NewsCorps’ 10-K Report Is Sooo Boring But Kind of Important

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*If you’re not one of my media business professors, you’re not going to want to read this. Seriously, look at the picture above, realize that this could not be any less fun, and read about nail polish or puppies instead.

Rupert Murdoch is a newspaper fetishist, two time divorcee and authentic Australian. And, oh yeah, also the founder of News Corporation, the third largest media company in the world. The company has its hand in eight different segments of the industry: 1) Film 2) TV 3) Cable Networks 4) Direct Broadcast Satellite TV 5) Magazines and Inserts 6) Newspapers and “Information Services” 7) Books and 8 ) the oh-so-mysterious “Other”.

Basically, for all intents and purposes, there’s a pretty good chance that News Corp owns something you’ve looked at today. And they could definitely buy your house, your family and probably your dignity. Don’t believe me? Let’s take a closer look at some of NewsCorp’s more notable holdings:

  1. Fox. This means that everything from everyone’s favorite conservative, often vitriolic news channel to the new show “Dollhouse” and “Alvin and the Chipmunks 2” are part of Murdoch’s stable.
  2. A Hell of a Lot of Newspapers. 29, to be exact. The Wall Street Journal, one of a very few newspapers able to successfully monetize web content is the giant though. Murdoch’s rumored to have his print-loving eye on The New York Times, but nothing’s come of that yet.
  3. Cable Channels. Again, lots of them. From everything Fox does on cable to National Geographic, NewsCorp is covering its cable bases.
  4. A couple of direct broadcast satellite channels.
  5. A handful of magazines. But nothing involving fashion, so who really cares? Kidding.
  6. Harper Collins Book Publishers all around the world and also lesser known Zondervan Publishers.
  7. “Other.” OMG, AMERICAN IDOL. And Askmen.com. And Myspace. And Hulu.com. And the National Rugby League. And a whole host of other holdings that are pretty damn unrelated but generally kind of fun.

I’ll assume that you’ve been convinced at this point. So now let’s get into some of the specifics of NewsCorps’ painfully long 2008 10-K report. To make this a little more digestible, I’ll move through by segment (see the 8 listed above).

  1. Film- Fox Filmed Entertainment does all the NewsCorp movie magic. In 2008, they released 25 films, a definite drom tfrom 34 in 2007 and 31 in 2006. But the movie distribution doesn’t end with in-theatre new releases. They also distribute for at home watching pay per view and TV syndication. They also spend legitimate money marketing upcoming movies, generally starting three to six months in advance of the release. As one might expect, the 10-K acknowledges that “motion picture production and distribution are highly competitive businesses.” Unauthorized distribution (as in me watching new releases online the week they come out in theatres…) seems to be their biggest point of concern these days. Shocker.
  2. TV- FOX, ABC, CBS, NBC, The CW, E! and Fox News produce shows under contracts that account for licensing fees. Unfortunately, unforseen production costs have been increasing of late and add on licensing has become a pretty standard annoyance. The challenges are similar to those mentioned in #1. Unlike Fox movies though, a lot of these networks are making their shows available online, trying to monetize that.
  3. Cable Networks- Fox News, Fox Sports Network, FX, Speed, Fuel TV, Fox College Sports, Fox Movie Channel, Fox Soccer Channel (and on and on with the Fox channels), and a 67% share in NGC, which produces and distributes National Geographic. Between all of these channels, NewsCorps controlled channels are available in about 500 million households.
  4. Satellite TV- SKY Italia and part of BSkyB. The former produces and distributes more than 170 channels from basic to premium and pay-per-view. It’s Italy’s biggest Satellite brand, with 4.6million subscribers at the end of June ’08. The previous three segments were pretty heavy on the competition, not so much with Satellite. The number of channels available in Italy will undoubtedly grow, but NewsCorps is pretty dominant right now.
  5. Magazines and Inserts- NewsCorps owns NAMG, which is the second largest producer of those annoying littler inserts that advertise everything from sweepstakes to rebates and generic brand shampoo. Not so dominant in magazine publishing though, where The Weekly Standard (US political commentary) and a few Australian titles are part of NewsCorps’ fairly unimpressive magazine stock.
  6. Newspapers are another story. Murdoch’s Australian titles (147) he’s got some decent holdings in the UK. The Wallstreet Journal, a national title through Dow Jones, is the gem in the newspaper crown though. It’s circulation is enormous, its online content unprecedentedly monetized and its pinkish paper color bad ass. More than that though, WSJ.com is the highest traffic subscription site on the net, with over 1million subscribers as of July ’08.
  7. Books- Harper Collins released 165 books that ended up on the NYTimes Best Sellers list (14 of them in the #1 spot). But the 10-K acknowledges that Harper Collins was hit by a “consolidation trend” that’s resulted in some of the major publishers merging, providing giant-like competition for Harpers.
  8. “Other”- American Idol is all that matters in this category. But in case your interests are a tad more diversified, I guess we can discuss “other” a little more broadly. A lot of this “other” is online-based media from Hulu to Myspace and Fox Interactive. Internet competition is, of course, ever-growing as new sites pop up by the day

And once NewsCorps’ bragged about all the cool stuff it owns for about 30 pages, we get into the scarier area of “risk factors,” or reasons not to buy their stock. The big one with NewsCorps (and the rest of the media world) is a drop in advertising income. They say it in a lot of words, but the short story is that these are crappy economic times, advertisers are spending accordingly and things may get worse.

Then comes public taste in terms of which shows are actually hits. The 10-K says that “acceptance of the Company’s Film and Television Programming by the Public is Difficult to Predict,” kind of making it sound like viewers may or may not have bad taste, glossing over the fact that “Dollhouse” is full on retarded.

More threatening than terrible TV shows though, is the possibility that further technological advances will mean more piracy and less royalties. This concern, much like their next “labor disputes may have an adverse effect on the Company’s business,” is a relatively new threat. (These “labor disputes,” by the way, refer mostly to things like ’07’s massive writers strike.)

The End

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