price increases at FOX Net and all of the other FOX News affiliate fees kicking in for the full year... I was just wondering why you feel that you can't do much better than the low teens that you spoke about?

Separately, I guess this is for Rupert. Can you perhaps suggest what you think --

Rupert Murdoch

If you add back the $340 million we talked about in developing new properties, it adds up to more than 20% of guidance. So one thing we don't want to do is come back to you and take guidance down. We haven't done that yet and we don't intend to.

Tuna Amobi - Standard & Poor’s

Okay, that's fair enough. Separately, I was wondering, can you comment on what you think the value of MySpace today might be, and if you strategically might have any interest in contributing that stake to a large portal to accelerate monetization of that asset? I think Yahoo! has been mentioned in that context. Any comment?

Rupert Murdoch

No. It's certainly very, very valuable, and people are kicking around huge figures for that and other properties. People are talking of properties that don't even make any money yet but are worth $1 billion. Someone the other day said $25 billion to $30 billion, but he didn't come forward with any offer.

Tuna Amobi - Standard & Poor’s

Thank you.

Rupert Murdoch

I don't know. Look, it's a lot of money. We don't know.

Operator

Your next question comes from Spencer Wang - Bear Stearns.

Spencer Wang - Bear Stearns

Peter, can you just update us on the negotiations with the Writer's Guild? I think that's still ongoing. If you cannot get to an agreement, is that potentially problematic for the industry?

Secondly, with respect to Dow Jones, Rupert, are you committed to keeping all of the assets of Dow Jones, things like the community papers?

Rupert Murdoch

I will answer that very quickly, that last bit. No, we will probably be selling the local newspapers fairly quickly. But outside of that, yes, we think we will be keeping everything and developing it.

Peter Chernin

The Writer's, very slow, not particularly productive negotiations so far. My guess is that contract expires at the end of October. I don't believe they will go out on strike at the end of October, but I don't know. I'm probably a little more pessimistic about a general industry strike closer to the expiration of the Directors and Screen Actor Guild, and maybe two out of three of them will go out together May/June of next year. I don't think it will have much, if any, impact on our business this year, although there has been a lot of accelerated production across the industry by companies like ours, both on the film side and the television side, in order to make sure that if there is a strike, we're well positioned for it.

Operator

Your next question comes from Alex Pollak - Macquarie Bank.

Alex Pollak - Macquarie Bank

I have a couple of questions. The first one concerns whether you think that the growth in web advertising, how much of that is going to come from video on the newspaper web sites? How much do you think that's going to come out of screen ads, like video ads on newspaper websites? It seems to be like a contestable market on the newspaper websites which you did not have before broadband came along.

My next question was, we've seen this whole sub-prime thing on Wall Street. Do you see it having any impact in terms of the ad market on Main Street?

Rupert Murdoch

It goes beyond Wall Street. I think it goes into Australia too, doesn't it? The consensus opinion here is that it is a matter which the financial markets will be able to handle, without affecting the general economy to much. There are pessimists who go further than that, and there are optimists who are really not as strong as that. But it's going to make money more expensive.

David DeVoe

We're not seeing any effect of that at all on our businesses, at least right now.

Rupert Murdoch

None at all. I mean, the state of the advertising market suggests confidence and optimism out of the general economy with big ads for business.

Peter Chernin

Yes, and as for video advertising, I would expect there to be dramatic increases in video advertising across all properties on the web. Obviously, newspaper and print properties, but also things like MySpace, things like ours sports web sites, things like IGN and I think it will perhaps rival search as the fastest-growing area of advertising in the industry over the next several years. We think that we are uniquely positioned to benefit from that.

Alex Pollak - Macquarie Bank

By extension, I guess it may be the largest single component of the ad market online as well. Would that be a fair statement?

Rupert Murdoch

It's too early to say that.

Peter Chernin

I don't think it will surpass search. I think search will remain the largest segment, but I think you will see video advertising begin to move up and compete and probably ultimately surpass regular display advertising.

Operator

Your next question comes from Jason Bazinet - Citigroup.

Jason Bazinet - Citigroup

I guess when all the Dow Jones stuff was hitting the newswires, I don't know if it got enough attention, but can I just go back to the decision on your part to divest of the Russian outdoor business, the smaller TV stations and Gemstar? I really was just more curious about the strategic thoughts behind each one of those asset sales and then potential uses of cash. Are you just going to use the proceeds to build up your cash balance? Thanks.

Rupert Murdoch

I think it's not because of Dow Jones. There are different reasons in each case. But we thought that to put the whole Gemstar thing behind us, and it was a good thing and we have had several inquiries about it, so we're going ahead to negotiate and see what's there. In terms of outdoor, I think we're just a little nervous about Russia, although I believe there's going to be a great boom there, whoever buys it will do very well.

Peter Chernin

I think in general, it's sort of what Rupert alluded to in his comments, which is we're continually rebalancing our assets, trying to make sure that we have maximum exposure to growth areas like digital and television in developing parts of the world and that we're constantly looking at our more mature assets and making sure that we have the right mix of cash flow that comes out of those, along with growth drivers in position for the future.

Operator

Your next question comes from Jason Helfstein - CIBC World Markets.

Jason Helfstein - CIBC World Markets

Two quick questions, one on guidance. Can you talk about what your newspaper assumptions are perhaps underlying the guidance? Should we expect growth out of that business, or does the upgrade continue to weigh on that? So basically, should we assume any margin expansion there?

Secondly, as we have been digging into Dow Jones, we've found that they are paying vendors like Yahoo! Finance to actually carry their stories. I would think, given that they provide all of the value, it should be the other way around. So maybe talk about how you think about that, because there seems to be a lot of way to extract value out of that where Dow Jones is not to today. Thanks.

David DeVoe

The newspapers, there's going to be some increase in earnings in the current year, but the large increase in earnings in the newspaper segment will come in fiscal '09 when this $170 million of charges that we have in the current year disappear.

Jason Helfstein - CIBC World Markets

That excludes the gain, correct?

Rupert Murdoch

We've had very large depreciation charges in Britain, but we are doing well. Our papers are improving, we have been in a more dominant position than we have before in a very, very competitive market. So we are confident about the future there.

In Australia, it's the same, I think it will reflect the state of the economy, and we will grow. The media situation there is fairly static in that there are no more television stations. The web businesses are growing. We're doing everything we can there and supporting the newspapers, but there, the circulations are holding well. In case of The Australian, it is growing virally without any promotion. We're pretty happy about the situation with newspapers as they stand. They're not going to have the growth outside of the one big jump in Britain. They're not going to have the growth that we're going to have on the web. But they're still going to be very, very important cash contributors to the company.

Jason Helfstein - CIBC World Markets

Can you answer the Dow Jones question?

Peter Chernin

We just think there's great value in their financial information and we'll maximize it.

Operator

Your next question comes from Fraser McLeish - ABN Amro.

Fraser McLeish - ABN Amro

Just on the outdoor business that's up for sale, I was wondering if you could just give us some rough ideas of what sort of operating profit that's doing within your other category at the moment, and maybe some ballpark idea of valuation?

Gary Ginsberg

We don't break it out.

David DeVoe

We do not break out that business given that we're in the middle of trying to sell the asset.

Fraser McLeish - ABN Amro

Just on STAR then, you talked quite a bit about that in your Q3 results. That's been a bit disappointing and I think you said the operating profit was down for the year. Have these issues been sorted out, and can we expect to see that return to growth next year?

Rupert Murdoch

Yes, we have had almost a complete management change in India where we took our eyes off it and things started to go wrong there. We have a new team in now which we're very, very confident of. They're fine people, and we have got some things to absorb this year in the changeover, but we'll at least hold our profits there and increase them slightly, I think. But, we'll be losing a little bit of money and we're investing also in Indonesia and new channels.

Peter Chernin

I would expect the results to be flat in fiscal '08, but that being said, I agree with Rupert. We've actually made tremendous progress there. I think that we're making the following changes this year which I think should out us back on aggressive growth probably in the latter part of '08 and into '09, which is we need to change our programming mix. Our programming, while the ratings are still strong, has gotten far too expensive and we need to get new lower-cost programming in there to lower our expense base and also fuel our ratings.

Secondly, we're looking at launching multiple new channels in fiscal '08 in India, so that is why the profits won't grow in '08, but that will lead to significant increased profits beyond that. We're seeing distribution increase, not only in India through Tata Sky and through the growth of cable, but also in Indonesia and the rest of the region.

So we feel like the bad news is behind us and we're back, we're making the investments and we have the strategy in place to get this thing growing aggressively in some of the most exciting economies in the world going forward.

Gary Ginsberg

Brad, we'll take one more question from the investment community and then go right to the press.

Operator

Very good, and thank you very much to all of our participants and your interest in the call today. As you just heard, our final financial question is from Anthony DiClemente - Lehman Brothers.

Anthony DiClemente - Lehman Brothers

Rupert, you mentioned that the broader advertising environment is one of confidence and optimism, and I just thought that is somewhat divergent from some of the reports from local advertising firms like radio and TV stations, newspapers, outdoor. I'm just wondering, some of these local advertisers are being affected by dislocation in the categories of financial services and real estate. Is there not weakness in those categories broadly? And if there is not, why don't you think that News Corp is seeing it relative to your competition? Thank you.

Rupert Murdoch

I think there's always change in advertising between the different sectors and where it comes from. We're talking very broadly. Our figures are excellent, our reports from all of our sales directors are excellent. In fact, our bookings are first class. So we can only say how it is affecting us.

Peter Chernin

I think if you look at, first of all, the only one of those sectors we're in is the local station business. We are the market leader. We're growing market share virtually every quarter, and we don't have any real estate business on any of those local television stations. The only softness there is sort of comps in political spending last year and this year, and we expect to see political spending really take off in the latter part of this year in those local stations.

So overall, that market is sort of flat. We're outperforming the market probably by a share point or two and growing market share, but we expect that market to accelerate as political, the one area that is down right now and as that ramps up, we expect that market to accelerate. Most of our other categories are actually up right now, including most importantly autos, which is our single largest advertiser and is actually a category that we've seen growth in this quarter.

Operator

(Operator Instructions) Your next question comes from Ken Lee - Reuters.

Ken Lee - Reuters

I have one question, getting back to the CNBC contract and Dow Jones. Are you currently negotiating a buyout, and what do you estimate that would cost?

Rupert Murdoch

No, we're not negotiating.

Operator

Your next question comes from Miriam Steffens - Sydney Morning Herald.

Miriam Steffens - Sydney Morning Herald

How do you plan to leverage on the Dow Jones acquisition in Australia and the UK? For example, Stock Market Watch here or add Dow Jones copy to your news web sites?

Rupert Murdoch

Could you repeat that?

Miriam Steffens - Sydney Morning Herald

Are there any plans to leverage on the Dow Jones acquisition in Australia? For example, start MarketWatch, the web site here, or add Dow Jones copy to your news web sites?

Rupert Murdoch

We'll get around to that, but that's not high on our list of things to do.

Operator

Your next question comes from Aline van Duyn - Financial Times.

Aline van Duyn - Financial Times

I wanted to ask about possible expansion of the Wall Street Journal and Dow Jones in Europe. Are there likely to be different strategies for the UK and other parts of Europe? Specifically, I wondered if it's possible that expansion of The Journal in the UK market might have an adverse effect on The Times and potentially its audience or its advertisers?

Rupert Murdoch

We already have complete dominance, or very, very strong leadership, should we say, in senior management of business news in The Times over all other papers. So I don't see the Journal really affecting that.

Aline van Duyn - Financial Times

But you wouldn't necessarily want to expand it, particularly in the UK, in order not to expect that, or you don't think it would affect that?

Rupert Murdoch

I don't think it would affect that.

Aline van Duyn - Financial Times

So the UK is included in plans for Europe?

Rupert Murdoch

Absolutely.

Operator

Your next question comes from Seth Sutel - the Associated Press.

Seth Sutel - the Associated Press

Just a question about branding. Rupert, you said you have hopes for expanding the potential for Dow Jones' brand. I wondered if you could talk about that a little bit more, and perhaps some specific ideas you might have about licensing the name in ways that have not been done before, say for investment products or on media outlets that might carry the Dow Jones or the Wall Street Journal brand name?

Rupert Murdoch

I don't see us licensing the name very much; it's too valuable. We want to use it in every way ourselves that is going to make money. But you're not going to see Dow Jones shirts or caps or anything like that.

Seth Sutel - the Associated Press

Is there something that you might be planning internally that you might be able to share with us about how to use either the Dow Jones or the Wall Street Journal name within News Corp?

Rupert Murdoch

We have our own very, very strong bands, and we'll march them all along together.

Operator

Your next question comes from Joe Menn - Los Angeles Times.

Joe Menn - Los Angeles Times

I understand that you're still kicking around exactly what to do with The Journal in particular, but you have talked about going after The Times. Can you give us an idea of some of the things that are on the table? Would you consider cutting subscription costs or cutting ad rates to build up an audience over the next couple of years?

Rupert Murdoch

We're certainly not going to be cutting of our advertising or subscriptions.

Joe Menn - Los Angeles Times

I'm sorry -- could you repeat that?

Rupert Murdoch

We're not getting into any price war or any cutting of prices for either advertisers or subscriptions.

Operator

Your next question comes from Nishant Bahia - National Public Radio.

Nishant Bahia - National Public Radio

I had a question about [Ottawa] newspapers. Are there any plans to sell or divest from it?

Rupert Murdoch

Can you speak up a little? On [Ottawa] newspapers, you said?

Nishant Bahia - National Public Radio

Yes, and do you have any plans to sell or divest from it.

Rupert Murdoch

Too early to say plans, but yes, we would expect to divest ourselves of those newspapers.

Operator

Your next question comes from Andrew Clark - The Guardian.

Andrew Clark - The Guardian

I wondered if you could just update us on your thinking as regards to Wapping in London. There have been some reports that you might move your entire newspaper operation away from Wapping. Is that the case and have you identified a new location for it?

Rupert Murdoch

No, we have a very, very valuable property in Wapping. Of course, we're taking the printing away from it altogether. We may sell some land or if we were to move all the operations to somewhere else. I mean, there are the few proposals on the table, none of them have been accepted. But we're looking at our alternatives now.

Operator

Your next question comes from Gillian Wee - Bloomberg.

Gillian Wee - Bloomberg

I'm wondering if you can be more specific about your plans to expand Dow Jones' Internet access? Also, could you talk about any hiring or firing plans you might have?

Rupert Murdoch

No. Certainly, we don't have any firing plans at all. If people have been saying it is against their principles to work for me, we'll of course respect that but we are going to be in a hiring mode almost immediately.

Gillian Wee - Bloomberg

Okay, what about the Internet plans for Dow Jones?

Rupert Murdoch

I don't want to discuss them further at the moment. We have a lot of alternatives, a lot of planning going on. We're not ready to announce, I'm sorry.

Operator

Your next question comes from Robert MacMillan - Reuters.

Robert MacMillan - Reuters

I just wanted to ask regarding the editorial independence committee, after this news out about Nicholas Negroponte and the financial contribution that News Corp has made to his One Laptop per Child Program, I'm just wondering, especially after the Bancroft family's findings about editorial independence, what made you think that somebody like Negroponte was the right choice for your Board?

Rupert Murdoch

That's the greatest line of bull I've ever heard. The One Laptop per Child For the World was something that Negroponte got about six companies to give him a $1 million startup, and then it has continued at about $1 million a year for three years. It's a great pro bono thing, and that is all there is to it. I can assure you that the other people there on the committee are much closer friends and associates of the editors than Mr. Negroponte is to me.

Peter Chernin

There's no objective standard of independence as defined by the agreement, and so if they define him as independent, we define him as independent, then he's independent.

Operator

Your next question comes from Georg Szalai - The Hollywood Reporter.

Georg Szalai - The Hollywood Reporter

Peter, I was wondering if you have any update on the day and date trials you've been running with cable companies? Anything new there, any plans to expand those trials a little further?

Peter Chernin

I would say the results of that are highly inconclusive. Certainly, we are looking at always testing our models and making sure that we are maximizing our ability to get every penny out of every window we can, and we have agreed to continue the trials and I think we have actually expanded them into a couple of markets. But I don't think there's anything conclusive about the results of those trials yet, and certainly anything to suggest that we're about to change our overall strategy there.

Operator

Your next question comes from Max Bowie - Inside Market Data.

Max Bowie - Inside Market Data

I wanted to ask a couple of questions about the plans for specific components of Dow Jones. Specifically, I'm thinking about the index business, and also the real-time newswires aimed at financial professionals. In particular, I'm thinking in the context of a report that I saw in The Telegraph claiming that Richard Zannino of Dow Jones had said that you want to be able to take on Bloomberg and Reuters in the provision of real-time financial news and data. Could you comment on that?

Rupert Murdoch

Of course, we would take on everybody in terms of the supply of real-time news. As for the indexes and the other things you've mentioned, they're valuable assets, which we intend to hold on to and expand. They're some of the attractions of the company.

Operator

Your final question comes from Staci Kramer - Paidcontent.org.

Staci Kramer - Paidcontent.org

First, on the Wall Street Journal WSJ.com plans, who is making the decision on this? Are people from the Journal and Dow Jones going to be involved, or is this strictly a News Corp decision?

The second question is, we've spent so much talking about FIM, I'm just curious as what you see as your best interactive effort of the U.S. and outside of MySpace international expansion?

Rupert Murdoch

Let's just take the first thing. Dow Jones should not be separated from News Corp, it's part of News Corp. Our senior colleagues there, with senior colleagues currently at News Corp, will talk this over and we'll come to a final decision. But we'll do it collectively.

Peter Chernin

As for our interactive assets outside of the U.S. and outside of I guess MySpace international, which is trying to preclude a lot of things, but I think there's a number of things we're very excited about. Whether it is hugely excited about the growth of broadband through BSkyB, hugely excited about all of our newspaper web sites, The Times, our Australian web sites, The Sun; hugely excited about some of our regular Internet investments, our realestate.com, our cars investment in Australia. So across the board and across what we have been trying to do is transform this into being a digital company, and virtually every part of the company has digital efforts outside of the U.S. We think we're making the progress on all of them.

Operator

Thank you very much. Mr. Murdoch and our team, back to you for any closing remarks.

Gary Ginsberg

I don't think we have any closing remarks, other than to say, as usual, if you have any further questions, feel free to contact us in New York. Thank you for your time and your attention for the call today.

Operator

Ladies and gentlemen, Rupert is making today's call available for digitized replay, it's for one full week, it starts at 9:00 pm Eastern daylight time, August 8, all the way through 11:59 pm August 15. To access AT&T's executive replay service, please dial toll-free from North America 800-475-6701. At the voice prompt, enter today's conference ID 880387. Internationally, you may access the replay as well. Please dial 320-365-3844 with the conference ID 880387.

Ladies and gentlemen, that does conclude our fourth quarter 2007 earnings release for today. Thank you very much for your participation as well as for using AT&T's executive teleconference service. You may now disconnect.

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Source: News Corporation F4Q07 (Qtr End 6/30/07) Earnings Call Transcript
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