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MUMBAI: "By sticking to a consistent, well-conceived,
and long-term strategy over the course of many years, our
company has achieved spectacular rates of growth – on
average, 13 per cent revenue growth and 18 per cent operating
income growth annually over the last three years alone."
These were the words of encouragenment and confidence that
News Corp chairman and CEO Rupert Murdoch had for stockholders
at a recent meeting.
Murdoch noted that the company's strategy has four steps. "First,
we are willing to ignore or even take on conventional wisdom.
Second, we generally try to invest early in new businesses rather
than overpaying for already established businesses.
"Third, we are patient as these new efforts find their
footing. Fourth, we enjoy the growth and profitability as
the businesses mature, but we are always thinking about and
building the next generation of new revenue sources."
He noted that the firm's early – and in many cases substantial
– investments in these new businesses have sometimes
been criticised as excessive and unwise. "Some of that
criticism has even come from people in this room. Yet in nearly
every case, we have been vindicated by time and results.
"Fox television – at the time of its launch, the
first new broadcast network in four decades – is now
the number one network among the key 18-49 demographic two
years running, and boasts what is far and away the most popular
show on the air (American Idol).
"Our cable businesses – launched amidst much uncertainty
a decade ago – are today huge profit generators, and
still growing. The Fox News Channel celebrated its tenth anniversary
this month by continuing its ratings dominance, and has now
held the number one position in cable news for 19 straight
quarters.
"This month, our initial deals with cable and satellite
providers have begun to expire, and we are working to renew
these carriage agreements at substantially higher rates to
reflect our enormous and enthusiastic audience. And earlier
this week, we successfully completed a new deal with Cablevision
at an attractive new rate. Meanwhile, FX is now one of the
top five basic cable channels in the US, driven by hits like
Rescue Me, The Shield and Nip/Tuck."
On the internet he says that the latest investments – are
moving quickly toward profitability. With the acquisition of
MySpace.com and other popular sites in the space of one year,
News Corp he says has begun to rival and in some cases surpass
the Internet elite.
"News Corporation sites now rank second in total page
views and fifth in unique visitors, reaching more than 70
million people per month in the United States. Revenues from
MySpace alone have doubled every four months over the last
year. And others are noticing. This summer, after the fiscal
year-end, we announced a landmark deal with Google to provide
search functionality to all of our Internet sites – most
importantly MySpace.
"With $900 million guaranteed to us over 15 quarters,
this agreement more than pays for the MySpace acquisition.
More importantly, it allies us with one of the great companies
of the digital age, while signifying our ability to monetise
our traffic in ways that make sense for our audience.
"We can afford to make these investments in high growth
businesses because our established businesses are such reliable
generators of steady cash. Indeed, the bedrock of our strategy
is to ensure that our company is always comprised of a mix
of businesses in various stages of growth and development.
Established businesses produce modest growth yet sizable cash
flows.
"Businesses in the middle stage are the primary growth
drivers of the company, delivering strong profit growth. And
our youngest efforts are being nurtured and developed by the
cash generated by our mature businesses, to allow them to
find their footing and realise their potential as the company’s
future growth drivers."
On the print side of things he notes that the businesses,
and especially newspapers – the historic heart of the
company – continue to deliver value in part by generating
huge amounts of cash that fund and fulfill our strategy. Right
now the print business have more total readers than they ever
have, thanks to the Internet. The distinction that today seems
to divide 'new' and 'old' media will prove illusory over time
he maintains.
"In the meantime, we are investing in the future of
these businesses, with new colour printing plants in the UK.
In Australia, operating income was up on strong advertising
sales and higher circulation revenues.
"The results of this strategy have not gone unnoticed.
Our share price is up 40 per cent in the last twelve months,
and nearly 80 per cent over the last five years. Investors
are recognising that we are the best positioned media company
in the world today, with the best mix of assets with real
global spread to maintain growth and produce value for shareholders
over the long term.
"To some in the traditional media business, these are
the most stressful of times. But to us, these are great times.
Technology is liberating us from old constraints, lowering
key costs, easing access to new customers and markets, and
multiplying the choices we can offer."
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