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."
