News
Annual Report 2017

Plain-text annual report

Annual Report 2017 Critical Data Connect to the markets in real time with a redesigned data center. Find It Faster Search is always right at your fi ngertips. Save and Share Easily share stories or save them for offl ine reading. What’s News A streamlined What’s News feed brings you the day’s top stories. The Wall Street Journal saw strong digital growth to nearly 1.3 million subscribers, representing 56% of total paid subscribers. Easier Navigation A cleaner navigation bar gets you where you want to go faster. Upwardly Mobile Introducing the new WSJ iPhone app for iOS. With an enhanced data center, easier navigation, save and share functionality and more, the new WSJ app keeps you moving. DOWNLOAD NOW celebrated HarperCollins celebrated celebrated celebrated HarperCollins celebrated its 200th anniversary. its 200th anniversary. its 200th anniversary. its 200th anniversary. its 200th anniversary. © 2017 Dow Jones & Co., Inc. All rights reserved. 6DJ5844 People visited realestate.com.au 2.5 times more than its nearest competitor. realtor.com®, the leading digital real estate site in engagement in the U.S., is the most important source of leads for real estate professionals. The Digital Real Estate Services The Digital Real Estate Services The Digital Real Estate Services The Digital Real Estate Services segment contributed nearly 40% nearly 40% segment contributed nearly 40% segment contributed segment contributed segment contributed of News Corp’s profi tability. of News Corp’s profi tability. of News Corp’s profi tability. of News Corp’s profi tability. of News Corp’s profi tability. of News Corp’s profi tability. of News Corp’s profi tability. The Sun more than doubled its global monthly unique online visitors to a record 85 million. SunTHE FOR A GREATER BRITAIN thesun.co.uk Friday, June 9, 2017 50p lTories ‘fail on majority’ lShe’s set to lose 17 seats lCoalition of chaos fear By TOM NEWTON DUNN, Political Editor BRITAIN was heading for a hung parliament last night after an exit poll showed Theresa May losing her majority. The Tories were projected to lose 17 MPs overnight, putting them on 314. That would leave them 12 short of overall control — meaning her snap election gamble had ended in disaster. Jeremy Corbyn’s Labour were set to gain 34 seats to put them on 266. The SNP would lose 22 seats, leaving them on 34. The Lib Dems would win five, taking them up to 14. TORIES 314 17 ELECTION 2017 EXIT POLL VERDICT LABOUR 266 34 SNP 34 22 LIB DEM 14 5 UKIP 0 1 MAYHEM EXIT POLL HUNG PARLIAMENT SHOCK: PAGES 2, 3, 4, 5, 6, 7, 8, 9, 10 At The Australian, readership grew to nearly half a million weekday readers. Subscriptions to The Times and The Sunday Times reached an all-time high. Checkout 51 grew its valuable digital membership base to more than 14 million. INTHENEWSTitanictourismToursoftheTitanic,whosewreckageliesmorethantwomilesunderwaterintheAtlantic,aretoresumeafter12years.Ticketswillcost£85,000each.Page3VolcanicepisodeMembersofaBBCfilmcrewwereinjuredwhilefilminganeruptionatEtna.Onejournalistdescribedrunningdownthemountain“dodgingburningboulders”.Page5Hospital’scashwasteAhospitalthatleavesspecialmeasurestodayafteralmostfouryearsstartedtoimprovewhenitstopped“throwingmoney”atinterimbosses,itschairmansaid.Page8GirldiesonyachtAteenagerfell30fttoherdeathfromtheriggingofayachtinJamaica.BethanySmith,18,wasworkingonthevesselandwantedtobecomeacaptain.Page15TrumppowerplayPresidentTrumphaspromisedasharpriseinmilitaryspendingattheexpenseofforeignaid,medicalresearchandtheenvironment.Page30EnglanddropRooneyWayneRooney’sfutureasanEnglandinternationalisinthebalanceafterhewasleftoutofthesquadformatchesagainstGermanyandLithuanianextweek.Page72Googleistobesummonedbeforethegovernmenttoexplainwhytaxpayersareunwittinglyfundingextremiststhroughadvertising,TheTimescanreveal.TheCabinetOfficejoinedsomeoftheworld’slargestbrandslastnightinpullingmillionsofpoundsinmarketingfromYouTubeafteraninvestigationshowedthatrapeapologists,anti-enteringBritainlastyearafterrepeat-edlycallinghomosexuals“sodomites,queersandfaggots”,hasYouTubevideoswithadvertsforChannel4,VisitScotland,theFinancialConductAuthority(FCA),Argos,Honda,Sandals,TheGuardianandSainsbury’s.AYouTubepostertypicallyearnsabout$7.60forevery1,000timesthatanadvertisseen.Morethan40videospostedbyDuke,aformerimperialwizardoftheKuKluxKlan,havebeenviewedinexcessof100,000times.Lastnightthegovernmentsuspend-editsYouTubeadvertising“pendingreassurances”fromGoogle.Commer-cialbrandsalsoremovedadverts,withChannel4sayingthatitwasnotsatis-fiedthattheplatformwas“asafeenvironment”.“Googleisresponsibleforensuringthatthehighstandardsappliedtogov-ernmentadvertisingareadheredtoandthatadvertsdonotappearalong-sideinappropriatecontent,”agovern-mentspokeswomansaid.“GooglehasbeensummonedfordiscussionsattheCabinetOfficetoexplainhowitwillTheresaMaystepsupthepressureonNicolaSturgeontoday,accusingtheSNPleaderofforcinga“fundamentallyunfair”independencereferendumthatwoulddamageBrexitnegotiations.InanarticleforTheTimes,theprimeministertoughensherstanceagainststartingtalksoverasecondindepend-encevotebeforespring2019—thetimetablesetoutbyMsSturgeoninasurpriseannouncementthisweek.TheprimeministerhadalreadyappealedtoMsSturgeonto“stepback”fromplanstotableademandforasecondvotenextweek,makingclearthatitwouldberejected.“Nowisnotthetime,”shesaidlastnight.InresponseScotland’sfirstministeraccusedMrsMayof“returningtothebadolddaysofMargaretThatcher”,sayingthatitwouldbea“democraticoutrage”ifScotsweredeniedtheTheresaMaysaidthatareferendumin2019wouldbeunfaironvoterstimesinvestigationAlexiMostrousHeadofInvestigationsOnly80ptosubscribers£1.40FridayMarch172017|thetimes.co.uk|No72173TaxpayersfundextremismSemitesandbannedhatepreacherswerereceivingpayoutsfrompubliclysubsidisedadvertsontheinternetcom-pany’svideoplatform.DavidDuke,theAmericanwhitenationalist,MichaelSavage,ahomo-phobic“shock-jock”,andStevenAnderson,apastorwhopraisedthekill-ingof49peopleinagaynightclub,allhavevideosvariouslycarryingadver-tisingfromtheHomeOffice,theRoyalNavy,theRoyalAirForce,TransportForLondonandtheBBC.MrAnderson,whowasbannedfromdeliverthehighqualityofservicethatgovernmentdemandsonbehalfofthetaxpayer.”Sainsbury’sandArgos,whoseadvertsalsoappearedonvideospostedonbehalfofthenationalistorganisa-tionthePolishDefenceLeague,saiditwas“unacceptablethatGoogleisallowingouradstobeplacedalongsidethesevideosonYouTube”.TransportforLondon,theFCA,TheGuardianandL’Oréalalsopulledcommercials.“ItiscompletelyunacceptablethatContinuedonpage6,col46Governmentadvertspayforhatevideosandrapeapologists6GooglesummonedtoexplainasbigbrandspullcampaignsBestplacestodownsize20UnbeatableguidetotheCheltenhamGoldCup12-pagepulloutINSIDEBRICKS&MORTARNonewindependencevoteforScotlandbeforeBrexitFrancisElliottPoliticalEditorLindsayMcIntoshScottishPoliticalEditorchancetovoteontheirfuturebeforeBritainlefttheEuropeanUnion.MsSturgeonraisedthestakesfurtherbyrefusingtoruleoutaconsultativerefer-endumifshefailedtogetauthorisationfromtheprimeminister.WithexpertswarningthatrelationsbetweentheBritishandScottishgov-ernmentswereheadingforcrisis,MrsMaywilluseaspeechinCardifftodaytoinsistthatsheisdeterminedtogovern“intheinterestsofthewholecountry”andtodefendthe“precious,preciousUnion”.WritinginTheTimes,shewarnsofthedangerofasecondScottishinde-pendencereferendumoverthenexttwoyears.“Todosonow,whileallourenergiesshouldbedirectedtowardsthenegotiationswithEurope,wouldmakeitmoredifficulttogettherightdealforScotlandandtherightdealfortheUKasawhole.ItisnotsomethingtowhichanyresponsibleUKgovernmentcouldreasonablyagree,”MrsMaywrites.“TheSNPistryingtoforcetheUKgovernmenttoagreetosomethingthatisfundamentallyunfairtotheScottishpeople.Itwantstoaskthemtomakeacrucialdecisionwithoutthenecessaryinformation.TheywouldnotknowwhatthenewpartnershipwiththeEUwouldlooklike,orwhatthealternativeofanindependentScotlandwouldbe.Itwouldsimplynotbefair.”LegislationthatauthorisesthestartofEUexittalksreceivedroyalassentyesterday.MrsMaywilltodaylauncha“PlanforBritain”—asummaryofherContinuedonpage2,col3IfaruthlessstreakisneededatNo10noonetaughtLarry,thechiefmouser.ThisintruderranoffHammondfallout,page12GameofcatandmousecontinuesinDowningStreetSTEVEBACKFOX SPORTS Australia secured its future as the number one home for Australian sports through the extension of A-League soccer rights. the Future Video Lab Looking to max out on inspiration? Come to the Future Video Lab for some uncommon video insights. News UK acquired Wireless Group, owner of talkSPORT, the leading sports radio network in the U.K. h c o d r u M t r e p u R m o r f e g a s s e M A Rupert Murdoch Executive Chairman In a world defi ned and challenged by disruption of many kinds, News Corp prospers through constant digital transformation, strategic investments and the pursuit of sustainable global growth. We also benefi t by being faithful to principles that remain unchanged: rigorous fi nancial management and corporate governance; collaborating across our businesses to ensure the whole is greater than the sum of our parts; and focusing on the interests of our audiences, investors and customers. This is an era where publishers – and the economy and society at large – are affected by the behavior of a small number of technology companies, who are using their dominance to the detriment of many. We continue to contest their abuse of the marketplace wherever possible. At the same time, we recognize the power of our own assets, from superior content to large and engaged audiences and the accurate and useful data they provide. We are developing new platforms to bring those assets to bear for the benefi t of brands, which crave safe environments for their advertisements and reliable metrics with which to measure their effectiveness. I am proud of all that the people of News Corp have accomplished, from the impressive growth of our digital real estate businesses around the world to the successes of our mastheads, which are delivering fast and factual news to readers when and where they want it. Such quality journalism, in both print and digital, is in greater demand than ever in these times, and News Corp is better able than any other to meet that need. We also bring to readers and consumers the books they love, the coupons they use to save money and the sports and other entertainment they enjoy on television, radio and online. And the technological innovations of our own start-up digital enterprises are fi ltering their expertise and insights throughout our company, while also helping brands protect their reputations and connect with their customers. In all these ways, News Corp is providing valuable benefi ts to people and organizations the world over. And in so doing, we continue on the path toward sustainable growth to the benefi t of our employees, clients and investors. Rupert Murdoch Executive Chairman n o s m o h T t r e b o R m o r f e g a s s e M A Robert Thomson Chief Executive In fi scal 2017, News Corp achieved tangible improvement in profi tability, powered by the fast-growing Digital Real Estate Services segment, and continued to monetize premium content, while being resolutely focused on operating effi ciencies. Since the birth of the new News Corp in 2013, we have been assertively digital, and have led the global debate over the value of content, by word and by deed, at a time of profound change in our markets and in society. That strategy continues to pay off, as evidenced by our full-year operating results, and by the intensifying focus on provenance, for which News Corp has been a catalyst. Our acquisitions and digital development have changed the composition of the company, even as they enhanced the personality and principles that have defi ned us since the conception of the original News Corporation. Revenues were relatively stable this year at over $8.1 billion, despite blustery print advertising headwinds and an extra week in the prior year. (Loss) income from continuing operations was ($643) million for fi scal 2017 as compared to $235 million in the prior year. But, importantly, Total Segment EBITDA improved to $885 million, compared to $684 million in the prior year, which included a one-time charge of $280 million for the settlement of litigation and related claims at News America Marketing and a one-time gain of $122 million for the settlement of the Zillow litigation. For the year, we took signifi cant impairments as we fully recognized the challenges facing print-based businesses and ensured that the company is fully focused on the future. Digital Real Estate During fi scal 2017, excluding the impact of the Zillow settlement, digital real estate continued to deliver on its potential, not only as a strong source of growth but also in its rapidly expanding contribution to Total Segment EBITDA. At both REA and Move, we were pleased to see increased traffi c, improved engagement and continuing revenue growth, particularly at realtor.com®, where Move is making positive contributions to segment EBITDA. From a lagging number three player in the U.S. market at the time of our acquisition in 2014, realtor.com® has grown substantially, while having the most engaged audiences and being the most important source of leads for real estate professionals. We are far from satisfi ed with that progress, as we fi rmly believe that the U.S. digital property market is still in an early phase of its e-evolution and expect many more years of strong audience and revenue growth. In December, realtor.com® rolled out Advantage, a state-of-the-art listing agent product, capturing real-time feedback about potential leads and providing more targeted ad prominence for properties. The company also unveiled new technological advances with its use of image recognition and augmented reality to highlight listing details on smartphones, via its Sign Snap and Street Peek products. We are very conscious of the key role that real estate professionals play and do not seek to disintermediate them, as is clearly the aspiration of some companies in the sector. One example: in August 2017, realtor.com® entered an agreement with the Real Estate Board of New York to provide a direct syndicated feed of listings from more than 600 brokerage fi rms in New York City, further expanding our presence in that important market. REA continues to outperform the competition in Australia, in June achieving a record market share of 74% against its nearest competitor. REA is also enhancing engagement through new products, as well as through the creation of compelling content relevant to buyers, sellers and agents. During the year, we divested REA’s European operations, renewing our focus on core markets in Australia and East Asia, and we recently expanded into the complementary mortgage business with the acquisition of Smartline. That acquisition, along with a strategic partnership with the National Australia Bank, allows REA to tap into a $400 billion-a-year home loan market. Also, in fi scal 2017, News Corp’s standing as the world’s largest digital real estate business was bolstered through the acquisition by Elara Technologies Pte. Ltd, the operator of PropTiger.com in which we have a strategic investment, of Housing.com, creating India’s most comprehensive digital real estate platform. The market is at an early stage of its development, but we see an important role in ensuring that all families in India have access to accurate listings and insightful information when making a crucial investment. News and Information Services The Wall Street Journal saw strong digital growth, ending with nearly 1.3 million digital subscribers, representing 56% of the Journal’s total paid subscribers, up almost 70% in the past two years. In fact, at Dow Jones, we saw 10% circulation revenue growth in the fourth quarter, the largest it has experienced since fi scal 2011. Meanwhile, the team streamlined print costs and reinvested in digital through the implementation of our WSJ2020 strategy. In total, digital accounted for 55% of Dow Jones full-year revenues. Our Professional Information Business gained in strength, with Risk and Compliance delivering a strong performance and a healthy sales pipeline. For the year, Risk and Compliance revenues rose over 20%, with close to 30% growth year-on- year in the fourth quarter, and we expect even higher growth in fi scal 2018. At the New York Post, digital ad revenue more than offset declines in print advertising for two straight fi scal years. The Post has also had success in monetizing mobile, with 41% of digital ad revenue coming from mobile in fi scal 2017. We are sharing lessons about mobile successes and techniques around the company with far greater rapidity and alacrity. While print advertising remains challenged across the newspaper industry, our emerging digital advertising platform, News IQ, will help us meet the needs of advertisers through precise and permissioned customer data from our monthly unique U.S. audience of over 110 million people. We strongly believe that, for advertisers, our ability to deliver premium content in a prestige environment will set us apart from the polluted platforms and commodifi ed content. On the other side of the globe, we saw particular success at The Australian, where readership burgeoned to nearly half a million a day as of May, resulting in higher revenues. The blossoming of The Australian refl ects the immense value of excellent journalism and the importance of strong editorial leadership. Meanwhile, news.com.au is the number one news brand in Australia, according to Nielsen, and taste.com.au is Australia’s foremost food site. Overall, News Corp Australia remains the country’s largest print and digital publisher, and including REA, reaches more than 16.1 million Australians each month. In the U.K., The Times was the only national newspaper to show print circulation growth in the fourth quarter. In fact, subscriptions to The Times and The Sunday Times reached an all-time high of nearly half a million as of June 30, 2017. And on the digital front, The Times and The Sunday Times are hosting over 200,000 digital-only subscribers, representing 45% of its paid subscriber base and growth of 10% for the fourth quarter versus the prior year. Digitally, The Sun is fast closing the gap with its nearest competitor in the U.K., more than doubling our global monthly unique visitors in the past year to reach a record 85 million in June 2017. The integration of Wireless Group, which connected The Sun’s sports devotees with its fl agship station talkSPORT, is proceeding and the complementarity between the platforms is clear. This year, talkSPORT won the radio rights for the English Football League, making it the biggest holder of exclusive English football rights among U.K. broadcasters, and we will also deploy Wireless Group’s expertise to improve the quality of our audio products around the company. News America Marketing stabilized its business this year thanks to the impressive performance of its in-store products. There is no doubt retailers are under pressure from digital competition and providing an enhanced in-store experience is an imperative. Meanwhile, Checkout 51 comfortably surpassed its goal of reaching ten million users during the year. At year-end, the company boasted a valuable, digital membership base over 14 million strong and growing – that is triple the number of members at acquisition in July 2015. Book Publishing Book publishing has fl ourished, as HarperCollins showed its understanding of the American heartland, underscored by such best-selling titles as The Magnolia Story by Chip and Joanna Gaines, and J.D. Vance’s Hillbilly Elegy. We also saw digital audio sales increase by 47% year-over-year, and expanded our foreign language footprint, an important driver for long-term growth as we seek to exploit best sellers across languages and borders. The rise of audio books is a particularly notable trend, highlighted by the success of Mark Manson’s The Subtle Art of Not Giving a F*ck – which has audio sales of over 470,000 and print of over 490,000, showing the power of savvy self- help books and of the audio genre. Cable Network Programming Returning to Australia, FOX SPORTS Australia secured its market-leading position through the extension of A-League soccer rights, and successfully launched the Fox League Channel, its dedicated Rugby League offering. Foxtel has undergone a major brand refresh, which has coincided with the rollout of Foxtel Now, a streaming service with premium content and multiple price points. Foxtel will complement that with the launch of a dedicated low-cost IP box in the coming months, while the improved IQ3 state-of- the-art set top box is showing encouraging results. In the fourth quarter, total subscribers at Foxtel, including IP, improved slightly from the third quarter and we saw an improvement in cable/satellite churn. In August, News Corp and Telstra announced their intention to combine Foxtel and FOX SPORTS Australia into a new company, which we expect will unlock value for News Corp shareholders and align ownership and management for success at a time when more Australians are consuming premium content across more platforms than ever before. Conclusion No review of fi scal 2017 would be complete without noting the global impact of our principled stand on intellectual property and the responsibility of the digital duopoly to recognize the provenance of premium content and prevent the proliferation of false news and vile extremist propaganda. It is crucial that algorithms are not used to discriminate against quality journalism and that societies have an informed debate about potential algorithmic abuse. As a result of our efforts, we have begun working with Facebook and Google on a subscription mechanic, one which could help bring more readers to our mastheads and fundamentally change the content ecosystem. Refl ecting on the year, we are more confi dent than ever in the power of content and connectivity. Whether it is the news of the day, the match of the week, the book of the year or the home of a lifetime, we are dedicated to informing and inspiring our readers and our partners. And in an age of digital opacity, we are committed to making markets more transparent and more lucrative for our advertisers and allies. Our newer businesses have brought much innovation and energy to the company, and our ability to drive growth is patent and potent. Even so, we are not complacent. We will continuously drive our digital businesses and build our brands. As custodians of a company with the proudest of histories, we know that the past is a platform for the future. For these reasons and more, we’re looking forward to the coming year with much confi dence in the prospects for shareholders and for our partners. Robert Thomson Chief Executive  Purchased Energy 69% Global Environmental Initiative News Corp is deeply committed to minimizing our environmental impact, growing our businesses sustainably and encouraging others to take action. Through the Global Environmental Initiative (GEI), our comprehensive environmental sustainability program, we measure and report the carbon footprint of our global operations each year. This work has been overseen by third-party experts at Deloitte and independently verifi ed by Cventure LLC. In fi scal 2016, News Corp generated a carbon footprint of 226,698 metric tons of carbon dioxide equivalents (CO2e), a reduction of 39% against our fi scal 2006 baseline and 7% against fi scal 2015.* Carbon Emissions (metric tons CO2e) 400k 350k 300k 250k 200k 150k 100k 50k 0 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 ■ Transport Fuel ■ Refrigerants ■ Purchased Energy ■ Onsite Fuel ■ Business Air Travel As a result of rigorous and transparent measurement, improvements in operational effi ciency, investments in renewable energy and engagement with our customers, employees, suppliers and partners on sustainability outcomes, News Corp has reduced our environmental impact, saved millions of dollars across our operations and supply chain, and been recognized by key third parties as a corporate leader. Some key environmental achievements include: ■ Achieving the leadership level of A- for our 2016 CDP Climate Change report, well above both the media industry average and the overall global company average score of C. 5,800 global companies disclosed environmental data to CDP in 2016. ■ Exceeding our goal of 90% Zero Waste** by 2016, achieving a 96% average diversion from landfi ll rate at our major owned print centers across the globe. ■ Achieving the leadership level of A- for our 2016 CDP Forests report, exceeding both the media industry average and the overall global company average score of B. ■ Saving over $3.3 million in electricity costs and reducing carbon emissions by over 23,000 metric tons since 2011 through our 4.1 megawatt solar power installation at Dow Jones’ New Jersey offi ce. ■ Scoring 4 out of 5 points on the Forest 500 company rankings in 2016 and 2015, a signifi cant improvement over our 2014 score of 2 points, highlighting our efforts to reduce our impact on forests. ■ News Corp Australia recently celebrated the 10th anniversary of their “1 Degree” program with employees and partners, and held a showcase event featuring many different environmental organizations and initiatives who are all taking steps that add up to big change. The Global Environmental Initiative (GEI) is News Corp’s company wide approach to environmental sustainability We bring together all of our different businesses with a vision built on minimizing environmental impacts, growing sustainably and inspiring others to take action. THE INITIATIVE STANDS ON THREE PILLARS REDUCE ENGAGE SOURCE RESPONSIBLY Our global CARBON FOOTPRINT reduction target is 40% by FY2020 & we are well on track with a 39% reduction IN FY2016 since FY2006 Our Global Waste Policy shows our commitment to minimizing landfill waste within our within our businesses & businesses & communities communities & includes our global goal of achieving ZERO WASTE** at our owned print sites We are committed to engaging our customers, suppliers and partners to work towards a sustainable future with us We engage our employees as AMBASSADORS through our many staff engagement programs Our efforts have been recognized globally CDP CARBON, CDP FORESTS, FSC, PEFC, SFI & PANPA Our Global Paper Policy means that 100% of our puchased publication paper is from sustainably certified mills We partipate in CDP Forests annual reporting program The Dow Jones NJ campus has a 4.1 MEGAWATT solar system which has saved over 23,000 tonnes of carbon 2017 MARKS OUR 10TH ANNIVERSARY 10 To find out more go to newscorp.com/gei To learn more about News Corp’s ongoing sustainability efforts, please visit newscorp.com/gei. * Carbon footprint does not include reductions due to purchases of energy generated from clean power sources. **Defi ned as > 90% diverted from landfi ll on average Corporate Citizenship From our corporate headquarters in New York to our metro papers in Australia, philanthropy and service are integral to News Corp’s mission and culture. At the corporate level, our Philanthropy Partners program champions organizations with a track record of success in K-12 education, youth empowerment, veteran’s affairs, digital literacy and free press. Since the launch of the program in 2013, we have helped more than 80,000 students in and out of the classroom, given over $700,000 in college scholarships, donated 200,000+ books and mentored thousands of veterans. Empowering women and girls was a particular focus this year with the addition of the writing mentorship nonprofi t Girls Write Now to our Philanthropy Partner family and our continued support of Girls Who Code and The Young Women’s Leadership Network. News Corp seeks to promote diversity in all its forms. Worldwide, our businesses and employees have made great contributions to the communities in which we live and work. In the U.S., HarperCollins worked with several nonprofi ts to provide books and other essential learning materials to children in need. realtor.com® partnered with the National Association of Realtors® on the annual Good Neighbor Awards, which recognize real estate professionals who have made an extraordinary impact on their community through volunteer work. Dow Jones put their support toward two major organizations that advocate for freedom of the press, and the New York Post gave to the Police Athletic League and other local organizations focused on underserved youth. News UK publications gave a voice to a number of charities and movements. The Sun’s readers hand-knitted millions of items of clothing for needy children while The Times raised £900,000 for four charities in its Christmas campaign. Each year, News Corp provides funding to its global businesses so that local charities can receive assistance, with employees helping select the worthiest causes in their regions. News UK staff voted in the thousands to choose this year’s funding recipients, with Refuge, Buttle UK, Whizz-Kidz and Mary’s Meals each receiving £25,000. Lastly, News UK’s celebrated News Academy, which fi nds and trains the next generation of journalists, expanded to include academies for Wireless Group radio stations. In Australia, News Corp employees took an active role in nominating charities to support. Since its inception in 2015, the Staff Donations Fund has contributed to 91 charities across Australia that assist the homeless, provide nursery equipment to families in need and help provide rehabilitation options to current and former Australian Defence Force members. Health is a pillar of focus for News Corp Australia, which is a founding partner of the Step- a-thon, an initiative of the Murdoch Children’s Research Institute to encourage children to “step to a healthier future.” News Corp Australia also helped raise a record $17.6 million AUD for The Royal Children’s Hospital’s annual Good Friday Appeal, continuing an 86-year relationship with the organization. In fi scal 2017, News Corp Giving provided support to: 826 National After-School All-Stars America Needs You American Corporate Partners Boys & Girls Clubs of America Brotherhood/Sisterhood Sol Buttle UK Change for Kids Clontarf Foundation DonorsChoose.org Eagle Academy First Book First Robotics Four Block Foundation Girls Who Code Girls Write Now Grace Outreach Homes for Our Troops International Center For Journalism Jumpstart Murdoch Children’s Research Institute My Brother’s Keeper Alliance New Classrooms New Leaders News Literacy Project NYC Outward Bound Parent-Child Home Program Per Scholas Police Athletic League PowerMyLearning Refuge Reporters Committee Safe Horizon Tech for All The Royal Children’s Hospital United Way Whizz-Kidz Young Women’s Leadership Network Youth Inc UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2017 or For the transition period from to Commission file number 001-35769 NEWS CORPORATION (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 1211 Avenue of the Americas, New York, New York (Address of principal executive offices) 46-2950970 (I.R.S. Employer Identification No.) 10036 (Zip Code) Registrant’s telephone number, including area code (212) 416-3400 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Class A Common Stock, par value $0.01 per share Class B Common Stock, par value $0.01 per share Class A Preferred Stock Purchase Rights Class B Preferred Stock Purchase Rights The NASDAQ Global Select Market The NASDAQ Global Select Market The NASDAQ Global Select Market The NASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Act: None (Title of class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No È Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes È No ‘ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes È No ‘ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. È Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer È Non-accelerated filer ‘ (Do not check if a smaller reporting company) ‘ Accelerated filer Smaller reporting company ‘ Emerging growth company ‘ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ‘ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È As of December 30, 2016, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s Class A Common Stock, par value $0.01 per share, held by non-affiliates was approximately $4,349,929,638, based upon the closing price of $11.46 per share as quoted on The NASDAQ Stock Market on that date, and the aggregate market value of the registrant’s Class B Common Stock, par value $0.01 per share, held by non-affiliates was approximately $1,426,670,174, based upon the closing price of $11.80 per share as quoted on The NASDAQ Stock Market on that date. As of August 7, 2017, 382,305,541 shares of Class A Common Stock and 199,630,240 shares of Class B Common Stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Certain information required for Part III of this Annual Report on Form 10-K is incorporated by reference to the News Corporation definitive Proxy Statement for its 2017 Annual Meeting of Stockholders, which shall be filed with the Securities and Exchange Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, within 120 days of News Corporation’s fiscal year end. [THIS PAGE INTENTIONALLY LEFT BLANK] TABLE OF CONTENTS PART I Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 1. ITEM 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 2. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 3. ITEM 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART II ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 6. ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 8. Changes in and Disagreements With Accountants on Accounting and Financial ITEM 9. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART III ITEM 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . ITEM 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 14. PART IV ITEM 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 16. SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1 17 30 30 32 33 34 36 38 76 78 149 149 149 150 150 150 151 151 152 152 153 [THIS PAGE INTENTIONALLY LEFT BLANK] PART I ITEM 1. BUSINESS OVERVIEW The Company News Corporation (the “Company,” “News Corp,” “we,” “us,” or “our”) is a global diversified media and information services company focused on creating and distributing authoritative and engaging content to consumers and businesses throughout the world. The Company comprises businesses across a range of media, including: news and information services, book publishing, digital real estate services, cable network programming in Australia and pay-TV distribution in Australia, that are distributed under some of the world’s most recognizable and respected brands, including The Wall Street Journal, Dow Jones, The Australian, Herald Sun, The Sun, The Times, HarperCollins Publishers, FOX SPORTS Australia, realestate.com.au, realtor.com®, Foxtel, talkSPORT and many others. The Company’s commitment to premium content makes its properties a trusted source of news and information and a premier destination for consumers across various media. Many of these properties deliver broad reach and high audience engagement levels in their respective markets, making them attractive advertising vehicles for the Company’s advertising customers. The Company delivers its premium content to consumers across numerous distribution platforms consisting not only of traditional print and television, but also through an array of digital platforms including websites, applications for mobile devices and tablets, social media and e-book devices. The Company is focused on pursuing integrated strategies across its businesses to continue to capitalize on the growth in digital consumption of high-quality content. The Company believes that the increasing number of media choices and formats will allow it to continue to deliver its content in a more engaging, timely and personalized manner, provide opportunities to more effectively monetize its content via strong customer relationships and more compelling and engaging advertising solutions and reduce its physical production and distribution costs as it continues to focus on its digital platforms. The Company’s diversified revenue base consists of advertising sales, recurring subscriptions, circulation copies, sales of real estate listing products, licensing fees, affiliate fees, direct sales and sponsorship sales. The Company manages its businesses to take advantage of opportunities to share technologies and practices across geographies and businesses and bundle selected offerings to provide greater value to consumers and advertising partners. Headquartered in New York, the Company operates primarily in the United States, Australia and the U.K., and its content is distributed and consumed worldwide. The Company’s operations are organized into five reporting segments: (i) News and Information Services; (ii) Book Publishing; (iii) Digital Real Estate Services; (iv) Cable Network Programming; and (v) Other, which includes the Company’s general corporate overhead expenses, corporate Strategy and Creative Group and costs related to the U.K. Newspaper Matters, as defined in “Item 3. Legal Proceedings.” The Company also owns a 50% stake in Foxtel, the largest pay-TV provider in Australia, which is accounted for as an equity investment. The Company maintains a 52-53 week fiscal year ending on the Sunday nearest to June 30 in each year. Fiscal 2017, fiscal 2016 and fiscal 2015 included 52, 53 and 52 weeks, respectively. Unless otherwise noted, all references to the fiscal years ended June 30, 2017, June 30, 2016 and June 30, 2015 relate to the fiscal years ended July 2, 2017, July 3, 2016 and June 28, 2015, respectively. For convenience purposes, the Company continues to date its financial statements as of June 30. Corporate Information News Corporation is a Delaware corporation originally organized on December 11, 2012 in connection with its separation (the “Separation”) from Twenty-First Century Fox, Inc. (formerly named News Corporation) (“21st Century Fox”), which was completed on June 28, 2013 (the “Distribution Date”). In connection with the Separation, the Company assumed the name “News Corporation.” Unless otherwise indicated, references in this 1 Annual Report on Form 10-K for the fiscal year ended June 30, 2017 (the “Annual Report”) to the “Company,” “News Corp,” “we,” “us,” or “our” means News Corporation and its subsidiaries. The Company’s principal executive offices are located at 1211 Avenue of the Americas, New York, New York 10036, and its telephone number is (212) 416-3400. The Company’s Class A and Class B Common Stock are listed on The NASDAQ Global Select Market (“NASDAQ”) under the trading symbols “NWSA” and “NWS,” respectively, and CHESS Depositary Interests (“CDIs”) representing the Company’s Class A and Class B Common Stock are listed on the Australian Securities Exchange (“ASX”) under the trading symbols “NWSLV” and “NWS,” respectively. More information regarding the Company is available on its website at www.newscorp.com, including the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are available, free of charge, as soon as reasonably practicable after the material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). Special Note Regarding Forward-Looking Statements This document and any documents incorporated by reference into this Annual Report, including “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contain statements that constitute “forward-looking statements” within the meaning of Section 21E of the Exchange Act and Section 27A of the Securities Act of 1933, as amended. All statements that are not statements of historical fact are forward-looking statements. The words “expect,” “estimate,” “anticipate,” “predict,” “believe” and similar expressions and variations thereof are intended to identify forward-looking statements. These statements appear in a number of places in this document and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things, trends affecting the Company’s financial condition or results of operations and the outcome of contingencies such as litigation and investigations. Readers are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. More information regarding these risks, uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is set forth under the heading “Item 1A. Risk Factors” in this Annual Report. The Company does not ordinarily make projections of its future operating results and undertakes no obligation (and expressly disclaims any obligation) to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Readers should carefully review this document and the other documents filed by the Company with the SEC. This section should be read together with the Consolidated Financial Statements of News Corporation (the “Financial Statements”) and related notes set forth elsewhere in this Annual Report. BUSINESS OVERVIEW The Company’s five reporting segments are described below. In addition, the Company owns a 50% stake in Foxtel, which is accounted for as an equity investment. For financial information regarding the Company’s segments and operations in geographic areas, see Note 19 to the Financial Statements. For information regarding revenues generated by the principal products and services of each segment, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” For the fiscal year ended June 30, 2017 Revenues Segment EBITDA (in millions) News and Information Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Book Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Digital Real Estate Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cable Network Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,069 1,636 938 494 2 $ 414 199 324 123 (175) Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,139 $ 885 2 News and Information Services The Company’s News and Information Services segment consists primarily of Dow Jones, News Corp Australia, News UK, the New York Post and News America Marketing. This segment also includes Unruly Holdings Limited (“Unruly”), a leading global video advertising distribution platform, Wireless Group, operator of talkSPORT, the leading sports radio network in the U.K., and Storyful Limited (“Storyful”), a social media content agency that enables the Company to source real-time video content through social media platforms. The News and Information Services segment generates revenue primarily through sales of print and digital advertising and circulation and subscriptions to its print and digital products. Advertising revenues at the News and Information Services segment are subject to seasonality, with revenues typically being highest in the Company’s second fiscal quarter due to the end-of-year holiday season in its main operating geographies. Dow Jones Dow Jones is a global provider of news and business information, which distributes its content and data through a variety of media channels including newspapers, newswires, websites, applications for mobile devices, tablets and e-book readers, newsletters, magazines, proprietary databases, conferences and video. Dow Jones’s products, which target individual consumer and enterprise customers, include The Wall Street Journal, Factiva, Dow Jones Risk & Compliance, Dow Jones Newswires, Barron’s, MarketWatch, Dow Jones PEVC and DJX. Dow Jones’s revenue is diversified across business-to-consumer and business-to-business subscriptions, circulation, advertising and licensing fees for its print and digital products. Consumer Products Through its premier brands and authoritative journalism, Dow Jones’s products targeting individual consumers provide insights, research and understanding that enable customers to stay informed and make educated financial decisions. With a focus on the financial markets, investing and other professional services, many of these products offer advertisers an attractive customer demographic. Products targeting consumers include the following: • The Wall Street Journal (WSJ). WSJ, Dow Jones’s flagship product, is available in print, online and across multiple mobile, tablet and e-book devices. WSJ covers national and international news and provides analysis, commentary and opinions on a wide range of topics, including business developments and trends, economics, financial markets, investing, science and technology, lifestyle, culture and sports. WSJ’s print products are printed at plants located around the U.S., including eight owned by the Company. WSJ sells regional advertising in three major U.S. regional editions (Eastern, Central and Western) and 21 smaller sub-regional editions. WSJ’s digital products offer both free and premium content and are comprised of WSJ.com, WSJ mobile products, including a responsive design website and applications for multiple mobile devices (WSJ Mobile), and live and on-demand video through WSJ.com and other platforms such as YouTube, Internet-connected television and set-top boxes (WSJ Video). For the 12 months ended June 30, 2017, WSJ Mobile (including WSJ.com accessed via mobile devices, as well as applications) accounted for approximately 54% of visits to WSJ’s digital news and information products according to Adobe Analytics. • Dow Jones Media Group. The Dow Jones Media Group focuses on Dow Jones consumer brands outside of The Wall Street Journal franchise, including Barron’s and MarketWatch, among other properties. Barron’s. Barron’s, which is available in print, online and on multiple mobile, tablet and e-book devices, delivers news, analysis, investigative reporting, company profiles and insightful statistics for investors and others interested in the investment world. MarketWatch. MarketWatch is an investing and financial news website targeting active investors. It also provides real-time commentary and investment tools and data. Products include mobile and 3 tablet applications, a mobile site and MarketWatch Premium Newsletters (paid newsletters on a variety of investing topics). • The Wall Street Journal Digital Network (WSJDN). WSJDN offers advertisers the opportunity to reach Dow Jones’s audience across a number of brands, including the WSJ.com, Barrons.com and MarketWatch.com websites. The following table provides information regarding issue sales and subscriptions for certain Dow Jones consumer products. (in 000’s) The Wall Street Journal(1) Barron’s(1) Average Global Issue Sales(2) Average Global Subscriptions Average Global Issue Sales(2) Average Global Subscriptions Print(3) . . . . . . . . . . . . . . Digital Only . . . . . . . . . Total . . . . . . . . . . . . . . . 1,240 1,281 2,521 1,007 1,270 2,277 305 152 457 292 152 444 (1) Based on internal data for the period from April 3, 2017 to July 2, 2017, with independent assurance provided by Pricewaterhouse Coopers LLP UK. (2) Average Global Issue Sales includes subscription and non-subscription categories. Non-subscription categories include, but are not limited to, single copy (newsstand) sales and copies purchased by hotels for distribution to guests. In addition to their print and digital-only products, The Wall Street Journal and Barron’s sell print and digital products bundled into one subscription, which is counted only once, under “Print,” in the table above. (3) The following table provides information regarding the digital platforms for certain Dow Jones consumer products. WSJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . MarketWatch . . . . . . . . . . . . . . . . . . . . . . . . . WSJDN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 million 49 million 158 million FY2017 Average Monthly Visits(1) (1) Includes visits via websites and mobile device and tablet applications based on Adobe Analytics for the 12 months ended June 30, 2017. Professional Information Products Dow Jones’s professional information products, which target enterprise customers, combine news and information with technology and tools that inform decisions and aid awareness, research and understanding. These products are designed to be integral to the success of Dow Jones’s enterprise customers, and Dow Jones expects to continue to build strong customer relationships by providing high levels of service and continued innovation through news, data and tools that meet its customers’ specific needs. These products include the following: • Knowledge and Insight. Dow Jones Knowledge and Insight products provide data and analysis from curated sources and include: Factiva. Factiva is a leading provider of global business content, built on an archive of important, original publishing sources. This combination of business news and information, plus sophisticated tools, helps professionals find, monitor, interpret and share essential information. As of June 30, 2017, there were approximately 1.2 million activated Factiva users, including both institutional and individual accounts. Factiva offers content from over 32,000 global news and information sources from nearly 200 countries and in 28 languages. Factiva leverages complex 4 metadata extraction and text mining to help its customers build precise searches and alerts to access and monitor this data. Dow Jones PEVC. Dow Jones PEVC products provide news and deal data on venture capital and private equity-backed private companies and their investors to help venture capital and private equity professionals, financial services professionals and other service providers identify deal and partnership opportunities, perform due diligence and examine trends in venture capital and private equity investment, fund-raising and liquidity. DJX. DJX is comprised of a bundle of underlying products, including Factiva, Dow Jones Newswires, certain PEVC products, including Venture Source and LP Source, certain Risk & Compliance products, WSJ.com and Barrons.com. • Dow Jones Risk & Compliance. Dow Jones Risk & Compliance products provide data solutions for customers focused on anti-corruption, anti-money laundering, monitoring embargo and sanction lists and other compliance requirements. Dow Jones’s solutions allow customers to filter their business transactions against its data to identify regulatory, corporate and reputational risk, and request follow-up due diligence reports. Products include online risk data and negative news searching tools such as Risk Database Search/Research/Premium and the Risk & Compliance Portal for batch screening. Feed services include Dow Jones Watchlist, Dow Jones Anti-Corruption, Dow Jones Sanction Alert and Adverse Media Entities. In addition, Dow Jones produces customized Due Diligence Reports to assist its clients with regulatory compliance. • Dow Jones Newswires. Dow Jones Newswires distributes real-time business news, information, analysis, commentary and statistical data to financial professionals and investors worldwide. It publishes, on average, over 15,000 news items each day, which are distributed via terminals, trading platforms and websites reaching hundreds of thousands of financial professionals. This content also reaches millions of individual investors via customer portals and the intranets of brokerage and trading firms, as well as digital media publishers. News Corp Australia News Corp Australia is one of the leading news and information providers in Australia by readership and circulation, owning over 200 newspapers covering a national, regional and suburban footprint. As of December 31, 2016, its daily, Sunday, weekly and bi-weekly newspapers accounted for more than 63% of the total circulation of newspapers in Australia, and during the year ended May 31, 2017, its Sunday newspaper network was read by approximately 3.2 million Australians on average every week. In addition, its digital mastheads and other websites are among the leading digital news properties in Australia based on monthly unique audience data. News Corp Australia’s news portfolio includes The Australian and The Weekend Australian (National), The Daily Telegraph and The Sunday Telegraph (Sydney), Herald Sun and Sunday Herald Sun (Melbourne), The Courier Mail and The Sunday Mail (Brisbane) and The Advertiser and Sunday Mail (Adelaide), as well as paid digital platforms for each. In addition, News Corp Australia owns a large number of community newspapers in all major capital cities and leading regional publications in Cairns, Gold Coast, Townsville and Geelong and in the other capital cities of Hobart and Darwin. In December 2016, News Corp Australia also acquired Australian Regional Media (“ARM”), which operates a portfolio of regional print assets and websites that extends the reach 5 of its Australian newspaper business. The following table provides information regarding key properties within News Corp Australia’s portfolio: Average Daily Paid Print Circulation(1) Total Paid Subscribers for Combined Masthead (Print and Digital)(2) Total Monthly Audience for Combined Masthead (Print and Digital)(3) The Australian (Mon – Fri) . . . . . . . . . . . . . . . The Weekend Australian (Sat) . . . . . . . . . . . . . The Daily Telegraph (Mon – Sat) . . . . . . . . . . The Sunday Telegraph . . . . . . . . . . . . . . . . . . . Herald Sun (Mon – Sat) . . . . . . . . . . . . . . . . . Sunday Herald Sun . . . . . . . . . . . . . . . . . . . . . The Courier Mail (Mon – Sat) . . . . . . . . . . . . The Sunday Mail . . . . . . . . . . . . . . . . . . . . . . . The Advertiser (Mon – Sat) . . . . . . . . . . . . . . . Sunday Mail . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,000 224,000 237,000 413,000 325,000 380,000 149,000 318,000 128,000 198,000 127,000 122,000 109,000 3.2 million 4.6 million 4.1 million 79,000 3.0 million 112,000 1.5 million (1) Based on Audit Bureau of Circulation (“ABC”) data for the year ended December 31, 2016. (2) As of June 30, 2017, based on internal sources. (3) For the month of May 2017, based on Enhanced Media Metrics Australia (“EMMA”) average monthly print data for the year ended May 31, 2017 and Nielsen desktop, mobile and tablet audience data for May 2017. EMMA data incorporates more frequent sampling and combines both online usage derived from Nielsen data and print usage into a single metric that removes any audience overlap. News Corp Australia’s broad portfolio of digital properties also includes news.com.au, the leading general interest site in Australia that provides breaking news, finance, entertainment, lifestyle, technology and sports news and delivers an average monthly unique audience of approximately 5.7 million based on Nielsen monthly total audience ratings for the year ended June 30, 2017. In addition, News Corp Australia owns other premier properties such as taste.com.au, a leading food and recipe site, and kidspot.com.au, a leading parenting website, as well as various other digital media assets. As of June 30, 2017, News Corp Australia’s other assets included a 13.40% interest in HT&E Limited (formerly APN News and Media Limited), which operates a portfolio of Australian radio and outdoor media assets, a 13.75% interest in SEEKAsia Limited, which operates leading online employment marketplaces throughout Southeast Asia, and a 25% interest in Hipages Group Pty Ltd., which operates a leading on-demand home improvement services marketplace. News UK News UK publishes The Sun, The Sun on Sunday, The Times and The Sunday Times, which are leading newspapers in the U.K. As of June 30, 2017, sales of these four titles accounted for approximately one-third of all national newspaper sales in the U.K, and The Sun is the most read national newspaper in the U.K. News UK’s newspapers (except some Saturday and Sunday supplements) are printed at News UK’s world-class printing facilities in England, Scotland and Ireland. In addition to revenue from the sale of advertising, circulation and subscriptions to its print and digital products, News UK generates revenue by providing third party printing services through these facilities and is one of the largest contract printers in the U.K. News UK also distributes content through its digital platforms, including its websites, thesun.co.uk, thetimes.co.uk and thesundaytimes.co.uk, as well as mobile and tablet applications. News UK’s online and mobile offerings include the rights to show English Premier League Football, English Premiership Rugby Union and UEFA Champions League and Europa League match clips across its digital platforms. In addition, News UK has assembled a 6 portfolio of complementary ancillary product offerings, including Sun Bingo and Sun Bets, an online sports betting service. The following table provides information regarding News UK’s news portfolio: Average Issue Readership(1) Average Daily Paid Print Circulation(2) Paid Subscribers(3) The Sun (Mon – Sat) . . . . . . . . . . . . . . . . . . 3,405,000 1,600,910 The Sun on Sunday . . . . . . . . . . . . . . . . . . . . 3,007,000 1,359,334 The Times (Mon – Sat) . . . . . . . . . . . . . . . . . 1,092,000 448,905 The Sunday Times . . . . . . . . . . . . . . . . . . . . 1,830,000 791,360 N/A N/A 180,000 (print)(4) 171,000 (digital) 213,000 (print)(4) 189,000 (digital) Online Global Monthly Unique Visitors(5) 85 million N/A N/A (1) Based on National Readership Survey / Audience Measurement for Publishers (75% / 25% blend) data for the six months ended March 31, 2017. (2) Based on ABC data for the six months ended June 30, 2017. (3) As of June 30, 2017, based on internal sources. (4) In addition to their print and digital-only products, The Times and The Sunday Times sell print and digital products bundled into one subscription, which is counted only once, under “print,” in the table above. (5) Based on ABC Electronic (Omniture) data for the month ended June 30, 2017. New York Post NYP Holdings (“NYP”) is the publisher of the New York Post (the “Post”), NYPost.com, PageSix.com, Decider.com and related mobile and tablet applications and social media channels. The Post is the oldest continuously published daily newspaper in the U.S., with a focus on coverage of the New York metropolitan area. The Post provides a variety of general interest content ranging from breaking news to business analysis, and is known in particular for its comprehensive sports coverage, famous headlines and its iconic Page Six section, an authority on celebrity news. The print version of the Post is primarily distributed in New York, where it is printed in a printing facility in the Bronx, as well as throughout the Northeast, Florida and California, where it uses Dow Jones’s printing facilities or third party printers. For the three months ended June 30, 2017, average weekday circulation based on Alliance for Audited Media data, including mobile and tablet application digital editions, was 413,452. In addition, the Post Digital Network, which includes NYPost.com, PageSix.com and Decider.com, reached approximately 68.9 million unique users on average each month during the quarter ended June 30, 2017 according to Google Analytics. NYP also co-produces “Page Six TV,” a daily television show modeled after the Post’s Page Six section and delivering in-the-know gossip and news from entertainment, culture, the media, finance, real estate and politics. News America Marketing News America Marketing (“NAM”) is the premier marketing partner of some of the world’s most well-known brands, and its broad network of shopper media, incentive platforms and custom merchandising services influences the purchasing decisions of online and offline shoppers across the U.S. and Canada. NAM’s marketing solutions are available via multiple distribution channels, including publications, in stores and online, primarily under the SmartSource brand name and through the Checkout 51 mobile application. NAM provides customers with solutions across the shopper’s path to purchase, focusing primarily on the following three business areas: • Home-Delivered: NAM is one of the leading providers of home-delivered shopper media, including free-standing inserts and direct mail products. Free-standing inserts are multiple-page marketing booklets containing coupons, rebates and other consumer offers, which are distributed to millions of households under the SmartSource Magazine® brand through insertion primarily into local Sunday 7 publications. Advertisers, primarily packaged goods companies, pay NAM to produce free-standing inserts where their offers are featured, often on an exclusive basis within their product category. NAM contracts with and pays publishers as well as printers, among others, to produce and/or distribute free- standing inserts in their papers. • In-Store Advertising and Merchandising: NAM is a leading provider of in-store marketing products and services, primarily to consumer packaged goods manufacturers. NAM’s marketing products include at- shelf advertising such as coupon, information and sample-dispensing machines, as well as floor and shopping cart advertising, among others, and are found in thousands of shopping locations, including supermarkets, drug stores, dollar stores, office supply stores, mass merchandisers and specialty stores across North America. NAM also provides in-store merchandising services, including production and installation of instant-redeemable coupons, on-pack stickers, shipper assembly, display set-up and refilling, shelf management and new product cut-ins. • Mobile/Digital: NAM’s digital marketing solutions include SmartSource Digital, which encompasses secure printable couponing, load-to-card couponing, targeted email campaigns and programmatic digital display, and the Checkout 51 mobile application, a leading receipt recognition application that enables packaged goods companies and brands to reach consumers with highly personalized marketing campaigns. NAM believes its programs have key advantages when compared to other marketing options available to packaged goods companies, retailers and other marketers. NAM offers effective and targeted programs that reach a national audience of consumers who are actively seeking incentives or information at critical points along the path to purchase. The Company’s News and Information Services products compete with a wide range of media businesses, including print publications, digital media and information services. The Company’s newspapers, magazines, digital publications and radio stations compete for consumers, audience and advertising with other local and national newspapers, web and application-based media, magazines and radio stations, social media sources, as well as other media such as television and outdoor displays. Competition for subscriptions and circulation is based on news and editorial content, subscription pricing, cover price and, from time to time, various promotions. Competition for advertising is based upon advertisers’ judgments as to the most effective media for their advertising budgets, which is in turn based upon various factors, including circulation volume, readership levels, audience demographics, advertising rates and advertising effectiveness. As a result of rapidly changing and evolving technologies, distribution platforms and business models, the consumer-focused businesses within the Company’s News and Information Services segment, including its newspaper businesses, continue to face increasing competition for both circulation and advertising revenue from a variety of alternative news and information sources. These include both paid and free websites, digital applications, news aggregators, blogs, search engines, social media platforms, digital advertising networks and exchanges, bidding and other programmatic advertising buying channels, as well as other emerging media and distribution platforms. Shifts in consumer behavior, including the widespread adoption of mobile phones, tablets, e-book readers and other portable devices as platforms through which news and information is consumed, require the Company to continually innovate and improve upon its own products, services and platforms in order to remain competitive. The Company believes that these changes will continue to pose opportunities and challenges, and that it is well positioned to leverage its global reach, brand recognition and proprietary technology to take advantage of the opportunities presented by these changes. Dow Jones professional information products that target enterprise customers compete with various information service providers, compliance data providers and global financial newswires, including Thomson Reuters, Bloomberg L.P., LexisNexis, as well as many other providers of news, information and compliance data. 8 NAM competes against other providers of advertising, marketing and merchandising products and services, including those that provide promotional or advertising inserts, direct mailers of promotional or advertising materials, providers of point-of-purchase and other in-store programs and providers of savings and/or grocery- focused digital applications, as well as other marketing products and services. Competition is based on, among other things, rates, availability of markets, quality of products and services provided and their effectiveness, rate of coupon redemption, store coverage and other factors. The Company believes that based on the scale of NAM’s home-delivered products, the reach of its in-store marketing products and the growing audience for its digital marketing platform, NAM provides broader consumer access than many of its competitors. The Company is also actively investing in shopper research and data-based insights that enable an advanced understanding of how to apply the Company’s media and incentive network to achieve the greatest impact and value for clients and partners. Book Publishing The Company’s Book Publishing segment consists of HarperCollins Publishers (together with its subsidiaries and affiliates, “HarperCollins”), the second largest consumer book publisher in the world based on global revenue, with operations in 18 countries. HarperCollins publishes and distributes consumer books globally through print, digital and audio formats. Its digital formats include e-books and audio books for tablets, e-book readers and mobile devices. HarperCollins owns more than 120 branded imprints, including Harper, William Morrow, HarperCollins Children’s Books, Avon, Harlequin and Christian publishers Zondervan and Thomas Nelson. HarperCollins publishes works by well-known authors such as Harper Lee, Patricia Cornwell, Chip and Joanna Gaines, Rick Warren, Sarah Young and Agatha Christie and popular titles such as The Hobbit, Goodnight Moon, To Kill a Mockingbird, Jesus Calling and Hillbilly Elegy. Its print and digital global catalog includes more than 200,000 publications in different formats, in 17 languages, and it licenses rights for its authors’ works to be published in more than 50 languages around the world. HarperCollins publishes fiction and nonfiction, with a focus on general, children’s and religious content. Additionally, in the U.K., HarperCollins publishes titles for the equivalent of the K-12 educational market. As of June 30, 2017, HarperCollins offered approximately 100,000 publications in digital formats, and nearly all of HarperCollins’ new titles, as well as the majority of its entire catalog, are available as e-books. Digital sales, comprising revenues generated through the sale of e-books as well as digital audio books, represented approximately 19% of global consumer revenues for the fiscal year ended June 30, 2017. With the widespread adoption of electronic formats by consumers, HarperCollins is publishing a number of titles in digital formats before, or instead of, publishing a print edition. During fiscal 2017, HarperCollins U.S. had 184 titles on the New York Times print and digital bestseller lists, with 20 titles hitting number one, including Hillbilly Elegy by J.D. Vance, Commonwealth by Ann Patchett, Settle for More by Megyn Kelly, The Black Widow by Daniel Silva, Hidden Figures by Margot Lee Shetterly, The Magnolia Story by Chip and Joanna Gaines, Carve the Mark by Veronica Roth and The Hate U Give by Angie Thomas. HarperCollins derives its revenue from the sale of print and digital books to a customer base that includes global technology companies, traditional brick and mortar booksellers, wholesale clubs and discount stores, including Amazon, Apple, Barnes & Noble and Tesco. Revenues at the Book Publishing segment are significantly affected by the timing of releases and the number of HarperCollins’ books in the marketplace, and are typically highest during the Company’s second fiscal quarter due to increased demand during the end-of-year holiday season in its main operating geographies. The book publishing business operates in a highly competitive market that is quickly changing and continues to see technological innovations. HarperCollins competes with other large publishers, such as Penguin Random House, Simon & Schuster and Hachette Livre, as well as with numerous smaller publishers, for the rights to 9 works by well-known authors and public personalities; competition could also come from new entrants as barriers to entry in book publishing are low. In addition, HarperCollins competes for consumers with other media formats and sources such as movies, television programming, magazines and mobile content. The Company believes HarperCollins is well positioned in the evolving book publishing market with significant size and brand recognition across multiple categories and geographies. Furthermore, HarperCollins is a leader in children’s and religious books, categories which have been less impacted by the transition to digital consumption. Digital Real Estate Services The Company’s Digital Real Estate Services segment consists primarily of its 61.6% interest in REA Group Limited (“REA Group”), a publicly-traded company listed on ASX (ASX: REA), and its 80% interest in Move, Inc. (“Move”). The remaining 20% interest in Move is held by REA Group. This segment also includes DIAKRIT International Limited (“DIAKRIT”), a leader in 3D visualization products, digital sales applications and professional services for the real estate industry. REA Group REA Group advertises property and property-related services on its websites and mobile applications across Australia and Asia. REA Group’s Australian operations include realestate.com.au and realcommercial.com.au, Australia’s leading residential and commercial property websites, as well as its media and property-related services businesses, serving the display media market and markets adjacent to property, respectively. Combined average monthly visits to realestate.com.au and realcommercial.com.au for the year ended June 30, 2017 increased 15% year-over-year to approximately 51.7 million according to Nielsen Online Market Intelligence Home and Fashion Suite. Realestate.com.au and realcommercial.com.au recorded an increase of 52% in total application launches for the same period as compared to the prior year according to Adobe Analytics. Realestate.com.au derives the majority of its revenue from its core property advertising listing products and monthly advertising subscriptions from real estate agents and property developers. Realestate.com.au offers a product hierarchy which enables real estate agents and property developers to upgrade listing advertisements to increase their prominence on the site, as well as a variety of targeted products, including media display advertising products. Realcommercial.com.au generates revenue through three main sources: agent subscriptions, agent branding and listing products. The media business offers unique advertising opportunities on both realestate.com.au and realcommercial.com.au to property developers and other relevant markets, including utilities and telecommunications, insurance, finance, automotive and retail. REA Group’s international operations consist of property sites throughout Asia, including an 87% interest in iProperty Group Limited, which operates leading property portals across Malaysia and Indonesia and prominent portals in Hong Kong, Thailand and Singapore. Visits to the Malaysian portal increased 38% and application visits in Indonesia grew 94% for the year ended June 30, 2017 compared to the prior year according to Google Analytics. REA Group also operates Chinese site myfun.com, which supports REA Group’s businesses in other geographic markets by showcasing residential property listings to Chinese buyers and investors, and delivers leads to agents. In January 2017, REA Group acquired an approximate 15% interest in Elara Technologies Pte. Ltd. (“Elara”), a leading online real estate services provider in India that owns and operates PropTiger.com, Housing.com and Makaan.com. REA Group also owns a 20% interest in Move, as referenced above. REA Group competes primarily with other property websites in its geographic markets, including domain.com.au in Australia. Move Move is a leading provider of online real estate services in the U.S. Move primarily operates realtor.com®, a premier real estate information and services marketplace, under a perpetual agreement and trademark license 10 with the National Association of Realtors® (“NAR”). Through realtor.com®, consumers have access to over 120 million properties across the U.S., including the most complete collection of homes and properties listed with Multiple Listing Services (“MLS”) and displayed for sale among the competing national online portals and an extensive database of “off-market” properties. Realtor.com® and its related mobile applications display approximately 98% of all MLS-listed, for-sale properties in the U.S., which are primarily sourced directly from relationships with MLSs across the country. Approximately 95% of its for-sale listings are updated at least every 15 minutes, on average, with the remaining listings updated daily. Realtor.com®’s content advantage attracts a highly engaged consumer audience. Based on internal data, realtor.com® and its mobile sites had 58 million average monthly unique users during the quarter ended June 30, 2017. These users viewed an average of over two billion pages and spent an average of over one billion minutes on the realtor.com® website and mobile applications each month. Realtor.com® generates the majority of its revenues through the sale of listing advertisement products, including ConnectionsSM for Buyers and AdvantageSM Pro, which allow real estate agents, brokers and franchises to enhance, prioritize and connect with consumers on for-sale property listings within the realtor.com® website and mobile applications. Listing advertisements are typically sold on a subscription basis. Realtor.com® also derives revenue from sales of non-listing advertisement, or Media, products to real estate, finance, insurance, home improvement and other professionals that enable those professionals to connect with realtor.com®’s highly engaged and valuable consumer audience. Media products include sponsorships, display advertisements, text links, directories and Digital Advertising Package. Non-listing advertisement pricing models include cost per thousand, cost per click, cost per unique user and subscription-based sponsorships of specific content areas or targeted geographies. In addition to realtor.com®, Move also offers a number of professional software and services products. These include the Top Producer® and FiveStreet® productivity and lead management tools and services, which are tailored to real estate agents and sold on a subscription basis, as well as the ListHubTM service, which syndicates for-sale listing information from MLSs and other reliable data sources, such as real estate brokerages, and distributes that content to an array of web sites. Listing syndication pricing includes fixed- or variable-pricing models based on listing counts, while ListHubTM’s advanced reporting products are sold on a monthly subscription basis. Move competes primarily with other real estate websites focused on the U.S. real estate market, including zillow.com and trulia.com. Cable Network Programming The Company’s Cable Network Programming segment consists of FOX SPORTS Australia and Australian News Channel Pty Ltd (“ANC”). FOX SPORTS Australia FOX SPORTS Australia is the leading sports programming provider in Australia based on total viewing hours as of June 30, 2017. FOX SPORTS Australia is focused on live national and international sports events and provides featured original and licensed premium sports content tailored to the Australian market, including live sports such as National Rugby League, the domestic football league, international cricket and the Australian Rugby Union, as well as various motorsports programming. FOX SPORTS Australia offers eight high definition television channels distributed via cable, satellite and Internet Protocol, or IP, and several interactive viewing applications. Its channels consist of FOX SPORTS 501, FOX LEAGUE, FOX SPORTS 503, FOX FOOTY, FOX SPORTS 505, FOX SPORTS 506, FOX SPORTS MORE and FOX SPORTS NEWS that broadcast over 13,000 hours of live sports programming per year reaching FOXTEL, Telstra and Optus subscription television customers. FOX SPORTS Australia’s access to compelling local and international sports programming, as well as its production of high-quality original sports content has made it the leading sports programming provider in 11 Australia. FOX SPORTS Australia also operates foxsports.com.au, a leading general sports website in Australia, and offers several interactive mobile and tablet applications that extend the reach of its content across multiple platforms. FOX SPORTS Australia is distributed via longstanding carriage agreements with pay-TV providers (mainly Foxtel) in Australia and generates revenue primarily through affiliate fees payable under these carriage agreements, as well as advertising sales. Results at the Cable Network Programming segment can fluctuate due to the timing and mix of the Company’s local and international sports programming, as expenses associated with licensing certain programming rights are recognized during the applicable season or event. FOX SPORTS Australia competes primarily with ESPN, beIN SPORTS, the Free-To-Air (“FTA”) channels and certain telecommunications companies in Australia. Australian News Channel ANC, acquired in December 2016, owns and operates six channels featuring the latest in news, politics, sports, entertainment, public affairs, business and weather. ANC is licensed by Sky International AG to use Sky trademarks and domain names in connection with its operation and distribution of channels and services. ANC’s channels consist of SKY NEWS LIVE, SKY NEWS BUSINESS, SKY NEWS WEATHER, SKY NEWS Multiview, A-PAC Australia’s Public Affairs Channel and SKY NEWS New Zealand. ANC channels are broadcast throughout Australia and New Zealand and available on Foxtel and Sky Television. ANC also owns and operates the international Australia Channel IPTV service and offers content across a variety of digital media platforms, including mobile, podcasts and social media websites. ANC competes primarily with other news providers in Australia and New Zealand via its subscription television channels, third party content arrangements and free domain website. Its Australia Channel IPTV service also competes against “over-the-top” IPTV subscription-based news providers in regions outside of Australia and New Zealand. Other The Other segment includes the Company’s general corporate overhead expenses, corporate Strategy and Creative Group and costs related to the U.K. Newspaper Matters. The Company’s corporate Strategy and Creative Group was formed to identify new products and services across the Company’s businesses to increase revenues and profitability and to target and assess potential acquisitions, investments and dispositions. Initiatives include News IQ, the Company’s new data-driven digital advertising platform that will enable targeting and engagement of audiences at scale across our network of assets. As part of its ongoing role in assessing potential acquisitions and investments, the corporate Strategy and Creative Group also oversaw the Company’s acquisitions of Move, a leading provider of online real estate services in the U.S., and Unruly, a leading global video advertising distribution platform, as well as its strategic digital investments in India, including Elara, which owns PropTiger.com, Housing.com and Makaan.com. Equity Investments Foxtel The Company and Telstra, an ASX-listed telecommunications company, each own 50% of Foxtel, the largest pay-TV provider in Australia. Foxtel had approximately 2.8 million subscribing households throughout Australia as of June 30, 2017 through cable, satellite and IP distribution. Foxtel delivers 200 channels (including standard definition channels, high definition versions of some of those channels and audio and interactive channels) covering news, sports, general entertainment, movies, documentaries, music and children’s programming. Foxtel’s premium content includes FOX SPORTS Australia’s suite of sports channels such as FOX SPORTS 501, FOX LEAGUE, FOX SPORTS 503, FOX 12 FOOTY, FOX SPORTS 505, FOX SPORTS 506, FOX SPORTS MORE and FOX SPORTS NEWS, and television content from HBO, FOX and Universal, among others. Foxtel also owns and operates 30 channels, including general entertainment and movie channels, and sources an extensive range of movie programming through arrangements with major U.S. studios. Foxtel’s channels are distributed to subscribers via both Telstra’s hybrid fibrecoaxial cable network and a long-term contracted satellite platform provided by Optus. Cable and satellite distribution is enabled by Foxtel’s set-top boxes, including the iQ3. Foxtel also offers versions of its services via the Internet through Foxtel Now, an Internet television service available on a number of compatible devices (including mobile phones, tablets, personal computers, Chromecast, Telstra TV, Sony PlayStation, Xbox One and select smart TVs), and Foxtel App, an Internet television service that allows subscribers to watch Foxtel channels via mobile devices and tablets. Foxtel also offers a triple play bundle product, which consists of Foxtel’s existing pay-TV services, sold together with broadband and/or home phone services. Foxtel generates revenue primarily through subscription revenue as well as advertising revenue. For the year ended June 30, 2017, in accordance with U.S. generally accepted accounting principles (“GAAP”), Foxtel recorded revenues of $2.4 billion, net income of $59 million and earnings before interest, taxes and depreciation and amortization, or EBITDA, of $568 million. Management believes that EBITDA is an appropriate measure for evaluating the operating performance of this business for the reasons set forth in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Segment Analysis” with respect to Segment EBITDA. In the year ended June 30, 2017, Foxtel’s average broadcast residential recurring subscription revenue per user, or ARPU, was A$86 (US$65) per month (as calculated by Foxtel), and its annualized residential subscriber churn rate based on data for the year ended June 30, 2017 was 15.1% (as calculated by Foxtel). In addition, Foxtel had approximately $1.65 billion of indebtedness outstanding as of June 30, 2017 (excluding $740 million of shareholder loans due to Telstra and the Company). The amount included for Foxtel in the Company’s Equity earnings of affiliates was $(265) million for the year ended June 30, 2017. The Company and Telstra each have the right to appoint one-half of the board of directors of Foxtel. In addition, the Company has the right to appoint the Chief Executive Officer and Chief Financial Officer of Foxtel, while Telstra has the right to terminate these officers. Foxtel competes for audiences primarily with FTA TV operators in Australia, including the three major commercial FTA networks and two major government-funded FTA broadcasters, as well as other pay-TV operators, IP television providers and subscription video-on-demand services such as Fetch TV, Netflix, Stan and Amazon Prime Video. Foxtel provides a 200-channel selection with premium and exclusive content and a wide array of digital and mobile features that are not available to viewers on these alternative providers. Through innovations such as digital HD channels, the extension of pay-TV programming to mobile devices, the use of DVR and Electronic Program Guide technology, including the iQ3 set-top box, its investment in On Demand capability and programming and benefits through broadband bundling, the Company believes Foxtel offers subscribers a compelling alternative to its competitors. Governmental Regulation General Various aspects of the Company’s activities are subject to regulation in numerous jurisdictions around the world. The introduction of new laws and regulations in countries where the Company’s products and services are produced or distributed, and changes in the enforcement of existing laws and regulations in those countries, could have a negative impact on the Company’s interests. Australian Media Regulation The Company’s subscription television interests are subject to Australia’s regulatory framework for the broadcasting industry. The key regulatory body for the Australian broadcasting industry is the Australian Communications and Media Authority. 13 Key regulatory issues for subscription television providers include: (a) anti-siphoning restrictions—currently under the ‘anti-siphoning’ provisions of the Australian Broadcasting Services Act 1992 (Cth), subscription television providers are prevented from acquiring rights to televise certain listed events (for example, the Olympic Games and certain Australian Rules football and cricket matches) unless national and commercial television broadcasters have not obtained these rights 12 weeks before the start of the event or the rights to televise are also held by commercial television licensees who have rights to televise the event to more than 50% of the Australian population or the rights to televise are also held by one of Australia’s two major government- funded broadcasters; and (b) the Broadcasting Services Act also may impact the Company’s ownership structure and operations and restrict its ability to take advantage of acquisition or investment opportunities including, for example, preventing it from exercising control of a commercial television broadcasting license, a commercial radio license and a newspaper in the same license area. Data Privacy and Security Our business activities are subject to laws and regulations governing the collection, use, sharing, protection and retention of personal data, which continue to evolve and have implications for how such data is managed. For example, in the U.S., certain of the Company’s websites, mobile applications and other online business activities are subject to the Children’s Online Privacy Protection Act of 1998, which prohibits websites from collecting personally identifiable information online from children under age 13 without prior parental consent. In addition, the Federal Trade Commission continues to expand its application of general consumer protection laws to commercial data practices, including to the use of personal and profiling data from online users to deliver targeted Internet advertisements. Most states have also enacted legislation regulating data privacy and security, including laws requiring businesses to provide notice to state agencies and to individuals whose personally identifiable information has been disclosed as a result of a data breach. Similar laws and regulations have been implemented in many of the other jurisdictions in which the Company operates, including the European Union and Australia. For example, the European Union adopted the General Data Protection Regulation (“GDPR”), which is intended to provide a uniform set of rules for personal data processing throughout the European Union and to replace the existing Data Protection Directive (Directive 95/46/EC). Fully applicable and enforceable as of May 25, 2018, the GDPR expands the regulation of the collection, processing, use and security of personal data, contains stringent conditions for consent from data subjects, strengthens the rights of individuals, including the right to have personal data deleted upon request, continues to restrict the trans-border flow of such data, requires companies to conduct privacy impact assessments to evaluate data processing operations that are likely to result in a high risk to the rights and freedoms of individuals, requires mandatory data breach reporting and notification, significantly increases penalties for non-compliance (up to 20 million Euros, or approximately 23 million U.S. dollars, or 4% of an entity’s worldwide annual turnover in the preceding financial year, whichever is higher) and increases the enforcement powers of the data protection authorities. The European Union is also considering an update to its Privacy and Electronic Communication (e-Privacy) Directive to, among other things, amend the current directive’s rules on the use of cookies. In 2015, the European Court of Justice invalidated the U.S.-E.U. Safe Harbor framework, one of the legal mechanisms through which personal data could be transferred from the European Union to the United States, and the mechanism relied upon by the Company with respect to certain personal data transfers among the Company’s businesses, and between the Company and some of its third party service providers. In 2016, the European Commission adopted a new transfer mechanism between the U.S. and the E.U. called the Privacy Shield. The Company has not certified to, and does not rely on, the Privacy Shield framework for data transfers among the Company’s businesses and instead relies on other mechanisms. However, certain of the Company’s service providers do rely on the Privacy Shield. The Privacy Shield is subject to significant uncertainty, including an annual review procedure by U.S. and E.U. authorities, that could affect the Company’s or its service providers’ obligations thereunder. The other mechanisms that the Company and certain of its service providers rely on to address the European data protection requirements for transfers of data, including the European Union standard 14 Model Contractual Clauses, are also subject to uncertainty and legal challenges. Challenges to existing data transfer mechanisms, and any future legal challenges to data transfer mechanisms that may be adopted, could cause the Company to incur additional costs, require us to change business practices or affect the manner in which we provide our services. In Australia, data privacy laws impose additional requirements on organizations that handle personal data by, among other things, requiring the disclosure of cross-border data transfers, placing restrictions on direct marketing practices and imposing mandatory data breach reporting, and additional data privacy and security requirements and industry standards are under consideration. Industry participants in the U.S., Europe and Australia have taken steps to increase compliance with relevant industry-level standards and practices, including the implementation of self-regulatory regimes for online behavioral advertising that impose obligations on participating companies, such as the Company, to give consumers a better understanding of advertisements that are customized based on their online behavior. The interpretation and application of data privacy and security laws are often uncertain, in flux, and evolving in the United States and internationally. The Company continues to monitor pending legislation and regulatory initiatives to ascertain relevance, analyze impact and develop strategic direction surrounding regulatory trends and developments, including any changes required in the Company’s data privacy and security compliance programs. U.K. Press Regulation As a result of the implementation of recommendations of the Leveson inquiry into the U.K. press, which was established by former Prime Minister David Cameron in mid-2011, a Royal Charter on Self-Regulation of the Press was granted in 2013, which established a Press Recognition Panel responsible for approving, overseeing and monitoring a new press regulatory body or bodies. Once approved by the Press Recognition Panel, the new press regulatory body or bodies would be responsible for overseeing participating publishers. In addition to the Royal Charter and establishment of the new Press Recognition Panel, legislation has been passed that provides that publishers who are not members of an approved regulator may be liable for exemplary damages in certain cases where such damages are not currently awarded and, if Section 40 of the Crime and Courts Act 2013 is enacted, the payment of costs for both parties in libel actions in certain circumstances. In late 2013, publications representing the majority of the industry in the U.K., including News UK, entered into binding contracts to form an alternative new regulator instead, the Independent Press Standards Organisation, or IPSO. IPSO, which began operating in September 2014, currently has no plans to apply for recognition from the Press Recognition Panel. IPSO has an independent chairman and a 12-member board, the majority of which are independent. IPSO oversees the Editors’ Code of Practice, requires members to implement appropriate internal governance processes and requires self-reporting of any failures, provides a complaints handling service, has the ability to require publications to print corrections and has the power to investigate serious or systemic breaches of the Editors’ Code of Practice and levy fines of up to £1 million. IPSO has also introduced a pilot arbitration scheme to resolve claims against publications. The burdens IPSO imposes on the print media, including the Company’s newspaper publishing businesses in the U.K., may result in competitive disadvantages versus other forms of media and may increase the costs of regulatory compliance. U.K. Radio Broadcasting Regulation The Company’s radio stations in the U.K. and Ireland are also subject to governmental regulation by the relevant broadcast authorities as the Company is required to obtain and maintain licenses from such authorities to operate these stations. Although the Company expects its licenses will, where relevant, be renewed in the ordinary course upon their expiration, there can be no assurance that this will be the case. Non-compliance by the Company with the requirements associated with such licenses or other applicable laws and regulations, including of the relevant 15 authority, could result in fines, additional license conditions, license revocation or other adverse regulatory actions. Intellectual Property The Company’s intellectual property assets include: copyrights in newspapers, books, television programming and other content and technologies; trademarks in names and logos; trade names; domain names; and licenses of intellectual property rights. In addition, its intellectual property assets include patents or patent applications for inventions related to its products, business methods and/or services, none of which are material to its financial condition or results of operations. The Company derives value and revenue from these assets through, among other things, print and digital newspaper and magazine subscriptions and sales, the sale, distribution and/or licensing of print and digital books, the sale of subscriptions to its content and information services, the operation of websites and other digital properties and the distribution and/or licensing of its television programming to cable and satellite television services. The Company devotes significant resources to protecting its intellectual property assets in the U.S., the U.K., Australia and other foreign territories. To protect these assets, the Company relies upon a combination of copyright, trademark, unfair competition, patent, trade secret and other laws and contract provisions. However, there can be no assurance of the degree to which these measures will be successful in any given case. Policing unauthorized use of the Company’s products, services and content and related intellectual property is often difficult and the steps taken may not in every case prevent the infringement by unauthorized third parties of the Company’s intellectual property. The Company seeks to limit such threat through a combination of approaches, including pursuing legal sanctions for infringement, promoting appropriate legislative initiatives and international treaties and enhancing public awareness of the meaning and value of intellectual property and intellectual property laws. Piracy, including in the digital environment, continues to present a threat to revenues from products and services based on intellectual property. Third parties may challenge the validity or scope of the Company’s intellectual property from time to time, and such challenges could result in the limitation or loss of intellectual property rights. Irrespective of their validity, such claims may result in substantial costs and diversion of resources that could have an adverse effect on the Company’s operations. Moreover, effective intellectual property protection may be either unavailable or limited in certain foreign territories. Therefore, the Company engages in efforts to strengthen and update intellectual property protection around the world, including efforts to ensure the effective enforcement of intellectual property laws and remedies for infringement. Raw Materials As a major publisher of newspapers, magazines, free-standing inserts and books, the Company utilizes substantial quantities of various types of paper. In order to obtain the best available prices, substantially all of the Company’s paper purchasing is done on a regional, volume purchase basis, and draws upon major paper manufacturing countries around the world. The Company believes that under present market conditions, its sources of paper supply used in its publishing activities are adequate. Employees As of June 30, 2017, the Company had approximately 26,000 employees, of whom approximately 9,000 were located in the U.S., 4,000 were located in the U.K. and 9,000 were located in Australia. Of the Company’s employees, approximately 5,000 were represented by various employee unions. The contracts with such unions will expire during various times over the next several years. The Company believes its current relationships with employees are generally good. 16 ITEM 1A. RISK FACTORS You should carefully consider the following risks and other information in this Annual Report on Form 10-K in evaluating the Company and its common stock. Any of the following risks, or other risks or uncertainties not presently known or currently deemed immaterial, could materially and adversely affect the Company’s business, results of operations or financial condition, and could, in turn, impact the trading price of the Company’s common stock. A Decline in Customer Advertising Expenditures in the Company’s Newspaper and Other Businesses Could Cause its Revenues and Operating Results to Decline Significantly in any Given Period or in Specific Markets. The Company derives substantial revenues from the sale of advertising through its newspapers, integrated marketing services, digital media properties and radio stations. The Company and its affiliates also derive revenues from the sale of advertising on their cable channels and pay-TV programming. Expenditures by advertisers tend to be cyclical, reflecting overall economic and business conditions, as well as budgeting and buying patterns. National and local economic conditions, particularly in major metropolitan markets, affect the levels of retail, national and classified advertising revenue. Changes in gross domestic product, consumer spending, housing sales, auto sales, unemployment rates and job creation, as well as federal, state and local election cycles, all impact demand for advertising. Certain sectors of the economy account for a significant portion of the Company’s advertising revenues, including retail, technology and finance. Some of these sectors, such as retail, are more susceptible to weakness in economic conditions and have also been under pressure from increased online competition. A decline in the economic prospects of these and other advertisers or the economy in general could alter current or prospective advertisers’ spending priorities or result in consolidation or closures across various industries, which may also reduce the Company’s overall advertising revenue. The Company’s ability to generate advertising revenue is also dependent on demand for the Company’s products and services, demographics of the customer base, advertising rates and results observed by advertisers. For example, circulation levels for the Company’s newspapers, ratings points for its cable channels and number of listeners for its radio stations are among the factors that are weighed by advertisers when determining the amount of advertising to purchase from the Company as well as advertising rates. For the Company’s digital media properties, including its digital real estate sites, advertisers use various metrics to evaluate consumer demand such as the number of visits, number of users and user engagement. Demand for the Company’s products and services depends in turn upon the Company’s ability to differentiate and distinguish those products and services and anticipate and adapt to changes in consumer tastes and behaviors in a timely manner. Technological and other developments may cause changes in consumer behavior that could affect the attractiveness of the Company’s offerings to advertisers. The increasing popularity of digital media among consumers as a source of news and other content is driving a corresponding shift in advertising from traditional print to digital, and the Company’s print advertising revenues have declined in each of its last three fiscal years. The development of new devices and technologies, as well as higher consumer engagement with other forms of digital media such as online and mobile social networking, are increasing the number of media choices and formats available to audiences, resulting in audience fragmentation and increased competition for advertising. The range of advertising choices across digital products and platforms and the large inventory of available digital advertising space have historically resulted in significantly lower rates for digital advertising than for print advertising. In addition, in the past, rates have been generally lower for mobile advertising than for desktop advertising. As a result, increasing consumer reliance on mobile devices may add additional pricing pressure. Consequently, the Company’s digital advertising revenue may not be able to replace print advertising revenue lost as a result of the shift to digital consumption. The digital advertising market also continues to undergo significant changes that may further impact digital advertising revenues. Digital advertising networks and exchanges, real-time bidding and other programmatic 17 buying channels that allow advertisers to buy audiences at scale are playing a more significant role in the advertising marketplace and may cause further downward pricing pressure. New delivery platforms may also lead to loss of distribution and pricing control and loss of a direct relationship with consumers. In addition, evolving standards for the delivery of digital advertising, including the industry-wide standard on viewability, as well as the development and adoption of technology designed to block, change the location of, or obscure, the display of advertising on websites and mobile devices and/or block or delete cookies, may also negatively impact digital advertising revenues. As the digital advertising market continues to evolve, the Company’s ability to compete successfully for advertising budgets will depend on, among other things, its ability to drive scale, engage and grow digital audiences, derive better demographic and other information about its users, develop new digital advertising products and formats such as branded content, and video and mobile advertising, and prove the value of its advertising and the effectiveness of the Company’s platforms to its advertising customers, including through more targeted, data-driven offerings. While the Company has adopted a number of strategies and initiatives to address these challenges, there can be no guarantee that its efforts will be successful. If the Company is unable to demonstrate the continuing value of its various platforms and high-quality content and brands or offer advertisers unique multi-platform advertising programs, its results may suffer. A decrease in advertising expenditures by the Company’s customers, reduced demand for the Company’s offerings or a surplus of advertising inventory could lead to a reduction in pricing and advertising spending, which could have an adverse effect on the Company’s businesses and assets, results of operations and financial condition. The Company’s Businesses Face Significant Competition from Other Sources of News, Information and Entertainment Content. The Company’s businesses face significant competition from other sources of news, information and entertainment content, including both traditional and new content providers. This competition has intensified as a result of the continued development of new digital and other technologies and platforms, and the Company may be adversely affected if consumers migrate to other media alternatives. For example, advertising and circulation revenues in the Company’s News and Information Services segment may continue to decline, reflecting general trends in the newspaper industry such as declining newspaper buying by younger audiences and consumers’ increasing reliance on a variety of content providers, including news aggregation websites, social media platforms and customized news feeds, for the delivery of news and information through the Internet, often without charge. Internet sites and mobile applications devoted to recruitment, automobile sales and real estate services have become significant competitors of the Company’s newspapers and websites for classified advertising sales. In addition, due to innovations in content distribution platforms, consumers are now more readily able to watch Internet-delivered content on television sets and mobile devices, in some cases also without charge, which could reduce consumer demand for the Company and its affiliates’ television programming and pay-TV services and adversely affect both its subscription revenue and advertisers’ willingness to purchase television advertising from the Company. The Company’s ability to compete effectively depends upon its ability to differentiate and distinguish its products and services and anticipate and adapt to changes in consumer tastes and behaviors, which in turn, depends on many factors both within and beyond its control. For example, the Company relies on audience acceptance of the high-quality differentiated content in its newspapers, book titles, cable channels, pay-TV programming and radio stations in order to retain and grow their audiences. Similarly, the success of the Company’s digital real estate services business depends in part on providing more comprehensive, current and accurate real estate listing data than its competitors, which the Company generally obtains through short-term arrangements with MLSs, real estate brokers, real estate agents and other third parties that may not be renewed and/or may be terminated with limited or no notice. However, when faced with a multitude of media choices, consumers may place greater value on when, where, how and at what price they consume content than they do on the source, quality or reliability of such content. Online traffic is also driven by internet search results, which are based on algorithms that may, among other things, de-prioritize the Company’s paid content. Any failure to 18 successfully manage, and adapt to changes in, search engine optimization across the Company’s businesses could result in significant decreases in traffic to our digital properties, lower advertiser interest in those properties and increased costs if free traffic is replaced with paid traffic or otherwise adversely affect the Company’s business. Some of the Company’s current and potential competitors may have greater resources or better competitive positions in certain areas than it does, which may allow them to respond more effectively to new technologies and changes in market conditions. If the Company is unable to compete successfully against existing or future competitors, its business, results of operations and financial condition could be adversely affected. The Company Must Respond to New Technologies and Changes in Consumer Behavior and Continue to Innovate and Provide Useful Products in Order to Remain Competitive. Technology continues to evolve rapidly, and the resulting changes in consumer behavior and preferences create constant opportunities for new and existing competitors that can quickly render the Company’s products and services less valuable. For example, alternative methods for the delivery, storage and consumption of digital content, including the distribution of news and other content through social networking tools and on mobile and other devices, often without charge, digital distribution models for books and Internet and mobile distribution of video content via streaming and downloading, have empowered consumers to seek more control over when, where, how and at what price they consume digital content. Enhanced Internet capabilities and the development of new media channels may continue to reduce the demand for the Company’s newspapers, television programs and other products, and if the Company is unable to introduce engaging, useful and reliable new products tailored for, and available across, these new devices and platforms, including mobile, the Company’s revenues, results of operations and financial condition could be adversely affected. Other digital platforms and technologies, such as user-generated sites and self-publishing tools, have also reduced the effort and expense of producing and distributing content on a wide scale, allowing digital content providers, customers, suppliers and other third parties to compete with us, often at a lower cost. This trend may drive down the price consumers are willing to spend on the Company’s products disproportionately to the costs associated with generating content and result in relatively low barriers to entry for competing Internet-based products and services. Additional digital distribution channels, such as the Internet and online retailers, have presented, and may continue to present, challenges to the Company’s businesses, including its traditional book publishing model, which could adversely affect sales volume and/or pricing. In order to succeed, the Company must continue to innovate to ensure that its products and services remain relevant and useful for consumers and customers. The Company may be required to incur significant capital expenditures and other costs in order to respond to new technologies, new and enhanced offerings from its competitors and changes in consumer behavior, and to attract and retain employees with the skill sets and knowledge base needed to successfully operate its digital businesses, and there is a risk that its responses and strategies to remain competitive, including distribution of its content on a “pay” basis, may not be adopted by consumers. The Company’s failure to protect and exploit the value of its content, while responding to and developing new technologies, distribution channels and platforms, products, services and business models to take advantage of advancements in technology and the latest consumer preferences could cause its customer, audience and/or user base or its advertisers to decline, in some cases precipitously, and could have a significant adverse effect on its businesses, asset values, financial condition and results of operations. The Inability to Renew Sports Programming Rights Could Cause the Revenue of Certain of the Company’s Operating Businesses to Decline Significantly in any Given Period, and Programming Costs Could Also Increase Upon Renewal. The sports rights contracts between certain of the Company’s operating businesses, on the one hand, and various professional sports leagues and teams, on the other, have varying duration and renewal terms. As these contracts expire, renewals on favorable terms may be sought; however, third parties may outbid the current rights holders 19 for the rights contracts. In addition, professional sports leagues or teams may create their own networks or the renewal costs could substantially exceed the original contract cost. The loss of rights could impact the extent of the sports coverage offered by the Company and its affiliates and lead to customer or audience dissatisfaction or, in some cases, loss of customers or audiences, which could, in turn, adversely affect its revenues. Upon renewal, the Company’s results could be adversely affected if escalations in sports programming rights costs are unmatched by increases in subscriber and carriage fees and advertising rates. Fluctuations in Foreign Currency Exchange Rates Could Have an Adverse Effect on the Company’s Results of Operations. The Company has significant operations in a number of foreign jurisdictions and certain of its operations are conducted in foreign currencies, primarily the Australian dollar and the British pound sterling. Since the Company’s financial statements are denominated in U.S. dollars, changes in foreign currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, a currency translation impact on the Company’s earnings, which could, in turn, have an adverse effect on its reported results of operations in a given period or in specific markets. In particular, the British pound sterling experienced a significant weakening against the U.S. dollar following the U.K.’s June 2016 referendum in which voters approved the U.K.’s exit from the European Union, commonly referred to as “Brexit.” This weakness caused the local currency results of the Company’s U.K. operations to be translated into fewer U.S. dollars, which adversely affected our reported results. The impact of foreign currency fluctuations of the U.S. dollar against the British pound sterling resulted in a decrease in reported revenues at our U.K. newspapers of approximately $177 million for the fiscal year ended June 30, 2017 as compared to the prior year. Exchange rates between the U.S. dollar and the British pound sterling are expected to remain volatile due to recent political uncertainty in the U.K. and the negotiation of its exit from the European Union. Weak Domestic and Global Economic Conditions and Volatility and Disruption in the Financial and Other Markets May Adversely Affect the Company’s Business. The U.S. and global economies have undergone, and continue to experience, periods of economic and market uncertainty, including following Brexit and the most recent U.S. presidential election. These conditions have in the past resulted in, among other things, a general tightening in the credit markets, limited access to the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, lower consumer and business spending, lower consumer net worth and a dramatic decline in the real estate market. The resulting pressure on the labor and retail markets and the downturn in consumer confidence weakened the economic climate in certain markets in which the Company does business and had an adverse effect on its business, results of operations, financial condition and liquidity, including advertising revenues. Any continued or recurring economic weakness could further impact the Company’s business, reduce its advertising and other revenues and negatively impact the performance of its newspapers, books, digital real estate services business, television operations, radio stations and other consumer products and services. In addition, further volatility and disruption in the financial markets could make it more difficult and expensive for the Company to obtain financing. These conditions could also impair the ability of those with whom the Company does business to satisfy their obligations to the Company, including as a result of their inability to obtain capital on acceptable terms. The Company is particularly exposed to certain Australian business risks, including specific Australian legal and regulatory risks, consumer preferences and competition, because it holds a substantial amount of Australian assets and generated approximately 29% of its fiscal 2017 revenues from Australia. As a result, the Company’s results of operations may be adversely affected by negative developments in the Australian market. The Company also generated approximately 19% of its fiscal 2017 revenues from the U.K., which is experiencing a period of economic and market uncertainty as a result of Brexit. While the impact of Brexit is difficult to predict, it could significantly affect the fiscal, monetary and regulatory landscape, lead other member countries to consider leaving the European Union, result in additional volatility and disruption in the financial and other markets and have an 20 adverse impact on the Company’s businesses in the U.K. and elsewhere. Although the Company believes that its capitalization, operating cash flow and current access to credit markets, including the Company’s revolving credit facility, will give it the ability to meet its financial needs for the foreseeable future, there can be no assurance that any further volatility and disruption in domestic and global capital and credit markets will not impair the Company’s liquidity or increase its cost of borrowing. The Company Has Made and May Continue to Make Strategic Acquisitions and Investments That Introduce Significant Risks and Uncertainties. In order to position its business to take advantage of growth opportunities, the Company has made and may continue to make strategic acquisitions and investments that involve significant risks and uncertainties. These risks and uncertainties include, among others: (1) the difficulty in integrating newly acquired businesses and operations in an efficient and effective manner, (2) the challenges in achieving strategic objectives, cost savings and other anticipated benefits, (3) the potential loss of key employees of the acquired businesses, (4) with respect to investments, risks associated with the inability to control the operations of the business, (5) the risk of diverting the attention of the Company’s senior management from the Company’s operations, (6) the risks associated with integrating financial reporting and internal control systems, (7) the difficulties in expanding information technology systems and other business processes to accommodate the acquired businesses, (8) potential future impairments of goodwill associated with the acquired business or investment, (9) in the case of foreign acquisitions and investments, the impact of specific economic, tax, currency, political, legal and regulatory risks associated with the relevant countries, (10) liabilities, both known and unknown, associated with the acquired businesses or investments and (11) in some cases, increased regulation. If any acquired business or investment fails to operate as anticipated or an acquired business cannot be successfully integrated with the Company’s existing businesses, the Company’s business, results of operations, financial condition and reputation could be adversely affected, and the Company may be required to record non- cash impairment charges for the write-down of certain acquired assets. The Company Does Not Have the Right to Manage Foxtel, Which Means It is Not Able to Cause Foxtel to Operate or Make Corporate Decisions in a Manner that is Favorable to the Company. The Company does not have the right to manage the business or affairs of Foxtel. While the Company’s rights include the right to appoint one-half of the board of directors of Foxtel, the Company is not able to cause management or the board of directors to take any specific actions on its behalf, including with regards to declaring and paying dividends. The Company Relies on Network and Information Systems and Other Technology Whose Failure or Misuse Could Cause a Disruption of Services or Loss or Improper Disclosure of Personal Data, Business Information, Including Intellectual Property, or Other Confidential Information, Resulting in Increased Costs, Loss of Revenue or Other Harm to our Business. Network and information systems and other technologies, including those related to the Company’s network management, are important to its business activities. The Company also relies on third party providers for certain technology and “cloud-based” systems and services that support a variety of business operations. Network and information systems-related events affecting the Company’s systems, or those of third parties upon which the Company’s business relies, such as computer compromises, cyber threats and attacks, computer viruses, worms or other destructive or disruptive software, process breakdowns, denial of service attacks, malicious social engineering or other malicious activities, or any combination of the foregoing, as well as power outages, equipment failure, natural disasters (including extreme weather), terrorist activities, war, human or technological error or malfeasance that may affect such systems, could result in disruption of the Company’s business and/or loss, corruption or improper disclosure of personal data, business information, including intellectual property, or other confidential information. In addition, any design or manufacturing defects in, or the improper 21 implementation of, hardware or software applications the Company develops or procures from third parties could unexpectedly compromise information security. In recent years, there has been a rise in the number of cyberattacks on companies’ network and information systems, and such attacks have become more sophisticated, targeted and difficult to detect and prevent against. As a result, the risks associated with such an event continue to increase, particularly as the Company’s digital businesses expand. The Company has experienced, and expects to continue to be subject to, cybersecurity threats and incidents, none of which have been material to the Company to date, individually or in the aggregate. While the Company and its vendors have developed and implemented security measures and internal controls that are designed to protect personal data, business information, including intellectual property, and other confidential information, to prevent data loss, and to prevent or detect security breaches, such security measures cannot provide absolute security and may not be successful in preventing these events from occurring, particularly given that techniques used to access, disable or degrade service, or sabotage systems change frequently, and any network and information systems-related events could require the Company to expend significant resources to remedy such event. Moreover, the development and maintenance of these measures is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. While the Company maintains cyber risk insurance, this insurance may not be sufficient to cover all losses from any future breaches of our systems. A significant failure, compromise, breach or interruption of the Company’s systems, or those of third parties upon which its business relies, could result in a disruption of its operations, customer, audience or advertiser dissatisfaction, damage to its reputation or brands, regulatory investigations and enforcement actions, lawsuits, remediation costs, a loss of customers, audience, advertisers or revenues and other financial losses. If any such failure, interruption or similar event results in the improper disclosure of information maintained in the Company’s information systems and networks or those of its vendors, including financial, personal, credit card, confidential and proprietary information relating to personnel, customers, vendors and the Company’s business, including its intellectual property, the Company could also be subject to liability under relevant contractual obligations and laws and regulations protecting personal data and privacy. In addition, media or other reports of perceived security vulnerabilities to our systems or those of third parties upon which the Company’s business relies, even if nothing has actually been attempted or occurred, could also adversely impact our brand and reputation and materially affect our business. The Company Could Suffer Losses Due to Asset Impairment and Restructuring Charges. As a result of adverse developments in the Company’s industry and challenging economic and market conditions, the Company may recognize impairment charges for write-downs of goodwill, intangible assets, investments and other long-lived assets, as well as restructuring charges relating to the reorganization of its businesses, which negatively impact the Company’s financial results. When the Company acquires a business, it records goodwill in an amount equal to the excess of the fair value of the acquired business over the fair value of the identifiable assets and liabilities, including intangible assets, as of the acquisition date. The Company’s management must regularly evaluate goodwill and other intangible assets expected to contribute indefinitely to the Company’s cash flows in order to determine whether, based on projected discounted future cash flows, the carrying value for such assets exceeds current fair value and the Company should recognize an impairment. In accordance with GAAP, the Company performs an annual impairment assessment of its recorded goodwill and indefinite-lived intangible assets, including newspaper mastheads, distribution networks, publishing imprints, radio broadcast licenses, trademarks and trade names, channel distribution agreements, publishing rights and customer relationships, during the fourth quarter of each fiscal year. The Company also continually evaluates whether current factors or indicators, such as prevailing conditions in the business environment, capital markets or the economy generally and actual or projected operating results, require the performance of an interim impairment assessment of those assets, as well as other investments and long-lived assets, or require the Company to engage in any additional business restructurings to address these conditions. Any significant shortfall, now or in the future, in advertising revenue and/or the expected popularity of the programming for which the Company has acquired rights could lead to a downward revision in the fair value of certain reporting units. Any downward revisions in the fair value 22 of a reporting unit, indefinite-lived intangible assets, investments or other long-lived assets could result in additional impairments for which non-cash charges would be required. Any such charge could be material to the Company’s reported results of operations. For example, in fiscal 2017, the Company recognized non-cash impairment charges of approximately $785 million, primarily related to the write-down of fixed assets at its U.K. and Australian newspapers, and a $227 million non-cash write-down of the carrying value of its investment in Foxtel to fair value. In addition, as of June 30, 2017, the Company had approximately $1.4 billion of goodwill and $1.2 billion of investments that are at risk for future impairment because the fair values of the corresponding reporting units and investments exceeded their carrying values by less than 3%. The Company may also incur additional restructuring charges in the future if it is required to further realign its resources in response to significant shortfalls in revenue or other adverse trends. The Company’s Business Could Be Adversely Impacted by Changes in Governmental Policy and Regulation. Various aspects of the Company’s activities are subject to regulation in numerous jurisdictions around the world, and the introduction of new laws and regulations in countries where the Company’s products and services are produced or distributed, and changes in the enforcement of existing laws and regulations in those countries, could have a negative impact on its interests. In addition, laws and regulations in some international jurisdictions differ from those in the United States, and the enforcement of those laws and regulations may be inconsistent and unpredictable. The Company may incur substantial costs or be required to change its business practices in order to comply with applicable laws and regulations and could incur substantial penalties or other liabilities in the event of any failure to comply. The Company’s Australian operating businesses may be adversely affected by changes in government policy, regulation or legislation, or the application or enforcement thereof, applying to companies in the Australian media industry or to Australian companies in general. This includes: • • anti-siphoning legislation which currently prevents pay-TV providers such as Foxtel from acquiring rights to televise certain listed events (for example, the Olympic Games and certain Australian Rules football and cricket matches) unless: – – – national and commercial television broadcasters have not obtained these rights 12 weeks before the start of the event; the rights to televise are also held by commercial television licensees who have rights to televise the event to more than 50% of the Australian population; or the rights to televise are also held by one of Australia’s two major government-funded broadcasters; and other parts of the Broadcasting Services Act that regulate ownership interests and control of Australian media organizations. Such legislation may have an impact on the Company’s ownership structure and operations and may restrict its ability to take advantage of acquisition or investment opportunities. For example, current media diversity rules would prevent the Company from exercising control of a commercial television broadcasting license, a commercial radio license and a newspaper in the same license area. The Company’s business activities are also subject to various laws and regulations in the United States and internationally governing the collection, use, sharing, protection and retention of personal data, which have implications for how such data is managed. Complying with these laws and regulations could be costly, require us to change our business practices, or limit or restrict aspects of the Company’s business in a manner adverse to our business operations. Many of these laws and regulations continue to evolve, and substantial uncertainty surrounds their scope and application. The Company’s failure to comply, even if inadvertent or in good faith, could result in exposure to enforcement by U.S. federal or state or foreign governments or private actors, as well as significant negative publicity and reputational damage. An example of such a law is the European Union’s 23 recently adopted GDPR, which expands the regulation of personal data processing throughout the European Union and significantly increases penalties for non-compliance. See “Governmental Regulation—Data Privacy and Security” for more information. Finally, because some of our products and services are available on the Internet, we may be subject to laws or regulations exposing us to liability or compliance obligations even in jurisdictions where the Company does not have a substantial presence. In addition, the Company’s newspaper publishing businesses in the U.K. are now subject to greater regulation and oversight as a result of the implementation of recommendations of the Leveson inquiry into the U.K. press, which was established by former Prime Minister David Cameron in mid-2011. The U.K. Government subsequently published a Royal Charter on Self-Regulation of the Press which established a Press Recognition Panel responsible for approving and monitoring a new press regulatory body. Publishers who are not members of an approved regulator, including the Company, may be subject to exemplary damages in privacy and libel cases and, if Section 40 of the Crime and Courts Act 2013 is enacted, the payment of costs for both parties in libel actions in certain circumstances. The majority of the U.K. press, including News UK, has established an alternative regulator, the Independent Press Standards Organisation, or IPSO, which began operating in September 2014. IPSO, which has indicated that it does not intend to seek approval by the Press Recognition Panel, has powers to impose burdens on its print media members in the U.K. These powers, which include the ability to impose fines of up to £1 million for systemic breaches of IPSO’s Editor’s Code of Practice, may result in competitive disadvantages versus other forms of media and may increase the costs of regulatory compliance. Depending on the political environment, the second phase of the Leveson inquiry may be commenced, investigating the relationship between the press and the police. The Company’s radio stations in the U.K. and Ireland are also subject to governmental regulation by the relevant broadcast authorities as the Company is required to obtain and maintain licenses from such authorities to operate these stations. Although the Company expects its licenses will, where relevant, be renewed in the ordinary course upon their expiration, there can be no assurance that this will be the case. Non-compliance by the Company with the requirements associated with such licenses or other applicable laws and regulations, including of the relevant authority, could result in fines, additional license conditions, license revocation or other adverse regulatory actions. Adverse Results from Litigation or Other Proceedings Could Impact the Company’s Business Practices and Operating Results. From time to time, the Company is party to litigation, as well as to regulatory and other proceedings with governmental authorities and administrative agencies, including with respect to antitrust, tax, data privacy and security, intellectual property and other matters. See “Item 3. Legal Proceedings” and Note 15 to the Financial Statements for a discussion of certain matters. The outcome of these matters and other litigation and proceedings is subject to significant uncertainty, and it is possible that an adverse resolution of one or more such proceedings could result in reputational harm and/or significant monetary damages, injunctive relief or settlement costs that could adversely affect the Company’s results of operations or financial condition as well as the Company’s ability to conduct its business as it is presently being conducted. For example, in February 2016, the Company entered into a settlement agreement relating to an action brought by customers of the NAM business pursuant to which it subsequently paid the plaintiffs and their attorneys approximately $250 million; the Company also settled related claims for approximately $30 million. In addition, regardless of merit or outcome, such proceedings can have an adverse impact on the Company as a result of legal costs, diversion of management and other personnel, and other factors. The Company Could Be Subject to Significant Additional Tax Liabilities. The Company is subject to taxation in U.S. federal, state and local jurisdictions and various non-U.S. jurisdictions, including Australia and the U.K. The Company’s effective tax rate is impacted by the tax laws, regulations, practices and interpretations in the jurisdictions in which it operates and may fluctuate significantly 24 from period to period depending on, among other things, the geographic mix of the Company’s profits and losses, changes in tax laws and regulations or their application and interpretation, the outcome of tax audits and changes in valuation allowances associated with the Company’s deferred tax assets. Evaluating and estimating the Company’s tax provision, current and deferred tax assets and liabilities and other tax accruals requires significant management judgment, and there are many transactions for which the ultimate tax determination is uncertain. The Company’s tax returns are routinely audited by various tax authorities. Tax authorities may not agree with the treatment of items reported in our tax returns or positions taken by the Company, and as a result, tax-related settlements or litigation may occur, resulting in additional income tax liabilities against the Company. Although the Company believes it has appropriately accrued for the expected outcome of tax reviews and examinations and any related litigation, the final outcomes of these matters could differ materially from the amounts recorded in the Financial Statements. As a result, the Company may be required to recognize additional charges in its Statements of Operations and pay significant additional amounts with respect to current or prior periods, or its taxes in the future could increase, which could affect its operating results and financial condition. In connection with the Separation, 21st Century Fox received a private letter ruling from the Internal Revenue Service (“IRS”) and an opinion from its tax counsel confirming the tax-free status of the Separation for U.S. federal income tax purposes. The private letter ruling and the opinion relied on certain facts and assumptions, and certain representations from the Company and 21st Century Fox regarding the past and future conduct of their respective businesses and other matters. Notwithstanding the receipt of the private letter ruling and the opinion, the IRS could determine on audit that the distribution or the related internal reorganization transactions should be treated as taxable transactions if any of these facts, assumptions, representations or undertakings is not correct or has been violated. If the internal reorganization and/or the distribution is ultimately determined to be taxable, 21st Century Fox and/or the Company would recognize gains on the internal reorganization and 21st Century Fox would recognize gain in an amount equal to the excess of the fair market value of shares of the Company’s common stock distributed to 21st Century Fox’s stockholders on the Distribution Date over 21st Century Fox’s tax basis in such shares. The Company may in certain circumstances be required to indemnify 21st Century Fox for liabilities arising out of the foregoing. Specifically, under the terms of the Tax Sharing and Indemnification Agreement that the Company and 21st Century Fox entered into in connection with the Separation, in the event that the distribution or the internal transactions intended not to be subject to tax were determined to be subject to tax and such determination was the result of certain actions taken, or omitted to be taken, after the Separation by the Company or any of its subsidiaries and such actions (1) were inconsistent with any representation or covenant made in connection with the private letter ruling or opinion of 21st Century Fox’s tax counsel, (2) violated any representation or covenant made in the Tax Sharing and Indemnification Agreement, or (3) the Company or any of its subsidiaries knew or reasonably should have expected, after consultation with its advisors, could result in any such determination, the Company will be responsible for any tax-related liabilities incurred by 21st Century Fox as a result of such determination. In addition, other tax authorities could determine on audit that the distribution or the related internal reorganizations should be treated as taxable transactions resulting in additional tax liabilities. Recently, the U.S. government has indicated that corporate tax reform is a high priority and has proposed sweeping changes to the U.S. tax system. These reforms may include changes to corporate tax rates, changes in the taxation of income earned outside the United States and taxing previously unremitted foreign earnings at concessional tax rates. We cannot determine whether some or all of these or other proposals will be enacted into law or what, if any, changes may be made to such proposals prior to being enacted into law. If U.S. tax laws change in a manner that increases our tax obligations, our financial position and results of operations could be adversely impacted. 25 The Company’s International Operations Expose it to Additional Risks that Could Adversely Affect its Business, Operating Results and Financial Condition. In its fiscal year ended June 30, 2017, approximately 54% of the Company’s revenues were derived outside the U.S., and the Company is focused on expanding the international scope of its operations. There are risks inherent in doing business internationally, including (1) issues related to managing international operations; (2) economic uncertainties and volatility in local markets and political or social instability; (3) potentially adverse changes in tax laws and regulations; (4) compliance with international laws and regulations, including foreign ownership restrictions and data privacy requirements; (5) compliance with anti-corruption laws and regulations such as the Foreign Corrupt Practices Act and the UK Bribery Act; (6) restrictions on repatriation of funds and foreign currency exchange; and (7) compliance with local labor laws and regulations. For example, Brexit may, among other things, adversely affect economic and market conditions in the U.K. and the E.U. and create uncertainty around doing business in the U.K., including with respect to data protection and transfer, tax rates and the recruitment and retention of employees. Events or developments related to these and other risks associated with the Company’s international operations could result in reputational harm and have an adverse impact on the Company’s business, financial condition, operating results and prospects. Challenges associated with operating globally may increase as the Company continues to expand into geographic areas that it believes represent the highest growth opportunities. There Can Be No Assurance That the Company Will Have Access to the Capital Markets on Terms Acceptable to It. From time to time the Company may need or desire to access the long-term and short-term capital markets to obtain financing. Although the Company believes that the sources of capital currently in place, including the Company’s revolving credit facility, will permit the Company to finance its operations for the foreseeable future on acceptable terms and conditions, the Company’s access to, and the availability of, financing on acceptable terms and conditions in the future will be impacted by many factors, including, but not limited to: (1) the Company’s financial performance, (2) the Company’s credit ratings or absence of a credit rating, (3) the liquidity of the overall capital markets and (4) the state of the economy. There can be no assurance, particularly as a company that currently has no credit rating, that the Company will continue to have access to the capital markets on terms acceptable to it. Technological Developments May Increase the Threat of Content Piracy and Limit the Company’s Ability to Protect Its Intellectual Property Rights. The Company seeks to limit the threat of content piracy; however, policing unauthorized use of its products and services and related intellectual property is often difficult and the steps taken by the Company may not in every case prevent infringement by unauthorized third parties. Developments in technology increase the threat of content piracy by making it easier to duplicate and widely distribute pirated material. The Company has taken, and will continue to take, a variety of actions to combat piracy, both individually and, in some instances, together with industry associations. However, protection of the Company’s intellectual property rights is dependent on the scope and duration of its rights as defined by applicable laws in the U.S. and abroad and the manner in which those laws are construed. If those laws are drafted or interpreted in ways that limit the extent or duration of the Company’s rights, or if existing laws are changed, the Company’s ability to generate revenue from its intellectual property may decrease, or the cost of obtaining and maintaining rights may increase. There can be no assurance that the Company’s efforts to enforce its rights and protect its products, services and intellectual property will be successful in preventing content piracy. The Company’s Business Relies on Certain Intellectual Property and Brands. The Company’s businesses rely on a combination of trademarks, trade names, copyrights, patents, domain names and other proprietary rights, as well as contractual arrangements, including licenses, to establish and protect their 26 intellectual property and brand names. The Company believes its proprietary trademarks, trade names, copyrights, patents, domain names and other intellectual property rights are important to its continued success and its competitive position. However, the Company cannot ensure that these intellectual property rights will be upheld if challenged or that these rights will protect the Company against infringement claims by third parties, and effective intellectual property protection may not be available in every country or region in which the Company operates or where its products are available. Any failure by the Company to effectively protect its intellectual property or brands could adversely impact the Company’s results of operations or financial condition. In addition, the Company may be contractually required to indemnify other parties against liabilities arising out of any third party infringement claims. Newsprint Prices May Continue to Be Volatile and Difficult to Predict and Control. Newsprint is one of the largest expenses of the Company’s newspaper publishing units. During the quarter ended June 30, 2017, the Company’s average cost per ton of newsprint was approximately 10% lower than its historical average annual cost per ton over the past five fiscal years on a constant currency basis. The price of newsprint has historically been volatile and the closure and consolidation of newsprint mills over the years has reduced the number of suppliers, which has led to increases in newsprint prices. Failure to maintain the Company’s current consumption levels, further supplier closure and consolidation or the inability to maintain the Company’s existing relationships with its newsprint suppliers could adversely impact newsprint prices in the future. The Company’s Relationship with NAR is an Important Part of its Digital Real Estate Services Business in the U.S. and this Business Could be Harmed if it were to Lose the Benefits of this Relationship. Move, the Company’s digital real estate services business in the U.S., licenses the realtor.com® trademark and website address, as well as the REALTOR® trademark, from NAR pursuant to a trademark license agreement (the “NAR License”). Move also operates the realtor.com® website under an agreement with NAR that is perpetual in duration. However, NAR may terminate the operating agreement for certain contractually-specified reasons upon expiration of applicable cure periods. If the operating agreement with NAR is terminated, the NAR License would also terminate, and Move would be required to transfer a copy of the software that operates the realtor.com® website to NAR and provide NAR with copies of its agreements with advertisers and data content providers. NAR would then be able to operate a realtor.com® website, either by itself or with another third party. In addition to the contractual limitations and risks described above, any adverse developments in Move’s business relationship with NAR as a result of existing or new areas of conflict or potential conflict between Move’s interests and NAR’s interests, changes in the real estate industry or other causes could also adversely affect Move’s business, particularly as many of its customers and data providers are members of, have interests that are closely aligned with, or are otherwise influenced by, NAR. Labor Disputes May Have an Adverse Effect on the Company’s Business. In a variety of the Company’s businesses, it engages the services of employees who are subject to collective bargaining agreements. If the Company is unable to renew expiring collective bargaining agreements, it is possible that the affected unions could take action in the form of strikes or work stoppages. Such actions, as well as higher costs in connection with these collective bargaining agreements or a significant labor dispute, could have an adverse effect on the Company’s business by causing delays in production or by reducing profit margins. The Market Price of the Company’s Stock May Fluctuate Significantly. The Company cannot predict the prices at which its common stock may trade. The market price of the Company’s common stock may fluctuate significantly, depending upon many factors, some of which may be beyond its control, including: (1) the Company’s quarterly or annual earnings, or those of other companies in its 27 industry; (2) actual or anticipated fluctuations in the Company’s operating results; (3) success or failure of the Company’s business strategy; (4) the Company’s ability to obtain financing as needed; (5) changes in accounting standards, policies, guidance, interpretations or principles; (6) changes in laws and regulations affecting the Company’s business; (7) announcements by the Company or its competitors of significant new business developments or customers; (8) announcements by the Company or its competitors of significant acquisitions or dispositions; (9) changes in earnings estimates by securities analysts or the Company’s ability to meet its earnings guidance, if any; (10) the operating and stock price performance of other comparable companies; (11) investor perception of the Company and the industries in which it operates; (12) results from material litigation or governmental investigations; (13) changes in capital gains taxes and taxes on dividends affecting stockholders; and (14) overall market fluctuations and general economic conditions. The Separation and Distribution Agreement May Restrict the Company From Acquiring or Owning Certain Types of Assets in the U.S. The Federal Communications Commission (“FCC”) has promulgated certain rules and regulations that limit the ownership of radio and television broadcast stations, television broadcast networks and newspapers (the “Broadcast Ownership Rules”) and place commercial restrictions on a cable network programmer in which a cable television operator holds an ownership interest (the “Program Access Rules”). Under the FCC’s rules for determining ownership of the media assets described above, the Murdoch Family Trust’s ownership interest in both the Company and 21st Century Fox following the Separation would generally result in each company’s businesses and assets being attributable to the Murdoch Family Trust for purposes of determining compliance with the Broadcast Ownership Rules and the Program Access Rules. Consequently, the Company’s future conduct, including its acquisition of any newspapers in the same local markets in which 21st Century Fox owns or operates television stations or the Company’s acquisition of an ownership interest in a cable operator, may affect 21st Century Fox’s ability to own and operate its television stations or otherwise comply with the Broadcast Ownership Rules, or may subject 21st Century Fox to the Program Access Rules. Therefore, the Company and 21st Century Fox agreed in the Separation and Distribution Agreement that if the Company acquires, after the Distribution Date, newspapers, radio or television broadcast stations or television broadcast networks in the U.S. and such acquisition would impede or be reasonably likely to impede 21st Century Fox’s business, then the Company will be required to take certain actions, including divesting assets, in order to permit 21st Century Fox to hold its media interests and to comply with such rules. In addition, the Company will be prohibited from acquiring an interest in a multichannel video programming distributor, including a cable television operator, if such acquisition would subject 21st Century Fox to the Program Access Rules to which it is not then subject. This agreement effectively limits the activities or strategic business alternatives available to the Company if such activities or strategic business alternatives implicate the Broadcast Ownership Rules or Program Access Rules and would impede or be reasonably likely to impede 21st Century Fox’s business. Certain of the Company’s Directors and Officers May Have Actual or Potential Conflicts of Interest Because of Their Equity Ownership in 21st Century Fox, and Certain of the Company’s Officers and Directors May Have Actual or Potential Conflicts of Interest Because They Also Serve as Officers and/or on the Board of Directors of 21st Century Fox, Which May Result in the Diversion of Corporate Opportunities to 21st Century Fox. Certain of the Company’s directors and executive officers own shares of 21st Century Fox’s common stock, and the individual holdings may be significant for some of these individuals compared to their total assets. In addition, certain of the Company’s officers and directors also serve as officers and/or as directors of 21st Century Fox, including K. Rupert Murdoch, who serves as the Company’s Executive Chairman and Executive Chairman of 21st Century Fox, Lachlan K. Murdoch, who serves as the Company’s Co-Chairman and Executive Chairman of 21st Century Fox, and James R. Murdoch, who serves as a director of the Company and Chief Executive Officer of 21st Century Fox. This ownership or service to both companies may create, or may create the appearance of, conflicts of interest when these directors and officers are faced with decisions that could have different implications for the Company and 21st Century Fox. For example, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between the Company and 21st Century Fox 28 regarding the terms of the agreements governing the internal reorganization, the Separation and the relationship thereafter between the companies, including with respect to the indemnification of certain matters. In addition to any other arrangements that the Company and 21st Century Fox may agree to implement, the Company and 21st Century Fox have agreed that officers and directors who serve at both companies will recuse themselves from decisions where conflicts arise due to their positions at both companies. The Company’s Restated Certificate of Incorporation acknowledges that the Company’s directors and officers, as well as certain of its stockholders, including K. Rupert Murdoch, certain members of his family and certain family trusts (so long as such persons continue to own, in the aggregate, 10% or more of the voting stock of each of the Company and 21st Century Fox), each of which is referred to as a covered stockholder, are or may become stockholders, directors, officers, employees or agents of 21st Century Fox and certain of its affiliates. The Company’s Restated Certificate of Incorporation provides that any such overlapping person will not be liable to the Company, or to any of its stockholders, for breach of any fiduciary duty that would otherwise exist because such individual directs a corporate opportunity (other than certain limited types of restricted business opportunities set forth in the Company’s Restated Certificate of Incorporation) to 21st Century Fox instead of the Company. As 21st Century Fox does not have a similar provision regarding corporate opportunities in its certificate of incorporation, the provisions in the Company’s Restated Certificate of Incorporation could result in an overlapping person submitting any corporate opportunities other than restricted business opportunities to 21st Century Fox instead of the Company. Certain Provisions of the Company’s Restated Certificate of Incorporation, Amended and Restated By-laws, Tax Sharing and Indemnification Agreement, Separation and Distribution Agreement and Delaware Law, the Company’s Second Amended and Restated Stockholder Rights Agreement and the Ownership of the Company’s Common Stock by the Murdoch Family Trust May Discourage Takeovers and the Concentration of Ownership Will Affect the Voting Results of Matters Submitted for Stockholder Approval. The Company’s Restated Certificate of Incorporation and Amended and Restated By-laws contain certain anti- takeover provisions that may make more difficult or expensive a tender offer, change in control, or takeover attempt that is opposed by the Company’s Board of Directors or certain stockholders holding a significant percentage of the voting power of the Company’s outstanding voting stock. In particular, the Company’s Restated Certificate of Incorporation and Amended and Restated By-laws provide for, among other things: • • • • • • • • a dual class common equity capital structure; a prohibition on stockholders taking any action by written consent without a meeting; special stockholders’ meeting to be called only by the Chief Executive Officer, the Board of Directors, or the holders of not less than 20% of the voting power of the Company’s outstanding voting stock; the requirement that stockholders give the Company advance notice to nominate candidates for election to the Board of Directors or to make stockholder proposals at a stockholders’ meeting; the requirement of an affirmative vote of at least 65% of the voting power of the Company’s outstanding voting stock to amend or repeal its by-laws; vacancies on the Board of Directors to be filled only by a majority vote of directors then in office; certain restrictions on the transfer of the Company’s shares; and the Board of Directors to issue, without stockholder approval, Preferred Stock and Series Common Stock with such terms as the Board of Directors may determine. These provisions could discourage potential acquisition proposals and could delay or prevent a change in control of the Company, even in the case where a majority of the stockholders may consider such proposals, if effective, desirable. 29 In addition, in connection with the Separation, the Company’s Board of Directors adopted a stockholder rights agreement, which it extended in June 2014 and again in June 2015. Pursuant to the second amended and restated stockholder rights agreement, each outstanding share of the Company’s common stock has attached to it a right entitling its holder to purchase from the Company additional shares of its Class A Common Stock and Class B Common Stock in the event that a person or group acquires beneficial ownership of 15% or more of the then- outstanding Class B Common Stock without approval of the Company’s Board of Directors, subject to exceptions for persons beneficially owning 15% or more of the Company’s Class B Common Stock immediately following the Separation. The stockholder rights agreement could make it more difficult for a third-party to acquire the Company’s voting common stock without the approval of its Board of Directors. The rights expire on June 18, 2018, except as otherwise provided in the rights agreement. Further, as a result of his ability to appoint certain members of the board of directors of the corporate trustee of the Murdoch Family Trust, which beneficially owns less than one percent of the Company’s outstanding Class A Common Stock and approximately 38.4% of the Company’s Class B Common Stock as of August 7, 2017, K. Rupert Murdoch may be deemed to be a beneficial owner of the shares beneficially owned by the Murdoch Family Trust. K. Rupert Murdoch, however, disclaims any beneficial ownership of these shares. Also, K. Rupert Murdoch beneficially owns or may be deemed to beneficially own an additional one percent of the Company’s Class B Common Stock and less than one percent of the Company’s Class A Common Stock as of August 7, 2017. Thus, K. Rupert Murdoch may be deemed to beneficially own in the aggregate less than one percent of the Company’s Class A Common Stock and approximately 39.4% of the Company’s Class B Common Stock as of August 7, 2017. This concentration of voting power could discourage third parties from making proposals involving an acquisition of the Company. Additionally, the ownership concentration of Class B Common Stock by the Murdoch Family Trust increases the likelihood that proposals submitted for stockholder approval that are supported by the Murdoch Family Trust will be adopted and proposals that the Murdoch Family Trust does not support will not be adopted, whether or not such proposals to stockholders are also supported by the other holders of Class B Common Stock. Furthermore, the adoption of the second amended and restated stockholder rights agreement will prevent, unless the Company’s Board of Directors otherwise determines at the time, other potential stockholders from acquiring a similar ownership position in the Company’s Class B Common Stock and, accordingly, could prevent a meaningful challenge to the Murdoch Family Trust’s influence over matters submitted for stockholder approval. ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 2. PROPERTIES The Company owns and leases various real properties in the U.S., Europe, Australia and Asia that are utilized in the conduct of its businesses. Each of these properties is considered to be in good condition, adequate for its purpose and suitably utilized according to the individual nature and requirements of the relevant operations. The Company’s policy is to improve and replace property as considered appropriate to meet the needs of the individual operation. United States The Company’s principal real properties in the U.S. are the following: (a) The U.S. headquarters of the Company, located at 1211 Avenue of the Americas, New York, New York and the offices of the Company located at 1185 Avenue of the Americas, New York, New York, each of which are subleased from 21st Century Fox. These spaces include the executive and corporate offices of the Company, the executive and editorial offices of Dow Jones, the editorial offices of the Post and the executive offices of NAM; (b) The leased offices of HarperCollins U.S. in New York, New York; 30 (c) The leased offices of HarperCollins U.S. in Scranton, Pennsylvania; (d) The leased printing plant of the Post located in Bronx, New York; (e) The leased offices of Move in Santa Clara, California; (f) The leased offices of NAM in Wilton, Connecticut; and (g) The office space campus owned by the Company in South Brunswick, New Jersey. Europe The Company’s principal real properties in Europe are the following: (a) The leased headquarters and editorial offices of the London operations of News UK, Dow Jones and HarperCollins at The News Building, 1 London Bridge Street, London, England; (b) The newspaper production and printing facilities for its U.K. newspapers, which consist of: 1. 2. The leased office space at each of Fleet House, Peterborough, England; Dublin, Ireland; and Glasgow City Centre, Scotland; and The freehold interests in each of a publishing and printing facility in Broxbourne, England and printing facilities in Knowsley, England and North Lanarkshire, Scotland; and (c) The leased warehouse and office facilities of HarperCollins Publishers Limited in Glasgow, Scotland. Australia and Asia The Company’s principal real properties in Australia and Asia are the following: (a) The Australian newspaper production and printing facilities which consist of: 1. 2. 3. 4. 5. The Company-owned print center and office building in Sydney, Australia at which The Australian, The Daily Telegraph and The Sunday Telegraph are printed and published; The Company-owned print center and the leased office facility in Melbourne, Australia at which Herald Sun and Sunday Herald Sun are printed and published; The Company-owned print center and office building in Adelaide, Australia utilized in the printing and publishing of The Advertiser and Sunday Mail; The Company-owned print center and office building in Brisbane, Australia at which The Courier Mail and The Sunday Mail are printed and published; and The two Company-owned buildings in Perth, Australia used to print and publish the Perth Sunday Times(1); (b) The leased offices and studios of FOX SPORTS Australia in Sydney, Australia; (c) The leased offices and studios of FOX SPORTS Australia in Melbourne, Australia; (d) The leased corporate offices of REA Group in Melbourne, Australia; and (e) The leased office space of Dow Jones in Hong Kong. (1) In June 2017, following the sale of the Perth Sunday Times, the Company entered into an agreement to sell one of its buildings in Perth, and the transaction is expected to be completed in the first quarter of fiscal 2018. The Company expects to dispose of the remaining building during fiscal 2018. 31 ITEM 3. LEGAL PROCEEDINGS The Company routinely is involved in various legal proceedings, claims and governmental inspections or investigations, including those discussed below. Valassis Communications, Inc. On November 8, 2013, Valassis Communications, Inc. (“Valassis”) initiated legal proceedings against certain of the Company’s subsidiaries alleging violations of various antitrust laws. These proceedings are described in further detail below. • Valassis previously initiated an action against News America Incorporated (“NAI”), News America Marketing FSI L.L.C. (“NAM FSI”) and News America Marketing In-Store Services L.L.C. (“NAM In- Store Services” and, together with NAI and NAM FSI, the “NAM Parties”), captioned Valassis Communications, Inc. v. News America Incorporated, et al., No. 2:06-cv-10240 (E.D. Mich.) (“Valassis I”), alleging violations of federal antitrust laws, which was settled in February 2010. On November 8, 2013, Valassis filed a motion for expedited discovery in the previously settled case based on its belief that defendants had engaged in activities prohibited under an order issued by the U.S. District Court for the Eastern District of Michigan in connection with the parties’ settlement, which motion was granted by the magistrate judge. Valassis subsequently filed a Notice of Violation of the order issued by the District Court in Valassis I. The Notice re-asserted claims of unlawful bundling and tying which the magistrate judge had previously recommended be dismissed from Valassis II, described below, on the grounds that such claims could only be brought before a panel of antitrust experts previously appointed in Valassis I (the “Antitrust Expert Panel”), and sought treble damages, injunctive relief and attorneys’ fees on those claims. On March 30, 2016, the District Court ordered that the Notice be referred to the Antitrust Expert Panel and further ordered that the case be administratively closed and that it may be re-opened following proceedings before the Antitrust Expert Panel. • On November 8, 2013, Valassis also filed a new complaint in the U.S. District Court for the Eastern District of Michigan against the NAM Group alleging violations of federal and state antitrust laws and common law business torts (“Valassis II”). The complaint sought treble damages, injunctive relief and attorneys’ fees and costs. On December 19, 2013, the NAM Group filed a motion to dismiss the newly filed complaint, and on March 30, 2016, the District Court ordered that Valassis’s bundling and tying claims be dismissed without prejudice to Valassis’s rights to pursue relief for those claims in Valassis I and that all remaining claims in the NAM Group’s motion to dismiss be referred to the Antitrust Expert Panel. The District Court further ordered that the case be administratively closed and that it may be re- opened following proceedings before the Antitrust Expert Panel. The Antitrust Expert Panel was convened and, on February 8, 2017, it recommended that the Notice of Violation in Valassis I be dismissed and the NAM Group’s counterclaims in Valassis II be dismissed with leave to replead three of the four counterclaims. The NAM Group filed an amended counterclaim on February 27, 2017. Valassis did not object to the Antitrust Expert Panel’s recommendation to dismiss Valassis I, and the parties are awaiting the District Court’s order of dismissal. However, Valassis filed a motion with the District Court asserting that the referral of Valassis II to the Antitrust Expert Panel is no longer valid and seeking either to re-open Valassis II in the District Court or to transfer the case to the United States District Court for the Southern District of New York. The NAM Group opposed the motion, and the District Court heard arguments on April 13, 2017. While it is not possible at this time to predict with any degree of certainty the ultimate outcome of these actions, the NAM Group believes it has been compliant with applicable laws and intends to defend itself vigorously in both actions. U.K. Newspaper Matters Civil claims have been brought against the Company with respect to, among other things, voicemail interception and inappropriate payments to public officials at the Company’s former publication, The News of the World, and 32 at The Sun, and related matters (the “U.K. Newspaper Matters”). The Company has admitted liability in many civil cases and has settled a number of cases. The Company also settled a number of claims through a private compensation scheme which was closed to new claims after April 8, 2013. In connection with the Separation, the Company and 21st Century Fox agreed in the Separation and Distribution Agreement that 21st Century Fox would indemnify the Company for payments made after the Distribution Date arising out of civil claims and investigations relating to the U.K. Newspaper Matters as well as legal and professional fees and expenses paid in connection with the previously concluded criminal matters, other than fees, expenses and costs relating to employees (i) who are not directors, officers or certain designated employees or (ii) with respect to civil matters, who are not co-defendants with the Company or 21st Century Fox. 21st Century Fox’s indemnification obligations with respect to these matters will be settled on an after-tax basis. The net expense related to the U.K. Newspaper Matters in Selling, general and administrative expenses was $10 million, $19 million and $50 million for the fiscal years ended June 30, 2017, June 30, 2016 and June 30, 2015, respectively. As of June 30, 2017, the Company has provided for its best estimate of the liability for the claims that have been filed and costs incurred, including liabilities associated with employment taxes, and has accrued approximately $132 million, of which approximately $82 million will be indemnified by 21st Century Fox, and a corresponding receivable was recorded in Other current assets on the Balance Sheet as of June 30, 2017. It is not possible to estimate the liability or corresponding receivable for any additional claims that may be filed given the information that is currently available to the Company. If more claims are filed and additional information becomes available, the Company will update the liability provision and corresponding receivable for such matters. The Company is not able to predict the ultimate outcome or cost of the civil claims. It is possible that these proceedings and any adverse resolution thereof could damage its reputation, impair its ability to conduct its business and adversely affect its results of operations and financial condition. Other The Company’s tax returns are subject to on-going review and examination by various tax authorities. Tax authorities may not agree with the treatment of items reported in the Company’s tax returns, and therefore the outcome of tax reviews and examinations can be unpredictable. The Company believes it has appropriately accrued for the expected outcome of uncertain tax matters and believes such liabilities represent a reasonable provision for taxes ultimately expected to be paid; however, these liabilities may need to be adjusted as new information becomes known and as tax examinations continue to progress. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 33 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES News Corporation’s Class A Common Stock and Class B Common Stock are listed and traded on The NASDAQ Global Select Market (“NASDAQ”), its principal market, under the symbols “NWSA” and “NWS,” respectively. CHESS Depositary Interests (“CDIs”) representing the Company’s Class A Common Stock and Class B Common Stock are listed and traded on the Australian Securities Exchange (“ASX”) under the symbols “NWSLV” and “NWS,” respectively. As of August 7, 2017, there were approximately 23,000 holders of record of shares of Class A Common Stock and 600 holders of record of shares of Class B Common Stock. The following table sets forth, for the fiscal periods indicated, the high and low sales prices for the Class A Common Stock and Class B Common Stock, as reported on NASDAQ. Class B Common Stock Class A Common Stock High Low High Low Fiscal year ended June 30, 2016: First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fiscal year ended June 30, 2017: First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15.62 15.74 14.45 13.55 14.65 15.22 13.80 14.40 12.62 12.24 10.74 10.90 11.50 11.25 11.90 12.60 15.92 15.68 13.81 13.06 14.34 14.68 13.48 13.92 12.63 12.16 10.21 10.54 11.05 10.99 11.51 12.19 Dividends During fiscal 2017 and 2016, the Company’s Board of Directors (the “Board of Directors”) declared semi-annual cash dividends on both the Company’s Class A Common Stock and Class B Common Stock. The timing, declaration, amount and payment of future dividends to stockholders, if any, is within the discretion of the Board of Directors (the “Board of Directors”). The Board of Directors’ decisions regarding the payment of future dividends will depend on many factors, including the Company’s financial condition, earnings, capital requirements and debt facility covenants, other contractual restrictions, as well as legal requirements, regulatory constraints, industry practice, market volatility and other factors that the Board of Directors deems relevant. The following table summarizes the dividends paid per share on both the Company’s Class A Common Stock and the Class B Common Stock: Cash dividends paid per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.20 2017 2016 $0.20 For the fiscal years ended June 30, Issuer Purchases of Equity Securities In May 2013, the Company’s Board of Directors authorized the Company to repurchase up to an aggregate of $500 million of its Class A Common Stock. On May 10, 2015, the Company announced it had begun repurchasing shares of Class A Common Stock under the stock repurchase program. No stock repurchases were made during the fiscal year ended June 30, 2017. Through August 7, 2017, the Company repurchased 34 approximately 5.2 million shares of Class A Common Stock for an aggregate cost of approximately $71 million. The remaining authorized amount under the stock repurchase program as of August 7, 2017 was approximately $429 million. All decisions regarding any future stock repurchases are at the sole discretion of a duly appointed committee of the Board of Directors and management. The committee’s decisions regarding future stock repurchases will be evaluated from time to time in light of many factors, including the Company’s financial condition, earnings, capital requirements and debt facility covenants, other contractual restrictions, as well as legal requirements, regulatory constraints, industry practice, market volatility and other factors that the committee may deem relevant. The stock repurchase authorization may be modified, extended, suspended or discontinued at any time by the Board of Directors and the Board of Directors cannot provide any assurances that any additional shares will be repurchased. The Company did not purchase any of its Class B Common Stock during the fiscal years ended June 30, 2017 and 2016. 35 ITEM 6. SELECTED FINANCIAL DATA The selected consolidated financial data should be read in conjunction with “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8—Financial Statements and Supplementary Data” and the other financial information included elsewhere herein. STATEMENT OF OPERATIONS DATA: Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Loss) income from continuing operations attributable to For the fiscal years ended June 30, 2017(b) 2016(b) 2015(b) 2014 2013(c) (in millions except per share information) $ 8,139 $ 8,292 $ 8,524 $ 8,486 $ 8,789 News Corporation stockholders(a) . . . . . . . . . . . . . . . . . . . (738) Net (loss) income attributable to News Corporation stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Loss) income from continuing operations available to News Corporation stockholders—basic and diluted . . . . . . . . . . Net (loss) income available to News Corporation 164 179 298 (147) 381 239 (738) (1.27) 0.28 0.51 0.65 stockholders per share—basic and diluted . . . . . . . . . . . . . (1.27) 0.30 (0.26) 0.41 Cash dividends per share of Class A and Class B Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.20 0.20 — — 612 506 1.06 0.87 — As of June 30, 2017 2016 2015 2014 2013 (in millions) BALANCE SHEET DATA: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Redeemable preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,016 14,552 379 20 $ 1,832 15,483 372 20 $ 1,951 15,035 — 20 $ 3,145 16,351 — 20 $ 2,381 15,523 — 20 (a) During the fiscal year ended June 30, 2017, the Company recorded non-cash impairment charges of approximately $785 million, of which approximately $360 million related to the News and Information Services business in the U.K. and approximately $310 million related to the News and Information Services business in Australia. See Note 7 to the Consolidated Financial Statements of News Corporation. Additionally, during the fiscal year ended June 30, 2017, the Company recognized a $227 million non-cash write-down of the carrying value of its investment in Foxtel to fair value. The write-down is reflected in Equity (losses) earnings of affiliates in the Statements of Operations for the fiscal year ended June 30, 2017. See Note 6 to the Consolidated Financial Statements of News Corporation. During the fiscal year ended June 30, 2016, the Company recognized $158 million ($98 million, net of tax) in net settlement costs associated with the NAM Group and Zillow legal settlements. The Company recognized one-time costs of approximately $280 million in connection with the settlement of certain litigation and related claims at News America Marketing during the three months ended March 31, 2016. In addition, the Company recognized a gain of $122 million in connection with the settlement of litigation with Zillow, Inc., which reflects settlement proceeds received from Zillow of $130 million, less $8 million paid to the National Association of Realtors® during the three months ended June 30, 2016. (b) See Notes 3, 4, 5, 6, 8 and 15 to the Consolidated Financial Statements of News Corporation for information with respect to significant acquisitions, disposals, discontinued operations, impairment charges, restructuring charges, contingencies and legal settlements and other transactions during fiscal 2017, 2016 and 2015. (c) On June 28, 2013 (the “Distribution Date”), the Company completed the separation of its businesses (the “Separation”) from Twenty-First Century Fox, Inc. (“21st Century Fox”). As of the effective time of the Separation, all of the outstanding shares of the Company were distributed to 21st Century Fox stockholders 36 based on a distribution ratio of one share of Company Class A or Class B Common Stock for every four shares of 21st Century Fox Class A or Class B Common Stock, respectively, held of record as of June 21, 2013 (the “Record Date”). Prior to the Separation, the Company’s combined financial statements were prepared on a stand-alone basis derived from the consolidated financial statements and accounting records of 21st Century Fox. The Company’s consolidated statement of operations for the fiscal year ended June 30, 2013 included allocations of general corporate expenses for certain support functions that were provided on a centralized basis by 21st Century Fox and not recorded at the business unit level, such as expenses related to finance, human resources, information technology, facilities and legal, among others. These expenses were allocated to the Company on the basis of direct usage when identifiable, with the remainder allocated on a pro rata basis of consolidated revenues, operating income, headcount or other measures of the Company. Management believes the assumptions underlying these consolidated financial statements, including the assumptions regarding allocating general corporate expenses from 21st Century Fox, were reasonable. During the fiscal year ended June 30, 2013, the Company acquired CMH, a media investment company that operates in Australia. The CMH acquisition was accounted for in accordance with ASC 805 “Business Combinations” which requires an acquirer to remeasure its previously held equity interest in an acquiree at its acquisition date fair value and recognize the resulting gain or loss in earnings. The carrying amount of the Company’s previously held equity interest in FOX SPORTS Australia was revalued to fair value as of the acquisition date, resulting in a step-up and non-cash gain of approximately $1.3 billion for the fiscal year ended June 30, 2013. Additionally, during the fiscal year ended June 30, 2013, the Company sold its 44% equity interest in SKY Network Television Ltd. for approximately $675 million and recorded a gain of approximately $321 million which was included in Other, net in the Statements of Operations for the fiscal year ended June 30, 2013. During the fiscal year ended June 30, 2013, the Company recorded non-cash impairment charges of approximately $1.4 billion. The charges primarily consisted of a write-down of the Company’s goodwill of $494 million, a write-down of intangible assets (primarily newspaper mastheads) of $862 million and a write-down of fixed assets of $46 million. 37 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion and analysis contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended. All statements that are not statements of historical fact are forward-looking statements. The words “expect,” “estimate,” “anticipate,” “predict,” “believe” and similar expressions and variations thereof are intended to identify forward-looking statements. These statements appear in a number of places in this discussion and analysis and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things, trends affecting the Company’s financial condition or results of operations and the outcome of contingencies such as litigation and investigations. Readers are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. More information regarding these risks, uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is set forth under the heading “Risk Factors” in Item 1A of this Annual Report on Form 10-K (the “Annual Report”). The Company does not ordinarily make projections of its future operating results and undertakes no obligation (and expressly disclaims any obligation) to publicly update or revise any forward- looking statements, whether as a result of new information, future events or otherwise, except as required by law. Readers should carefully review this document and the other documents filed by the Company with the Securities and Exchange Commission (the “SEC”). This section should be read together with the Consolidated Financial Statements of News Corporation and related notes set forth elsewhere in this Annual Report. INTRODUCTION News Corporation (together with its subsidiaries, “News Corporation,” “News Corp,” the “Company,” “we,” or “us”) is a global diversified media and information services company comprised of businesses across a range of media, including: news and information services, book publishing, digital real estate services, cable network programming in Australia and pay-TV distribution in Australia. During the first quarter of fiscal 2016, management approved a plan to dispose of the Company’s digital education business. As a result of the plan and the discontinuation of further significant business activities in the Digital Education segment, the assets and liabilities of this segment were classified as held for sale and the results of operations have been classified as discontinued operations for all periods presented. Unless indicated otherwise, the information in the notes to the Consolidated Financial Statements relates to the Company’s continuing operations. (See Note 4—Discontinued Operations in the accompanying Consolidated Financial Statements). For the fiscal years ended June 30, 2017, 2016 and 2015, the Company reclassified its listing revenues generated primarily from agents, brokers and developers from advertising revenue to real estate revenue to better reflect the Company’s revenue mix and how management reviews the performance of the Digital Real Estate Services segment. The consolidated financial statements are referred to herein as the “Consolidated Financial Statements.” The consolidated statements of operations are referred to herein as the “Statements of Operations.” The consolidated balance sheets are referred to herein as the “Balance Sheets.” The consolidated statements of cash flows are referred to herein as the “Statements of Cash Flows.” The Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Management’s discussion and analysis of financial condition and results of operations is intended to help provide an understanding of the Company’s financial condition, changes in financial condition and results of operations. This discussion is organized as follows: • Overview of the Company’s Business—This section provides a general description of the Company’s businesses, as well as developments that occurred during the three fiscal years ended June 30, 2017 and 38 through the date of this filing that the Company believes are important in understanding its results of operations and financial condition or to disclose known trends. • Results of Operations—This section provides an analysis of the Company’s results of operations for the three fiscal years ended June 30, 2017. This analysis is presented on both a consolidated basis and a segment basis. In addition, a brief description is provided of significant transactions and events that impact the comparability of the results being analyzed. The Company maintains a 52-53 week fiscal year ending on the Sunday closest to June 30 in each year. Fiscal 2017, fiscal 2016 and fiscal 2015 included 52, 53 and 52 weeks, respectively. As a result, the Company has referenced the impact of the 53rd week, where applicable, when providing analysis of the results of operations. • Liquidity and Capital Resources—This section provides an analysis of the Company’s cash flows for the three fiscal years ended June 30, 2017, as well as a discussion of the Company’s financial arrangements and outstanding commitments, both firm and contingent, that existed as of June 30, 2017. • Critical Accounting Policies—This section discusses accounting policies considered important to the Company’s financial condition and results of operations, and which require significant judgment and estimates on the part of management in application. In addition, Note 2 to the Consolidated Financial Statements summarizes the Company’s significant accounting policies, including the critical accounting policies discussed in this section. OVERVIEW OF THE COMPANY’S BUSINESSES The Company manages and reports its businesses in the following five segments: • News and Information Services—The News and Information Services segment includes the Company’s global print, digital and broadcast radio media platforms. These product offerings include the global print and digital versions of The Wall Street Journal and the Dow Jones Media Group, which includes Barron’s and MarketWatch, as well as the Company’s suite of professional information products, including Factiva, Dow Jones Risk & Compliance, Dow Jones Newswires, Dow Jones PEVC and DJX. The Company also owns, among other publications, The Australian, The Daily Telegraph, Herald Sun and The Courier Mail in Australia, The Times, The Sunday Times, The Sun and The Sun on Sunday in the U.K. and the New York Post in the U.S. This segment also includes News America Marketing, a leading provider of home-delivered shopper media, in-store marketing products and services and digital marketing solutions, including Checkout 51’s mobile application, as well as Unruly, a leading global video advertising distribution platform, Wireless Group, operator of talkSPORT, the leading sports radio network in the U.K., and Storyful, a social media content agency. • Book Publishing—The Book Publishing segment consists of HarperCollins, the second largest consumer book publisher in the world, with operations in 18 countries and particular strengths in general fiction, nonfiction, children’s and religious publishing. HarperCollins owns more than 120 branded publishing imprints, including Harper, William Morrow, HarperCollins Children’s Books, Avon, Harlequin and Christian publishers Zondervan and Thomas Nelson, and publishes works by well- known authors such as Harper Lee, Patricia Cornwell, Chip and Joanna Gaines, Rick Warren, Sarah Young and Agatha Christie and popular titles such as The Hobbit, Goodnight Moon, To Kill a Mockingbird, Jesus Calling and Hillbilly Elegy. • Digital Real Estate Services—The Digital Real Estate Services segment consists of the Company’s interests in REA Group Limited (“REA Group”), Move, Inc. (“Move”) and DIAKRIT International Limited (“DIAKRIT”). REA Group is a publicly traded company listed on the Australian Securities Exchange (“ASX”) (ASX: REA) that advertises property and property-related services on its websites and mobile applications across Australia and Asia, including iProperty.com. REA Group operates Australia’s leading residential and commercial property websites, realestate.com.au and realcommercial.com.au. The Company holds a 61.6% interest in REA Group. 39 Move is a leading provider of online real estate services in the U.S. and primarily operates realtor.com®, a premier real estate information and services marketplace. Move offers real estate advertising solutions to agents and brokers, including its ConnectionsSM for Buyers and AdvantageSM Pro products. Move also offers a number of professional software and services products, including Top Producer®, FiveStreet® and ListHubTM. The Company owns an 80% interest in Move, with the remaining 20% being held by REA Group. • Cable Network Programming—The Cable Network Programming segment consists of FOX SPORTS Australia and Australian News Channel Pty Ltd (“ANC”). FOX SPORTS Australia is the leading sports programming provider in Australia, with eight high definition television channels distributed via cable, satellite and IP, several interactive viewing applications and broadcast rights to live sporting events in Australia including: National Rugby League, the domestic football league, international cricket, Australian Rugby Union and various motorsports programming. ANC, acquired in December 2016, operates the SKY NEWS network, Australia’s 24-hour multi- channel, multi-platform news service. ANC channels are broadcast throughout Australia and New Zealand and available on Foxtel and Sky Television. ANC also owns and operates the international Australia Channel IPTV service and offers content across a variety of digital media platforms, including mobile, podcasts and social media websites. • Other—The Other segment consists primarily of general corporate overhead expenses, the corporate Strategy and Creative Group and costs related to the U.K. Newspaper Matters (as defined in “Item 3. Legal Proceedings”). The Company’s corporate Strategy and Creative Group was formed to identify new products and services across its businesses to increase revenues and profitability and to target and assess potential acquisitions, investments and dispositions. News and Information Services Revenue at the News and Information Services segment is derived from the sale of advertising, circulation and subscriptions, as well as licensing. Adverse changes in general market conditions for advertising continue to affect revenues. Advertising revenues at the News and Information Services segment are also subject to seasonality, with revenues typically being highest in the Company’s second fiscal quarter due to the end-of-year holiday season in its main operating geographies. Circulation and subscription revenues can be greatly affected by changes in the prices of the Company’s and/or competitors’ products, as well as by promotional activities. Operating expenses include costs related to paper, production, distribution, third party printing, editorial, commissions and radio sports rights. Selling, general and administrative expenses include promotional expenses, salaries, employee benefits, rent and other routine overhead. The News and Information Services segment’s advertising volume and rates, circulation and the price of paper are the key variables whose fluctuations can have a material effect on the Company’s operating results and cash flow. The Company has to anticipate the level of advertising volume and rates, circulation and paper prices in managing its businesses to maximize operating profit during expanding and contracting economic cycles. The Company continues to be exposed to risks associated with paper used for printing. Paper is a basic commodity and its price is sensitive to the balance of supply and demand. The Company’s expenses are affected by the cyclical increases and decreases in the price of paper. The News and Information Services segment’s products compete for readership, audience and advertising with local and national competitors and also compete with other media alternatives in their respective markets. Competition for circulation and subscriptions is based on the content of the products provided, pricing and, from time to time, various promotions. The success of these products also depends upon advertisers’ judgments as to the most effective use of their advertising budgets. Competition for advertising is based upon the reach of the products, advertising rates and advertiser results. Such judgments are based on factors such as cost, availability of alternative media, distribution and quality of consumer demographics. 40 The Company’s traditional print business faces challenges from alternative media formats and shifting consumer preferences. The Company is also exposed to the impact of long-term structural movements in advertising spending, in particular, the move in advertising from print to digital. These alternative media formats could impact the Company’s overall performance, positively or negatively. In addition, technologies have been and will continue to be developed that allow users to block advertising on websites and mobile devices, which may impact advertising rates or revenues. As a multi-platform news provider, the Company recognizes the importance of maximizing revenues from a variety of media formats and platforms, both in terms of paid-for content and in new advertising models, and continues to invest in its digital products. Technologies such as smartphones, tablets and similar devices and their related applications provide continued opportunities for the Company to make its content available to a new audience of readers, introduce new or different pricing schemes, and develop its products to continue to attract advertisers and/or affect the relationship between content providers and consumer. The Company continues to develop and implement strategies to exploit its content across a variety of media channels and platforms. Book Publishing The Book Publishing segment derives revenues from the sale of general fiction, nonfiction, children’s and religious books in the U.S. and internationally. The revenues and operating results of the Book Publishing segment are significantly affected by the timing of releases and the number of its books in the marketplace. The book publishing marketplace is subject to increased periods of demand during the end-of-year holiday season in its main operating geographies. This marketplace is highly competitive and continues to change due to technological developments, including additional digital platforms and distribution channels, and other factors. Each book is a separate and distinct product, and its financial success depends upon many factors, including public acceptance. Major new title releases represent a significant portion of the Book Publishing segment’s sales throughout the fiscal year. Print-based consumer books are generally sold on a fully returnable basis, resulting in the return of unsold books. In the domestic and international markets, the Book Publishing segment is subject to global trends and local economic conditions. Operating expenses for the Book Publishing segment include costs related to paper, printing, authors’ royalties, editorial, promotional, art and design expenses. Selling, general and administrative expenses include salaries, employee benefits, rent and other routine overhead. Digital Real Estate Services The Digital Real Estate Services segment generates revenue through the sale of real estate listing products to agents, brokers and developers and display advertising on its residential real estate and commercial property sites and also licenses certain professional software products on a subscription basis. Significant expenses associated with these sites and software solutions include development costs, advertising and promotional expenses, hosting and support services, salaries, employee benefits and other routine overhead expenses. Consumers are increasingly turning to the Internet and mobile devices for real estate information. The Digital Real Estate Services segment’s success depends on its continued innovation to provide products and services that make its websites and mobile applications useful for consumers and real estate and mortgage professionals and attractive to its advertisers. Cable Network Programming The Cable Network Programming segment consists of FOX SPORTS Australia and ANC. FOX SPORTS Australia offers the following eight channels in high definition: FOX SPORTS 501, FOX SPORTS 503, FOX SPORTS 505, FOX SPORTS 506, FOX LEAGUE, FOX FOOTY, FOX SPORTS MORE and FOX SPORTS NEWS. Revenue is primarily derived from monthly affiliate fees received from pay-TV providers (mainly Foxtel) based on the number of subscribers. 41 FOX SPORTS Australia competes primarily with ESPN, beIN SPORTS, the Free-To-Air channels and certain telecommunications companies in Australia. ANC offers the following channels: SKY NEWS LIVE, SKY NEWS BUSINESS, SKY NEWS WEATHER, SKY NEWS Multiview, A-PAC Australia’s Public Affairs Channel and SKY NEWS New Zealand. ANC also owns and operates the Australia Channel IPTV service for international markets. Revenue is primarily derived from monthly affiliate fees received from pay-TV providers based on the number of subscribers and advertising. The most significant operating expenses of the Cable Network Programming segment are the acquisition and production expenses related to programming and the expenses related to operating the technical facilities of the broadcast operations. The expenses associated with licensing certain programming rights are recognized during the applicable season or event, which can cause results at the Cable Network Programming segment to fluctuate based on the timing and mix of the Company’s local and international sports programming. Other expenses include marketing and promotional expenses related to improving the market visibility and awareness of the channels and their programming. Additional expenses include salaries, employee benefits, rent and other routine overhead expenses. Other The Other segment primarily consists of general corporate overhead expenses, the corporate Strategy and Creative Group and costs related to the U.K. Newspaper Matters. The Company’s corporate Strategy and Creative Group was formed to identify new products and services across the Company’s businesses to increase revenues and profitability and to target and assess potential acquisitions, investments and dispositions. Other Business Developments In July 2017, REA Group acquired an 80.3% interest in Smartline Home Loans Pty Limited (“Smartline”) for A$69 million in cash (approximately $55 million). The minority shareholders have the option to sell the remaining 19.7% interest to REA Group beginning three years after closing at a price dependent on the financial performance of Smartline. If the option is not exercised, the minority interest will become mandatorily redeemable four years after closing. As a result, REA Group will recognize a liability in the first quarter of fiscal 2018 for the present value of the amount expected to be paid for the remaining interest based on the formula specified in the acquisition agreement. Smartline is one of Australia’s premier mortgage broking franchise groups, and the investment provides REA Group’s financial services business with greater scale and capability. In January 2017, REA Group acquired an approximate 15% interest in Elara Technologies Pte. Ltd., a leading online real estate services provider in India (“Elara”), for $50 million. Elara operates PropTiger.com, Makaan.com and Housing.com, and the investment further strengthens REA Group’s presence in Asia. Following the completion of the investment and certain related transactions, including Elara’s acquisition of Housing.com, News Corporation’s pre-existing interest in Elara decreased to approximately 23%. In December 2016, REA Group sold its European business for approximately $140 million (approximately €133 million) in cash, which resulted in a pre-tax gain of $107 million for the fiscal year ended June 30, 2017. The sale allows REA Group to focus on its core businesses in Australia and Asia. In December 2016, the Company acquired Australian Regional Media (“ARM”) from HT&E Limited (formerly APN News and Media Limited) (“HT&E”) for approximately $30 million. ARM operates a portfolio of regional print assets and websites and extends the reach of the Australian newspaper business to new customers in new geographic regions. ARM is a subsidiary of News Corp Australia, and its results are included within the News and Information Services segment. In September 2016, the Company completed its acquisition of Wireless Group plc (“Wireless Group”) for a purchase price of 315 pence per share in cash, or approximately £220 million (approximately $285 million) in the 42 aggregate, plus $23 million of assumed debt which was repaid subsequent to closing. Wireless Group operates talkSPORT, the leading sports radio network in the U.K., and a portfolio of radio stations in the U.K. and Ireland. The acquisition broadens the Company’s range of services in the U.K., Ireland and internationally and the Company continues to closely align Wireless Group’s operations with those of The Sun and The Times. Wireless Group’s results are included within the News and Information Services segment, and it is considered a separate reporting unit for purposes of the Company’s annual goodwill impairment review. In May 2016, REA Group acquired Flatmates.com.au Pty Ltd (“Flatmates”) for $19 million in cash at closing and up to $15 million in future cash consideration related to payments contingent upon the achievement of certain performance objectives. Flatmates operates the Flatmates.com.au website, which is a market leading share accommodation site in Australia. The acquisition enhances REA Group’s Australian product offering by extending its reach into the quickly growing share accommodation business. Flatmates is a subsidiary of REA Group, and its results are included within the Digital Real Estate Services segment. In February 2016, the Company acquired a 92% interest in DIAKRIT for approximately $40 million in cash. The Company has the option to purchase, and the minority shareholders also have the option to sell to the Company, the remaining 8% in two tranches over the six years following the closing at fair value. DIAKRIT is a leader in 3D visualization products, digital sales applications and professional services for the real estate industry. DIAKRIT’s results are included within the Digital Real Estate Services segment, and it is considered a separate reporting unit for purposes of the Company’s annual goodwill impairment review. In February 2016, REA Group increased its investment in iProperty Group Limited (“iProperty”) from 22.7% to approximately 86.9% for A$482 million in cash (approximately $340 million). The remaining 13.1% interest will become mandatorily redeemable during fiscal 2018, and as a result, the Company recognized a liability of approximately $76 million. The acquisition was funded primarily with the proceeds from borrowings under an unsecured syndicated revolving loan facility (the “REA Facility”). (See Note 9—Borrowings in the accompanying Consolidated Financial Statements). The acquisition of iProperty extends REA Group’s market leading business in Australia to attractive markets throughout Southeast Asia. iProperty is a subsidiary of REA Group, and its results are included within the Digital Real Estate Services segment. During the fiscal year ended June 30, 2016, REA Group recognized a gain of $29 million related to the revaluation of its previously held equity interest in iProperty in Other, net in the Statements of Operations. The total fair value of iProperty at the acquisition date is set forth below (in millions): Cash paid for iProperty equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $340 76 Total consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of previously held iProperty investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416 120 Total fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $536 On September 30, 2015, the Company acquired Unruly Holdings Limited (“Unruly”) for approximately £60 million (approximately $90 million) in cash and up to £56 million (approximately $86 million) in future cash consideration related to payments primarily contingent upon the achievement of certain performance objectives. Unruly is a leading global video distribution platform that is focused on delivering branded video advertising across websites and mobile devices. Unruly’s results of operations are included within the News and Information Services segment, and it is considered a separate reporting unit for purposes of the Company’s annual goodwill impairment review. 43 In July 2015, the Company acquired Checkout 51 Mobile Apps ULC (“Checkout 51”) for approximately $13 million in cash at closing and approximately $10 million in deferred cash consideration which was paid during fiscal 2016. Checkout 51 is a data-driven digital incentives company that provides News America Marketing with a leading receipt recognition mobile app which enables packaged goods companies and brands to reach consumers with highly personalized marketing campaigns. Checkout 51’s results are included within the News and Information Services segment. During fiscal 2015, the Company purchased a 14.99% interest in HT&E for approximately $112 million. During fiscal 2016, the Company participated in an entitlement offer to maintain its 14.99% interest in HT&E for $20 million. During the second quarter of fiscal 2017, the Company participated in an entitlement offer for $21 million and its interest was diluted from 14.99% to 13.23%. During the fourth quarter of fiscal 2017, the Company’s interest increased from 13.23% to 13.40% as a result of dividend reinvestment. HT&E operates a portfolio of Australian radio and outdoor media assets. In November 2014, the Company completed its acquisition of Move, a leading provider of online real estate services. The acquisition expanded the Company’s digital real estate services business into the U.S., one of the largest real estate markets. The aggregate cash payment at closing to acquire the outstanding shares of Move was approximately $864 million, which was funded with cash on hand. The Company also assumed equity-based compensation awards with a fair value of $67 million, of which $28 million was allocated to pre-combination services and included in total consideration transferred for Move. The remaining $39 million was allocated to future services and was expensed over the weighted average remaining service period of 2.5 years. In addition, the Company assumed Move’s outstanding indebtedness of approximately $129 million, which the Company settled following the acquisition, and acquired approximately $108 million of cash. The total transaction value for the Move acquisition is set forth below (in millions): Cash paid for Move equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assumed equity-based compensation awards—pre-combination services . . . . . . . . . . . . . . . . . . . . . . . . . . $ 864 28 Total consideration transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 892 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plus: Assumed debt Plus: Assumed equity-based compensation awards—post-combination services . . . . . . . . . . . . . . . . . . . . . Less: Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 39 (108) Total transaction value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 952 Move’s results of operations are included within the Digital Real Estate Services segment, and it is considered a separate reporting unit for purposes of the Company’s annual goodwill impairment review. In November 2014, SEEKAsia Limited (“SEEK Asia”), in which the Company owned a 12.1% interest, acquired the online employment businesses of JobStreet Corporation Berhad (“JobStreet”), which were combined with JobsDB, Inc., SEEK Asia’s existing online employment business. The transaction was funded primarily through additional contributions by SEEK Asia shareholders which did not have an impact on the Company’s ownership. The Company’s share of the funding contribution was approximately $60 million. In June 2015, the Company purchased an additional 0.8% interest in SEEK Asia for approximately $7 million, which increased the Company’s investment to approximately 12.9%. In June 2016, the Company’s interest in SEEK Asia increased to approximately 13.75% as a result of the repurchase and cancellation of shares owned by certain other shareholders. In August 2014, the Company acquired Harlequin Enterprises Limited (“Harlequin”) from Torstar Corporation for $414 million in cash, net of $19 million of cash acquired. Harlequin is a leading publisher of women’s fiction and extends HarperCollins’ global platform, particularly in Europe and Asia Pacific. Harlequin is a subsidiary of HarperCollins, and its results are included within the Book Publishing segment. 44 Results of Operations—Fiscal 2017 versus Fiscal 2016 The following table sets forth the Company’s operating results for fiscal 2017 as compared to fiscal 2016. (in millions, except %) Revenues: For the fiscal years ended June 30, 2017 2016 Change % Change Better/(Worse) Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Circulation and subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,860 2,470 1,573 696 540 $ 3,025 2,569 1,578 619 501 $(165) (99) (5) 77 39 Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NAM Group and Zillow settlements, net . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment and restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity (losses) earnings of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Loss) income from continuing operations before income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Loss) income from continuing operations . . . . . . . . . . . . . . . . . . . . . . Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . . . Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Net income attributable to noncontrolling interests . . . . . . . . . 8,139 (4,529) (2,725) — (449) (927) (295) 39 132 (615) (28) (643) — (643) (95) 8,292 (4,728) (2,722) (158) (505) (89) 30 43 18 181 54 235 15 250 (71) (153) 199 (3) 158 56 (838) (325) (4) 114 (796) (82) (878) (15) (893) (24) (5)% (4)% — 12% 8% (2)% 4% — ** 11% ** ** (9)% ** ** ** ** ** ** (34)% Net (loss) income attributable to News Corporation . . . . . . . . . . . . . . (738) $ 179 $(917) ** ** not meaningful Revenues—Revenues decreased $153 million, or 2%, for the fiscal year ended June 30, 2017 as compared to fiscal 2016. The Revenue decrease was mainly due to a decrease in revenues at the News and Information Services segment of $269 million, primarily resulting from weakness in the print advertising market across mastheads, the $143 million negative impact of foreign currency fluctuations and the $77 million impact from the absence of the 53rd week in fiscal 2017. The revenue decrease was partially offset by the acquisitions of Wireless Group and ARM which contributed $74 million and $61 million in revenues, respectively. The decrease in the News and Information Services segment was partially offset by increased revenues at the Digital Real Estate Services segment of $116 million, primarily as a result of higher revenues at both REA Group and Move. The impact of foreign currency fluctuations of the U.S. dollar against local currencies and the absence of the 53rd week in fiscal 2017 resulted in revenue decreases of $147 million and $112 million, respectively, for the fiscal year ended June 30, 2017 as compared to fiscal 2016. The Company calculates the impact of foreign currency fluctuations for businesses reporting in currencies other than the U.S. dollar by multiplying the results for each quarter in the current period by the difference between the average exchange rate for that quarter and the average exchange rate in effect during the corresponding quarter of the prior year and totaling the impact for all quarters in the current period. Operating expenses—Operating expenses decreased $199 million, or 4%, for the fiscal year ended June 30, 2017 as compared to fiscal 2016. The decrease in Operating expenses for the fiscal year ended June 30, 2017 was mainly due to a decrease in operating expenses at the News and Information Services segment of $199 million, 45 primarily as a result of the impact of cost savings initiatives and lower newsprint, production, and distribution costs and a $74 million positive impact from foreign currency fluctuations, partially offset by higher costs of $75 million associated with the acquisitions of ARM and Wireless Group. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in an Operating expense decrease of $59 million for the fiscal year ended June 30, 2017 as compared to fiscal 2016. Selling, general and administrative expenses—Selling, general and administrative expenses increased $3 million for the fiscal year ended June 30, 2017 as compared to fiscal 2016. The increase in Selling, general and administrative expenses was primarily due to higher expenses at the News and Information Services segment of $10 million, mainly due to $56 million in higher costs associated with the acquisitions of Wireless Group and ARM, and $19 million in higher costs at News America Marketing, primarily due to a $12 million increase in investment spending at Checkout 51, partially offset by the $63 million positive impact of foreign currency fluctuations. The increase was also attributable to a one-time corporate charge of $11 million associated with a change in the Company’s executive management in February 2017. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a Selling, general and administrative expense decrease of $87 million for the fiscal year ended June 30, 2017 as compared to fiscal 2016. NAM Group and Zillow settlements, net—During the fiscal year ended June 30, 2016, the Company recognized one-time costs of approximately $280 million in connection with the settlement of certain litigation and related claims at News America Marketing and a one-time gain of $122 million in connection with the settlement of litigation with Zillow, Inc. (“Zillow”). The gain reflects settlement proceeds received from Zillow of $130 million, less $8 million paid to the National Association of Realtors® (“NAR”). (See Note 15—Commitments and Contingencies in the accompanying Consolidated Financial Statements). Depreciation and amortization—Depreciation and amortization expense decreased $56 million, or 11%, for the fiscal year ended June 30, 2017 as compared to fiscal 2016, primarily due to the write-down of fixed assets at the Australian newspapers in the second quarter of fiscal 2017 and the positive impact of foreign currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a depreciation and amortization expense decrease of $9 million for the fiscal year ended June 30, 2017 as compared to fiscal 2016. Impairment and restructuring charges—During the fiscal year ended June 30, 2017, the Company recognized total impairment charges of $785 million, primarily at News UK and News Corp Australia. The total charges consisted of a write-down of the Company’s fixed assets of $679 million, a write-down of intangible assets of $58 million and a write-down of goodwill of $48 million. During the fourth quarter of fiscal 2017, as part of the Company’s long-range planning process, the Company reduced its outlook for the U.K. newspapers due to the impact of adverse print advertising and print circulation trends on the future expected performance of the business. As a result, the Company recognized a non-cash impairment charge of approximately $360 million related to the write-down of fixed assets at the U.K. newspapers. The write-down was comprised of approximately $252 million related to print sites, $85 million related to printing presses and print related equipment and $23 million related to capitalized software. Significant unobservable inputs utilized in the income approach valuation method were a discount rate of 8.5% and a -1.0% long term growth rate. During the second quarter of fiscal 2017, the Company recognized a non-cash impairment charge of approximately $310 million primarily related to the write-down of fixed assets at the Australian newspapers. The write-down was a result of the impact of adverse trends on the future expected performance of the Australian newspapers, where revenue declines from continued weakness in the print advertising market accelerated during the second quarter. The write-down was comprised of approximately $149 million related to printing presses and print related equipment, $77 million related to facilities, $66 million related to capitalized software and $18 million related to tradenames. Significant unobservable inputs utilized in the income approach valuation method were a discount rate of 11.5% and no long-term growth. 46 In fiscal 2017, the Company recorded restructuring charges of $142 million, of which $133 million related to the News and Information Services segment. The restructuring charges were primarily related to employee termination benefits. In connection with a reorganization at Dow Jones, the Company incurred $38 million of restructuring expense in fiscal 2017, which is included in the restructuring charges discussed above. The reorganization is expected to reduce the Company’s costs by approximately $100 million on an annualized basis by the end of fiscal 2018. In fiscal 2016, the Company recorded restructuring charges of $89 million, of which $79 million related to the News and Information Services segment. The restructuring charges were primarily related to employee termination benefits. Equity (losses) earnings of affiliates—Equity (losses) earnings of affiliates decreased $325 million for the fiscal year ended June 30, 2017 as compared to fiscal 2016, primarily as a result of the $227 million non-cash write- down of the carrying value of the Company’s investment in Foxtel to fair value and lower net income at Foxtel. (See Note 6—Investments in the accompanying Consolidated Financial Statements). For the fiscal years ended June 30, 2017 2016 Change % Change (in millions, except %) Foxtel(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other equity affiliates, net(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(265) $38 (8) (30) Better/(Worse) ** ** $(303) (22) Total Equity (losses) earnings of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(295) $30 $(325) ** not meaningful ** (a) During the second quarter of fiscal 2017, the Company recognized a $227 million non-cash write-down of the carrying value of its investment in Foxtel to fair value. The write-down is reflected in Equity (losses) earnings of affiliates in the Statements of Operations for the fiscal year ended June 30, 2017. (See Note 6— Investments in the accompanying Consolidated Financial Statements). In accordance with Accounting Standards Codification (“ASC”) 350, “Intangibles—Goodwill and Other” (“ASC 350”), the Company amortized $68 million and $52 million related to excess cost over the Company’s proportionate share of its investment’s underlying net assets allocated to finite-lived intangible assets during the fiscal years ended June 30, 2017 and 2016, respectively. Such amortization is reflected in Equity (losses) earnings of affiliates in the Statements of Operations. (See Note 6—Investments in the accompanying Consolidated Financial Statements). The increase in amortization expense recognized by the Company in fiscal 2017 resulted from a corresponding decrease in amortization expense recognized by Foxtel as certain intangible assets were fully amortized in fiscal 2016. For the fiscal year ended June 30, 2017, Foxtel revenues increased $32 million, or 1%, as a result of the positive impact of foreign currency fluctuations, as revenues decreased 2% in local currency due to lower subscribers. Operating income decreased $20 million, primarily due to planned increases in programming spend and the lower revenues noted above, partially offset by lower depreciation costs and the positive impact of foreign currency fluctuations. Net income decreased $121 million, mainly due to $58 million in losses associated with the change in the fair value of Foxtel’s investment in Ten Network Holdings (“Ten”) and losses of $53 million associated with Presto, primarily resulting from Foxtel management’s decision to cease Presto operations in January 2017. (See Note 6—Investments in the accompanying Consolidated Financial Statements). During the first quarter of fiscal 2017, Foxtel was deemed to have significant influence over its investment in Ten. As a result, Foxtel was required to treat its investment in Ten as an equity method investment. Foxtel elected the fair value option under ASC 825, “Financial Instruments” (“ASC 825”) and adjusts the carrying value of the Ten investment to fair value each reporting period. Although Foxtel ceased to have significant 47 influence in Ten during the third quarter of fiscal 2017, it will continue to adjust the carrying value of the Ten investment to fair value each reporting period due to its election of the fair value option under ASC 825. This adjustment will be recorded as a component of Foxtel’s net income. (b) Other equity affiliates, net for the fiscal year ended June 30, 2017 includes losses primarily from the Company’s interest in Elara. Additionally, during the fourth quarter of fiscal 2017, the Company recognized impairments of $9 million on certain other equity method investments. The impairments are reflected in Equity (losses) earnings of affiliates in the Statement of Operations for the fiscal year ended June 30, 2017. (See Note 6—Investments in the accompanying Consolidated Financial Statements). Interest, net—Interest, net for the fiscal year ended June 30, 2017 decreased $4 million, or 9%, as compared to fiscal 2016, primarily due to higher interest expense associated with the REA Facility. (See Note 9—Borrowings in the accompanying Consolidated Financial Statements). Other, net— (in millions) Gain on sale of REA Group’s European business(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on iProperty transaction(b) . . . . . . . . . . . . . . . . . Impairment of marketable securities and cost method investments(c) Gain on sale of other businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of equity method investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends received from cost method investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . For the fiscal years ended June 30, 2017 $107 — (21) 19 11 7 3 6 $132 2016 $ — 29 (21) 2 1 1 — 6 $ 18 (a) (b) (c) The Company recognized a pre-tax gain of $107 million in the year ended June 30, 2017 related to REA Group’s sale of its European business. (See Note 3—Acquisitions, Disposals, and Other Transactions in the accompanying Consolidated Financial Statements). The Company recorded a $29 million gain resulting from the revaluation of REA Group’s previously held interest in iProperty during the fiscal year ended June 30, 2016. (See Note 3—Acquisitions, Disposals, and Other Transactions in the accompanying Consolidated Financial Statements). The Company recorded write-offs and impairments of certain investments in the fiscal years ended June 30, 2017 and 2016. These write-offs and impairments were taken either as a result of the deteriorating financial position of the investee or due to an other-than-temporary impairment resulting from sustained losses and limited prospects for recovery. (See Note 6—Investments in the accompanying Consolidated Financial Statements). Income tax (expense) benefit—The Company’s income tax expense and effective tax rate for the fiscal year ended June 30, 2017 were $28 million and (5%), respectively, as compared to an income tax benefit and effective tax rate of $54 million and (30%), respectively, for fiscal 2016. For the fiscal year ended June 30, 2017 the Company recorded a tax expense of $28 million on pre-tax loss of $615 million resulting in an effective tax rate that was lower than the U.S. statutory tax rate. The lower tax rate was primarily due to $139 million of lower tax benefits on impairments and write-downs in foreign jurisdictions of approximately $1 billion, a tax expense of approximately $63 million related to the settlement of a foreign tax audit and $40 million related to the recording of valuation allowance against foreign net operating losses, offset by lower taxes on the sale of certain business assets. 48 For the fiscal year ended June 30, 2016, the Company recorded a tax benefit of $54 million on pre-tax income of $181 million resulting in an effective tax rate that was lower than the U.S. statutory tax rate. The lower tax rate was primarily due to a tax benefit of approximately $106 million related to the release of previously established valuation allowances related to certain U.S. federal net operating losses and state deferred tax assets. This benefit was recognized in conjunction with management’s plan to dispose of the Company’s digital education business in the first quarter of fiscal 2016, as the Company now expects to generate sufficient U.S. taxable income to utilize these deferred tax assets prior to expiration. In addition, the effective tax rate was also impacted by the $29 million non-taxable gain resulting from the revaluation of REA Group’s previously held equity interest in iProperty. (See Note 18—Income Taxes in the accompanying Consolidated Financial Statements). Income (loss) from discontinued operations, net of tax—For the fiscal year ended June 30, 2017, the Company did not recognize any income from discontinued operations as the operations of the digital education business were discontinued during fiscal 2016. For the fiscal year ended June 30, 2016, the Company recorded income from discontinued operations, net of tax, of $15 million. The income recognized in fiscal 2016 was primarily due to the impact of a $144 million tax benefit recognized upon reclassification of the Digital Education segment to discontinued operations, a tax benefit of $30 million related to the operations for the period and lower operating losses as a result of the sale of Amplify Insight and Amplify Learning, which more than offset the pre-tax non-cash impairment charge recognized in the first quarter of fiscal 2016 of $76 million and $17 million in severance and lease termination charges recognized in the second quarter of fiscal 2016. (See Note 4—Discontinued Operations in the accompanying Consolidated Financial Statements). Net (loss) income—Net (loss) income decreased $893 million for the fiscal year ended June 30, 2017 as compared to fiscal 2016 primarily due to non-cash impairment charges of approximately $785 million, mainly related to the write-down of fixed assets at the U.K. and Australian newspapers, higher equity losses of affiliates, primarily due to the $227 million non-cash write-down of the carrying value of the Company’s investment in Foxtel to fair value, the absence of the one-time gain of $122 million in connection with the settlement of litigation with Zillow, and the tax benefit related to the release of valuation allowances and income from discontinued operations recognized in fiscal 2016 which did not recur in fiscal 2017, partially offset by the absence of the $280 million NAM Group settlement charge in the prior year and higher Other, net. Net income attributable to noncontrolling interests—Net income attributable to noncontrolling interests increased by $24 million for the fiscal year ended June 30, 2017 as compared to fiscal 2016, due to the gain on the sale of REA Group’s European business. Segment Analysis Segment EBITDA is defined as revenues less operating expenses and selling, general and administrative expenses and excluding the impact from the NAM Group and Zillow legal settlements. Segment EBITDA does not include: depreciation and amortization, impairment and restructuring charges, equity (losses) earnings of affiliates, interest, net, other, net, income tax (expense) benefit and net income attributable to noncontrolling interests. Segment EBITDA may not be comparable to similarly titled measures reported by other companies, since companies and investors may differ as to what items should be included in the calculation of Segment EBITDA. Segment EBITDA is the primary measure used by the Company’s chief operating decision maker to evaluate the performance of and allocate resources within the Company’s businesses. Segment EBITDA provides management, investors and equity analysts with a measure to analyze the operating performance of each of the Company’s business segments and its enterprise value against historical data and competitors’ data, although historical results may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences). 49 Total Segment EBITDA is a non-GAAP measure and should be considered in addition to, not as a substitute for, net (loss) income, cash flow and other measures of financial performance reported in accordance with GAAP. In addition, this measure does not reflect cash available to fund requirements and excludes items, such as depreciation and amortization and impairment and restructuring charges, which are significant components in assessing the Company’s financial performance. The Company believes that the presentation of Total Segment EBITDA provides useful information regarding the Company’s operations and other factors that affect the Company’s reported results. Specifically, the Company believes that by excluding certain one-time or non-cash items such as impairment and restructuring charges and depreciation and amortization, as well as potential distortions between periods caused by factors such as financing and capital structures and changes in tax positions or regimes, the Company provides users of its consolidated financial statements with insight into both its core operations as well as the factors that affect reported results between periods but which the Company believes are not representative of its core business. As a result, users of the Company’s consolidated financial statements are better able to evaluate changes in the core operating results of the Company across different periods. The following table reconciles Total Segment EBITDA to (Loss) income from continuing operations: For the fiscal years ended June 30, 2017 2016 Change % Change (in millions, except %) Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NAM Group and Zillow settlements, net $ 8,139 (4,529) (2,725) — $ 8,292 (4,728) (2,722) (158) Total Segment EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment and restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity (losses) earnings of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Loss) income from continuing operations before income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 885 (449) (927) (295) 39 132 (615) (28) (Loss) income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . $ (643) $ 684 (505) (89) 30 43 18 $(153) 199 Better/(Worse) (2)% 4% (3) — % 158 201 56 (838) (325) (4) 114 ** 29% 11% ** ** (9)% ** 181 54 235 (796) (82) $(878) ** ** ** ** not meaningful (in millions) For the fiscal years ended June 30, 2017 2016 Revenues Segment EBITDA Revenues Segment EBITDA News and Information Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Book Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Digital Real Estate Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cable Network Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,069 1,636 938 494 2 $ 414 199 324 123 (175) $5,338 1,646 822 484 2 $ 214 185 344 124 (183) Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,139 $ 885 $8,292 $ 684 50 News and Information Services (62% and 64% of the Company’s consolidated revenues in fiscal 2017 and 2016, respectively) (in millions, except %) Revenues: For the fiscal years ended June 30, 2017 2016 Change % Change Better/(Worse) Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Circulation and subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,608 2,010 451 $ 2,810 2,107 421 Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NAM Group settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,069 (2,943) (1,712) — 5,338 (3,142) (1,702) (280) $(202) (97) 30 (269) 199 (10) 280 Segment EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 414 $ 214 $ 200 (7)% (5)% 7% (5)% 6% (1)% ** 93% ** —not meaningful For the fiscal year ended June 30, 2017, revenues at the News and Information Services segment decreased $269 million, or 5%, as compared to fiscal 2016. The revenue decrease was mainly due to lower advertising revenues of $202 million as compared to fiscal 2016, primarily resulting from weakness in the print advertising market across mastheads, the $33 million impact from the absence of the 53rd week in fiscal 2017, the $28 million negative impact from foreign currency fluctuations and lower advertising revenues of $16 million from the Perth Sunday Times which was sold in November 2016. These decreases were partially offset by the acquisitions of Wireless Group and ARM, which contributed $63 million and $42 million of advertising revenues, respectively. Circulation and subscription revenues for the fiscal year ended June 30, 2017 decreased $97 million as compared to fiscal 2016, primarily due to the $88 million negative impact of foreign currency fluctuations and the $39 million impact from the absence of the 53rd week in fiscal 2017, which more than offset higher circulation and subscription revenues at Dow Jones. Other revenues for the fiscal year ended June 30, 2017 increased $30 million as compared to fiscal 2016, primarily due to higher brand partnership revenues in the U.K. of $14 million, higher third-party printing revenues in Australia of $10 million and the acquisitions of Wireless Group and Unruly, which contributed $11 million and $8 million, respectively, to the increase. These increases were partially offset by the $27 million negative impact of foreign currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies and the absence of the 53rd week in fiscal 2017 resulted in revenue decreases of $143 million and $77 million, respectively, for the fiscal year ended June 30, 2017 as compared to fiscal 2016. For the fiscal year ended June 30, 2017, Segment EBITDA at the News and Information Services segment increased $200 million, or 93%, as compared to fiscal 2016. The increase was primarily due to the absence of the $280 million NAM Group settlement charge in the prior year and the $12 million impact of an adjustment to the deferred consideration accrual related to the acquisition of Unruly. These factors were partially offset by lower contributions from News Corp Australia, News UK and Dow Jones of $44 million, $36 million and $22 million, respectively, primarily due to the impact of lower advertising revenues as discussed above, partially offset by the impact of cost savings initiatives and lower newsprint, production, editorial and distribution costs. News Corp Australia Revenues at the Australian newspapers were $1,271 million for the fiscal year ended June 30, 2017, a decrease of $21 million, or 2%, compared to fiscal 2016 revenues of $1,292 million. The impact of foreign currency fluctuations of the U.S. dollar against local currencies and the absence of the 53rd week in fiscal 2017 resulted in a revenue increase of $43 million, or 3%, and a revenue decrease of $21 million, or 2%, respectively, for the 51 fiscal year ended June 30, 2017 as compared to fiscal 2016. Advertising revenues decreased $46 million, primarily as a result of the $94 million impact of weakness in the print advertising market, lower advertising revenues of $16 million from the Perth Sunday Times, which was sold in November 2016, and the $14 million impact from the absence of the 53rd week in fiscal 2017. These decreases were partially offset by the acquisition of ARM, which contributed $42 million to advertising revenues, and the $25 million positive impact of foreign currency fluctuations. Circulation and subscription revenues increased $7 million due to the $14 million positive impact of foreign currency fluctuations and $13 million from the acquisition of ARM, partially offset by lower circulation and subscription revenues of $10 million primarily from the Perth Sunday Times and the $7 million impact from the absence of the 53rd week in fiscal 2017, as price increases and digital subscriber growth were offset by print volume declines. Other revenues increased $18 million primarily due to higher third-party printing revenues. News UK Revenues were $1,037 million for the fiscal year ended June 30, 2017, a decrease of $244 million, or 19%, as compared to fiscal 2016 revenues of $1,281 million. Advertising revenues decreased $114 million, primarily due to the $52 million negative impact of foreign currency fluctuations and the $51 million impact from weakness in the print advertising. Circulation and subscription revenues decreased $111 million, primarily due to the $96 million negative impact of foreign currency fluctuations and the $13 million impact from the absence of the 53rd week in fiscal 2017, as the $33 million impact of single-copy volume declines, primarily at The Sun, was offset by the $32 million impact of cover price increases across The Sun and The Times. Other revenues decreased $19 million due to the $29 million negative impact of foreign currency fluctuations, which more than offset higher brand partnership revenues. The impact of foreign currency fluctuations of the U.S. dollar against local currencies and the absence of the 53rd week in fiscal 2017 resulted in revenue decreases of $177 million and $21 million, respectively, for the fiscal year ended June 30, 2017 as compared to fiscal 2016. Dow Jones Revenues were $1,479 million for the fiscal year ended June 30, 2017, a decrease of $91 million, or 6%, as compared to fiscal 2016 revenues of $1,570 million. Advertising revenues decreased $103 million, primarily due to the $95 million impact of weakness in the print advertising market. Circulation and subscription revenues increased $9 million, primarily due to the $38 million impact of price increases and volume growth at The Wall Street Journal, partially offset by the $19 million impact from the absence of the 53rd week in fiscal 2017 and the $6 million negative impact of foreign currency fluctuations, as professional information business revenues were relatively flat compared to fiscal 2016. The absence of the 53rd week in fiscal 2017 and the impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in revenue decreases of $26 million and $6 million, respectively, for the fiscal year ended June 30, 2017 as compared to fiscal 2016. News America Marketing Revenues at News America Marketing were $1,021 million for the fiscal year ended June 30, 2017, an increase of $9 million, or 1%, as compared to fiscal 2016 revenues of $1,012 million. The increase was primarily due to higher other revenues of $9 million related to certain merchandising products. Advertising revenues were flat, as higher domestic in-store product revenues of $42 million and certain other increases were offset by lower home delivered revenues, which include free-standing insert products, of $51 million. 52 Book Publishing (20% of the Company’s consolidated revenues in fiscal 2017 and 2016) (in millions, except %) Revenues: For the fiscal years ended June 30, 2017 2016 Change % Change Better/(Worse) Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,573 63 $ 1,578 68 Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,636 (1,124) (313) 1,646 (1,145) (316) $ (5) (5) (10) 21 3 Segment EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 199 $ 185 $ 14 — (7)% (1)% 2% 1% 8% For the fiscal year ended June 30, 2017, revenues at the Book Publishing segment decreased $10 million, or 1%, as compared to fiscal 2016. The decrease was mainly due to the absence of $42 million in sales of Go Set a Watchman by Harper Lee, the $34 million negative impact of foreign currency fluctuations and the $19 million impact from the absence of the 53rd week in fiscal 2017. These decreases were partially offset by strong frontlist and backlist sales in the general books category, which increased $43 million, including Hillbilly Elegy by J.D. Vance, and in the Christian publishing category, which increased $24 million, including The Magnolia Story by Chip and Joanna Gaines and Jesus Calling and Jesus Always by Sarah Young, as well as the $25 million impact of the continued expansion of HarperCollins’ global footprint. Digital sales represented 19% of Consumer revenues during the fiscal year ended June 30, 2017 and were flat as compared to fiscal 2016. For the fiscal year ended June 30, 2017, Segment EBITDA at the Book Publishing segment increased $14 million, or 8%, as compared to fiscal 2016. The increase was primarily due to the mix of titles as compared to the prior year. Digital Real Estate Services (12% and 10% of the Company’s consolidated revenues in fiscal 2017 and 2016, respectively) (in millions, except %) Revenues: For the fiscal years ended June 30, 2017 2016 Change % Change Better/(Worse) Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Circulation and subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 165 58 696 19 $ 133 64 619 6 Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Zillow settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 938 (120) (494) 822 (102) (498) 122 $ 32 (6) 77 13 116 (18) 4 (122) 24% (9)% 12% ** 14% (18)% 1% ** Segment EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 324 $ 344 $ (20) (6)% **—not meaningful For the fiscal year ended June 30, 2017, revenues at the Digital Real Estate Services segment increased $116 million, or 14%, as compared to fiscal 2016. At REA Group, revenues increased $66 million, or 14%, to $525 million in fiscal 2017 from $459 million in fiscal 2016, primarily due to a $45 million increase in Australian residential depth revenue and the $18 million positive impact of foreign currency fluctuations, partially offset by an $18 million decrease resulting from the sale of REA Group’s European business in December 2016. Revenues at Move increased $37 million, or 10%, to $394 million in fiscal 2017 from $357 million in fiscal 2016, 53 primarily due to a $38 million increase in ConnectionsSM for Buyers product revenues and a $12 million increase in non-listing media revenues, partially offset by the $12 million impact of lower revenues from TigerLead® , which was sold in November 2016. The acquisition of DIAKRIT also contributed $13 million to the revenue increase for the fiscal year ended June 30, 2017. For the fiscal year ended June 30, 2017, Segment EBITDA at the Digital Real Estate Services segment decreased $20 million, or 6%, as compared to fiscal 2016. The decrease in Segment EBITDA was the result of the $63 million lower contribution from Move, primarily due to the absence of the $122 million gain recognized in connection with the settlement of litigation with Zillow in fiscal 2016 and $11 million of increased marketing costs to drive traffic growth and brand awareness, partially offset by the higher revenues noted above and the absence of $36 million of legal costs, primarily related to the Zillow litigation. The decrease was partially offset by the $46 million higher contribution from REA Group, primarily due to the higher revenues noted above, the $11 million positive impact of foreign currency fluctuations and the absence of $12 million of costs associated with REA Group’s European business, which was disposed of in fiscal 2017, partially offset by $16 million in higher costs associated with higher revenues and $14 million in higher costs related to the acquisition of iProperty. Cable Network Programming (6% of the Company’s consolidated revenues in fiscal 2017 and 2016) (in millions, except %) Revenues: For the fiscal years ended June 30, 2017 2016 Change % Change Better/(Worse) Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Circulation and subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86 402 6 $ 81 398 5 Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494 (341) (30) 484 (336) (24) $ 5 4 1 10 (5) (6) Segment EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 123 $ 124 $ (1) 6% 1% 20% 2% (1)% (25)% (1)% For the fiscal year ended June 30, 2017, revenues at the Cable Network Programming segment increased $10 million, or 2% as compared to fiscal 2016. The revenue increase was primarily due to the acquisition of ANC, which contributed $20 million of revenue in fiscal 2017 and the $12 million positive impact of foreign currency fluctuations. These increases were partially offset by lower affiliate revenues of $11 million at FOX SPORTS Australia and the $10 million impact of the absence of the 53rd week in fiscal 2017. For the fiscal year ended June 30, 2017, Segment EBITDA at the Cable Network Programming segment decreased $1 million, or 1%, as compared to fiscal 2016. The decrease in Segment EBITDA was due to the $3 million negative impact of foreign currency fluctuations as the impact of lower revenues at FOX SPORTS Australia were offset by lower programming rights costs. 54 Results of Operations—Fiscal 2016 versus Fiscal 2015 The following table sets forth the Company’s operating results for fiscal 2016 as compared to fiscal 2015. (in millions, except %) Revenues: For the fiscal years ended June 30, 2016 2015 Change % Change Better/(Worse) Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Circulation and Subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,025 2,569 1,578 619 501 $ 3,349 2,608 1,594 486 487 $(324) (39) (16) 133 14 Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NAM Group and Zillow settlements, net . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment and restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity earnings of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations before income tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Net income attributable to noncontrolling interests . . . . . . . . . 8,292 (4,728) (2,722) (158) (505) (89) 30 43 18 181 54 235 15 250 (71) 8,524 (4,952) (2,627) — (498) (84) 58 56 75 552 (185) 367 (445) (78) (69) (232) 224 (95) (158) (7) (5) (28) (13) (57) (371) 239 (132) 460 328 (2) Net income (loss) attributable to News Corporation . . . . . . . . . . . . . . $ 179 $ (147) $ 326 (10)% (1)% (1)% 27% 3% (3)% 5% (4)% ** (1)% (6)% (48)% (23)% (76)% (67)% ** (36)% ** ** (3)% ** ** not meaningful Revenues—Revenues decreased $232 million, or 3%, for the fiscal year ended June 30, 2016 as compared to fiscal 2015. The revenue decrease was mainly due to a decrease in revenues at the News and Information Services segment of $393 million, primarily resulting from the $290 million negative impact of foreign currency fluctuations, weakness in the print advertising market across mastheads and lower free-standing insert product revenues at News America Marketing of $98 million. The revenue decrease was partially offset by an increase in revenues at the Digital Real Estate Services segment of $197 million, primarily as a result of the acquisition of Move in November 2014 and increased revenues at REA Group. The impact of foreign currency fluctuations of the U.S. dollar amount against local currencies and the 53rd week in fiscal 2016 resulted in a revenue decrease of $455 million and increase of $112 million, respectively for the fiscal year ended June 30, 2016 as compared to fiscal 2015. Operating Expenses—Operating expenses decreased $224 million, or 5%, for the fiscal year ended June 30, 2016 as compared to fiscal 2015. The decrease in Operating expenses was mainly due to a decrease in operating expenses at the News and Information Services segment of $300 million, primarily as a result of the $157 million positive impact of foreign currency fluctuations, lower newsprint, production and distribution costs and the impact of cost savings initiatives. The decrease in Operating expenses was partially offset by higher operating expenses at the Digital Real Estate Services segment of $44 million due to the acquisition of Move in November 2014 and $39 million at the Book Publishing segment primarily due to higher costs associated with increased print book sales. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in an operating expense decrease of $199 million for the fiscal year ended June 30, 2016 as compared to fiscal 2015. 55 Selling, general and administrative expenses—Selling, general and administrative expenses increased $95 million, or 4%, for the fiscal year ended June 30, 2016 as compared to fiscal 2015. The increase in Selling, general and administrative expenses was primarily due to higher expenses at the Digital Real Estate Services segment of $132 million as a result of the acquisition of Move in November 2014 and increased costs in the News and Information Services segment of $16 million. The increases at the News and Information Services segment were primarily due to increased costs of $41 million related to the acquisition of Unruly in September 2015, an approximate $40 million in increased brand marketing and promotional expenses primarily at the U.K. newspapers, and $28 million at NAM primarily due to the acquisition of Checkout 51 in July 2015, partially offset by the $117 million positive impact of foreign currency fluctuations. The increases were partially offset by lower costs associated with the U.K. Newspaper Matters of $31 million and lower expenses at the Book Publishing segment of $24 million primarily as a result of cost savings initiatives. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a Selling, general and administrative expense decrease of $186 million for the fiscal year ended June 30, 2016 as compared to fiscal 2015. NAM Group and Zillow settlements, net—During the fiscal year ended June 30, 2016, the Company recognized one-time costs of approximately $280 million in connection with the settlement of certain litigation and related claims at News America Marketing. In addition, in the three months ended June 30, 2016, the Company recognized a gain of $122 million in connection with the settlement of litigation with Zillow, which reflects settlement proceeds received from Zillow of $130 million, less $8 million paid to NAR. (See Note 15— Commitments and Contingences in the accompanying Consolidated Financial Statements). Depreciation and amortization—Depreciation and amortization expense increased $7 million, or 1%, for the fiscal year ended June 30, 2016 as compared to fiscal 2015, primarily due to increased depreciation and amortization expense at the Digital Real Estate Services segment due to the acquisition of Move in November 2014, partially offset by the positive impact of foreign currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a depreciation and amortization expense decrease of $27 million for the fiscal year ended June 30, 2016 as compared to fiscal 2015. Restructuring charges—In fiscal 2016, the Company recorded restructuring charges of $89 million, of which $79 million related to the News and Information Services segment. The restructuring charges were primarily related to employee termination benefits. In fiscal 2015, the Company recorded restructuring charges of $84 million, of which $75 million related to the News and Information Services segment. The restructuring charges were primarily related to employee termination benefits. Equity earnings of affiliates—Equity earnings of affiliates decreased $28 million, or 48%, for the fiscal year ended June 30, 2016 as compared to fiscal 2015, primarily as a result of lower net income at Foxtel. For the fiscal years ended June 30, 2016 2015 Change % Change Better/(Worse) (in millions, except %) Foxtel(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other equity affiliates(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $38 (8) $59 (1) Total Equity earnings of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $30 $58 $(21) (7) $(28) (36)% ** (48)% ** (a) not meaningful In accordance with ASC 350, the Company amortized $52 million and $57 million related to excess cost over the Company’s proportionate share of its investment’s underlying net assets allocated to finite-lived intangible assets during the fiscal years ended June 30, 2016 and 2015, respectively. Such amortization is reflected in Equity earnings of affiliates in the Statements of Operations. (See Note 6—Investments in the accompanying 56 Consolidated Financial Statements). For the fiscal year ended June 30, 2016, Foxtel revenues decreased $279 million, or 10%, as a result of the negative impact of foreign currency fluctuations, which more than offset higher revenues in local currency. Operating income decreased primarily due to the negative net impact of foreign currency fluctuations, increased investment in programming to support subscriber growth, higher offer costs and continued investment in Presto, partially offset by lower depreciation expense resulting from Foxtel’s reassessment of the useful lives of cable and satellite installations. Net income decreased as a result of the lower operating income noted above, partially offset by lower income tax expense. (b) Other equity affiliates, net for the fiscal year ended June 30, 2016 includes losses primarily from the Company’s interests in Draftstars and Elara. Interest, net—Interest, net for the fiscal year ended June 30, 2016 decreased $13 million, or 23%, as compared to fiscal 2015, primarily due to the negative impact of foreign currency fluctuations and interest expense associated with the REA Facility. (See Note 9—Borrowings in the accompanying Consolidated Financial Statements). Other, net— For the fiscal years ended June 30, 2016 2015 (in millions) Gain on iProperty transaction(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment of marketable securities and cost method investments(b) . . . . . . . . . . . . . . . . . Gain on sale of other businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of equity method investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of marketable securities(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends received from cost method investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of cost method investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29 (21) 2 1 1 — — 6 $ — (5) — 7 29 25 15 4 Total Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18 $ 75 (a) (b) (c) The Company recorded a $29 million gain resulting from the revaluation of REA Group’s previously held interest in iProperty during the fiscal year ended June 30, 2016. (See Note 3—Acquisitions, Disposals and Other Transactions in the accompanying Consolidated Financial Statements). The Company recorded write-offs and impairments of certain investments in the fiscal years ended June 30, 2016 and 2015. These write-offs and impairments were taken either as a result of the deteriorating financial position of the investee or due to an other-than-temporary impairment resulting from sustained losses and limited prospects for recovery. (See Note 6—Investments in the accompanying Consolidated Financial Statements). In August 2014, REA Group completed the sale of a minority interest held in marketable securities for total cash consideration of $104 million. As a result of the sale, REA Group recognized a pre-tax gain of $29 million, which was reclassified out of accumulated other comprehensive loss and included in Other, net in the Statement of Operations. Income tax benefit (expense)—The Company’s income tax benefit and effective tax rate for the fiscal year ended June 30, 2016 were $54 million and (30%), respectively, as compared to an income tax expense and effective tax rate of $185 million and 34%, respectively, for fiscal 2015. For the fiscal years ended June 30, 2016 the Company recorded a tax benefit of $54 million on pre-tax income of $181 million resulting in an effective tax rate that was lower than the U.S. statutory tax. The lower tax rate was primarily due to a tax benefit of approximately $106 million related to the release of previously established valuation allowances related to certain U.S. federal net operating losses and state deferred tax assets. This benefit 57 was recognized in conjunction with management’s plan to dispose of the Company’s digital education business in the first quarter of fiscal 2016, as the Company now expects to generate sufficient U.S. taxable income to utilize these deferred tax assets prior to expiration. In addition, the effective tax rate was also impacted by the $29 million non-taxable gain resulting from the revaluation of REA Group’s previously held equity interest in iProperty. For the fiscal year ended June 30, 2015, the Company’s effective tax rate was lower than the U.S. statutory tax rate primarily due to the impact from foreign operations which are subject to lower tax rates, partially offset by the impact of nondeductible items and changes in our accrued liabilities for uncertain tax positions. (See Note 18—Income Taxes in the accompanying Consolidated Financial Statements). Income (loss) from discontinued operations, net of tax—For the fiscal year ended June 30, 2016, the Company recorded income from discontinued operations, net of tax, of $15 million as compared to a loss of $445 million for fiscal 2015. The income recognized in fiscal 2016 was primarily due to the impact of a $144 million tax benefit recognized upon reclassification of the Digital Education segment to discontinued operations, a tax benefit of $30 million related to the current year operations and lower operating losses as a result of the sale of Amplify Insight and Amplify Learning, which more than offset the pre-tax non-cash impairment charge recognized in the first quarter of fiscal 2016 of $76 million and $17 million in severance and lease termination charges recognized in the second quarter of fiscal 2016. The loss recognized in fiscal 2015 primarily relates to a non-cash impairment charge of $371 million recorded in the three months ended June 30, 2015 and a full year of operating losses at Amplify in 2015. (See Note 4—Discontinued Operations in the accompanying Consolidated Financial Statements). Net income (loss)—Net income increased $328 million for the fiscal year ended June 30, 2016 as compared to fiscal 2015 primarily due to higher income from discontinued operations and the income tax benefit discussed above, partially offset by the negative net impact of the NAM Group and Zillow legal settlements, lower Total Segment EBITDA, the lower contribution from Other, net, lower equity earnings, primarily from Foxtel, and lower Interest, net. Net income attributable to noncontrolling interests—Net income attributable to noncontrolling interests increased by $2 million for the fiscal year ended June 30, 2016 as compared to fiscal 2015, due to higher results at REA Group, partially offset by the negative impact of foreign currency fluctuations. Segment Analysis Segment EBITDA is defined as revenues less operating expenses, selling, general and administrative expenses and the NAM Group and Zillow settlement charge. Segment EBITDA does not include: depreciation and amortization, restructuring charges, equity earnings of affiliates, interest, net, other, net, income tax benefit (expense) and net income attributable to noncontrolling interests. Segment EBITDA may not be comparable to similarly titled measures reported by other companies, since companies and investors may differ as to what items should be included in the calculation of Segment EBITDA. Segment EBITDA is the primary measure used by the Company’s chief operating decision maker to evaluate the performance of and allocate resources within the Company’s businesses. Segment EBITDA provides management, investors and equity analysts with a measure to analyze the operating performance of each of the Company’s business segments and its enterprise value against historical data and competitors’ data, although historical results may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences). Total Segment EBITDA is a non-GAAP measure and should be considered in addition to, not as a substitute for, net income (loss), cash flow and other measures of financial performance reported in accordance with GAAP. In addition, this measure does not reflect cash available to fund requirements and excludes items, such as 58 depreciation and amortization and impairment and restructuring charges, which are significant components in assessing the Company’s financial performance. The Company believes that the presentation of Total Segment EBITDA provides useful information regarding the Company’s operations and other factors that affect the Company’s reported results. Specifically, the Company believes that by excluding certain one-time or non-cash items such as impairment and restructuring charges and depreciation and amortization, as well as potential distortions between periods caused by factors such as financing and capital structures and changes in tax positions or regimes, the Company provides users of its consolidated financial statements with insight into both its core operations as well as the factors that affect reported results between periods but which the Company believes are not representative of its core business. As a result, users of the Company’s consolidated financial statements are better able to evaluate changes in the core operating results of the Company across different periods. The following table reconciles Total Segment EBITDA to Income (loss) from continuing operations. (in millions, except %) Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NAM Group and Zillow settlements, net Total Segment EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment and restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity earnings of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations before income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ** not meaningful For the fiscal years ended June 30, 2016 2015 Change Change % Better/(Worse) $ 8,292 (4,728) (2,722) (158) $ 8,524 (4,952) (2,627) — $(232) 224 (95) (158) 684 (505) (89) 30 43 18 181 54 235 945 (498) (84) 58 56 75 552 (185) 367 (261) (7) (5) (28) (13) (57) (371) 239 (132) (3)% 5% (4)% ** (28)% (1)% (6)% (48)% (23)% (76)% (67)% ** (36)% For the fiscal years ended June 30, 2016 2015 Segment Revenues EBITDA Revenues EBITDA Segment News and Information Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Book Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Digital Real Estate Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cable Network Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,338 1,646 822 484 2 (in millions) $ 214 185 344 124 (183) $5,731 1,667 625 500 1 $ 603 221 201 135 (215) Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,292 $ 684 $8,524 $ 945 59 News and Information Services (64% and 67% of the Company’s consolidated revenues in fiscal 2016 and 2015, respectively) (in millions, except %) Revenues: For the fiscal years ended June 30, 2016 2015 Change % Change Better/(Worse) Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Circulation and subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,810 2,107 421 $ 3,163 2,159 409 Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NAM Group settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,338 (3,142) (1,702) (280) 5,731 (3,442) (1,686) — $(353) (52) 12 (393) 300 (16) (280) (11)% (2)% 3% (7)% 9% (1)% ** Segment EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 214 $ 603 $(389) (65)% ** not meaningful For the fiscal year ended June 30, 2016, revenues at the News and Information Services segment decreased $393 million, or 7%, as compared to fiscal 2015. The revenue decrease was mainly due to lower advertising revenues of $353 million as compared to fiscal 2015, primarily resulting from the $152 million negative impact of foreign currency fluctuations, weakness in the print advertising market and $98 million lower free-standing insert product revenues at News America Marketing. Circulation and subscription revenues for the fiscal year ended June 30, 2016 decreased $52 million as compared to fiscal 2015 due to the $109 million negative impact of foreign currency fluctuations, which more than offset higher paid circulation and subscription revenues at Dow Jones and the Australian newspapers primarily resulting from price increases and digital subscriber growth. Other revenues for the fiscal year ended June 30, 2016 increased $12 million as compared to fiscal 2015, primarily due to the $45 million contribution from Unruly which was acquired in September 2015, partially offset by the $29 million negative impact of foreign currency fluctuations. The impact of the 53rd week in fiscal 2016 resulted in a revenue increase of approximately $77 million. For the fiscal year ended June 30, 2016, Segment EBITDA at the News and Information Services segment decreased $389 million, or 65%, as compared to fiscal 2015. The decrease was primarily due to one-time costs of approximately $280 million recognized in connection with the settlement of certain litigation and related claims, lower free-standing insert product revenues discussed above and a loss of $20 million at Checkout 51, primarily related to investment spending and acquisition-related costs. Segment EBITDA was also impacted by a decrease of $27 million at the Australian newspapers, primarily resulting from the $14 million negative impact of foreign currency fluctuations and lower advertising revenues, which more than offset the impact of lower newsprint, production and distribution costs, and at the U.K. newspapers of $23 million, primarily due to lower revenues and higher promotion and marketing costs. These decreases were partially offset by an increase of $22 million at Dow Jones, primarily due to lower newsprint, production and distribution costs and the impact of cost savings initiatives. News Corp Australia Revenues at the Australian newspapers were $1,292 million for the fiscal year ended June 30, 2016, a decrease of $241 million, or 16%, as compared to fiscal 2015 revenues of $1,533 million. The impact of foreign currency fluctuations of the U.S. dollar against the Australian dollar resulted in a revenue decrease of $194 million, or 13%. Advertising revenues declined $203 million, primarily as a result of the $121 million negative impact of foreign currency fluctuations and the $93 million impact of weakness in the print advertising market in Australia. Circulation and subscription revenues declined $43 million due to the $57 million negative impact of foreign currency fluctuations, partially offset by the $18 million impact of price increases, digital subscriber growth and the positive impact of the 53rd week. 60 News UK Revenues were $1,281 million for the fiscal year ended June 30, 2016, a decrease of $142 million, or 10%, as compared to fiscal 2016 revenues of $1,423 million. The impact of foreign currency fluctuations of the U.S. dollar against the British pound resulted in a revenue decrease of $80 million, or 6%, for the fiscal year ended June 30, 2016 as compared to fiscal 2015. Advertising revenues decreased $63 million, primarily due to the $52 million impact from print market declines and the $25 million negative impact of foreign currency fluctuations. Circulation and subscription revenues decreased $41 million due to the $42 million negative impact of foreign currency fluctuations. Lower revenues of $55 million resulting from single-copy volume declines, primarily at The Sun, and changes in the digital strategy at The Sun, were offset by the $53 million impact from cover price increases, higher subscriptions at The Times and The Sunday Times and the 53rd week. Other revenues decreased $38 million due to a reduction in newsprint sales to third parties. Dow Jones Revenues were $1,570 million for the fiscal year ended June 30, 2016, an increase of $4 million, as compared to fiscal 2015 revenues of $1,566 million. Circulation and subscription revenues increased by $33 million, due to higher revenues at The Wall Street Journal of $20 million primarily related to price increases and digital volume growth and the $19 million positive impact of the 53rd week, partially offset by the $10 million negative impact of foreign currency fluctuations. Professional information business revenues were flat compared to fiscal 2015. Advertising revenues decreased $27 million primarily resulting from lower print advertising of $36 million, partially offset by higher digital advertising revenues. The impact of the 53rd week resulted in a revenue increase of $7 million. News America Marketing Revenues at News America Marketing were $1,012 million for the fiscal year ended June 30, 2016, a decrease of $63 million, or 6%, as compared to fiscal 2015 revenues of $1,075 million. The decrease was primarily due to decreased revenues for free-standing insert products of $98 million, partially offset by increased in-store product revenues of $18 million. Book Publishing (20% of the Company’s consolidated revenues in fiscal 2016 and 2015) (in millions, except %) Revenues: For the fiscal years ended June 30, 2016 2015 Change % Change Better/(Worse) Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,578 68 $ 1,594 73 Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,646 (1,145) (316) 1,667 (1,106) (340) $(16) (5) (21) (39) 24 (1)% (7)% (1)% (4)% 7% Segment EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 185 $ 221 $(36) (16)% For the fiscal year ended June 30, 2016, revenues at the Book Publishing segment decreased $21 million, or 1%, as compared to fiscal 2015. The decrease was primarily the result of $69 million in higher sales of the Divergent series by Veronica Roth and American Sniper by Chris Kyle in the prior year, the $39 million negative impact of foreign currency fluctuations and an industry-wide decline in e-book sales. These decreases were partially offset by higher print book sales across all genres, including sales of Go Set a Watchman by Harper Lee in fiscal 2016 of $42 million, $37 million due to strong sales in the Christian Publishing and Children’s Categories, $23 million related to the acquisition of Harlequin in August 2014 and $21 million related to the continued expansion of HarperCollins’ global footprint. The Company sold 2.0 million net units of the Divergent series in the fiscal year ended June 30, 2016 as compared to 8.3 million net units in fiscal 2015. Digital sales represented 19% and 22% of Consumer revenues during fiscal 2016 and 2015, respectively. Digital sales decreased 15% as compared to 61 fiscal 2015 due to an industry-wide decline in e-book sales and the lower contribution from the Divergent series. During the fiscal year ended June 30, 2016, HarperCollins had 239 titles on The New York Times Bestseller List, with 30 titles reaching the number one position. The impact of the 53rd week in fiscal 2016 resulted in a revenue increase of approximately $19 million. For the fiscal year ended June 30, 2016, Segment EBITDA at the Book Publishing segment decreased $36 million, or 16%, as compared to fiscal 2015. The decrease was primarily due to the mix of titles as compared to the prior year and cost saving initiatives. Digital Real Estate Services (10% and 7% of the Company’s consolidated revenues in fiscal 2016 and 2015, respectively) (in millions, except %) Revenues For the fiscal years ended June 30, 2016 2015 Change % Change Better/(Worse) Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Circulation and Subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 133 64 619 $ 103 36 486 6 — $ 30 28 133 6 Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Zillow settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625 (58) (366) 822 (102) (498) 122 — 197 (44) (132) 122 Segment EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 344 $ 201 $ 143 29% 78% 27% ** 32% (76)% (36)% ** 71% ** not meaningful For the fiscal year ended June 30, 2016, revenues at the Digital Real Estate Services segment increased $197 million, or 32%, as compared to fiscal 2015, primarily due to a $169 million increase from Move which was acquired in November 2014. The majority of the increase related to the inclusion of a full year of operations in fiscal 2016 as compared to fiscal 2015. Approximately $40 million of the increase related to Move was driven by increased ConnectionSM for Co-brokerage product revenues and to a lesser extent, non-listing media revenues in the period from November 2015 through the end of fiscal 2016, as compared to the comparable prior year period. At REA Group, revenues increased $22 million, or 5%, to $459 million in fiscal 2016 from $437 million in fiscal 2015 resulting from higher revenues from greater residential listing depth product penetration and higher developer and media revenues, largely offset by the $66 million negative impact of foreign currency fluctuations. For the fiscal year ended June 30, 2016, Segment EBITDA at the Digital Real Estate Services segment increased $143 million, or 71%, as compared to fiscal 2015, primarily due to an increase at Move resulting from a gain of $122 million recognized in connection with the settlement of litigation with Zillow. The gain reflects proceeds received from Zillow of $130 million, less $8 million paid to NAR. The results at Move were also positively impacted by transaction costs of $19 million in fiscal 2015 which did not recur in the current fiscal year and higher revenues, offset by increased legal costs of $28 million related to the Zillow litigation. Total legal costs incurred in connection with the Zillow litigation were $38 million for fiscal 2016. Segment EBITDA was also impacted by higher revenues at REA Group, noted above, which were partially offset by the $37 million negative net impact of currency fluctuations. These increases were partially offset by $7 million in one-time transaction costs related to the acquisition of iProperty. 62 Cable Network Programming (6% of the Company’s consolidated revenues in fiscal 2016 and 2015) (in millions, except %) Revenues: For the fiscal years ended June 30, 2016 2015 Change % Change Better/(Worse) Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Circulation and Subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 81 398 5 $ 82 413 $ (1) (15) (1)% (4)% 5 — — Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 484 (336) (24) 500 (339) (26) (16) 3 2 Segment EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 124 $ 135 $ (11) (3)% 1% 8% (8)% For the fiscal year ended June 30, 2016, revenues and Segment EBITDA at the Cable Network Programming segment decreased $16 million, or 3%, and $11 million, or 8%, respectively, as compared to fiscal 2015. The revenue decrease was primarily due to the $60 million negative impact of foreign currency fluctuations, which more than offset higher affiliate and advertising revenues of $44 million. The impact of the 53rd week in fiscal 2016 resulted in a revenue increase of approximately $10 million. The decrease in Segment EBITDA was primarily the result of the $14 million negative impact of foreign currency fluctuations as higher sports programming rights and production costs offset higher affiliate and advertising revenues discussed above. Other (0% of the Company’s consolidated revenues in fiscal 2016 and 2015) (in millions, except %) Revenues: For the fiscal years ended June 30, 2016 2015 Change % Change Better/(Worse) Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1 1 $ 1 — Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (3) (182) 1 (7) (209) $ — 1 1 4 27 Segment EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(183) $(215) $ 32 — ** 100% 57% 13% 15% ** —not meaningful Segment EBITDA at the Other segment for the fiscal year ended June 30, 2016 increased $32 million, or 15%, as compared to fiscal 2015. Segment EBITDA increased primarily due to $31 million lower costs associated with the U.K. Newspaper Matters. The net expense related to the U.K. Newspaper Matters included in Selling, general and administrative expenses was $19 million for the fiscal year ended June 30, 2016 as compared to $50 million in fiscal 2015. LIQUIDITY AND CAPITAL RESOURCES Current Financial Condition The Company’s principal source of liquidity is internally generated funds and cash and cash equivalents on hand. As of June 30, 2017, the Company’s cash and cash equivalents were $2,016 million. The Company expects these elements of liquidity will enable it to meet its liquidity needs in the foreseeable future. As described in greater detail below, in October 2013, the Company established a revolving credit facility of $650 million, which 63 terminates on October 23, 2020. The Company may request that the commitments be extended under certain circumstances as set forth in the credit agreement and may also request increases in the amount of the facility up to a maximum amount of $900 million. In addition, the Company expects to have access to the worldwide capital markets, subject to market conditions, in order to issue debt if needed or desired. Although the Company believes that its cash on hand and future cash from operations, together with its access to the capital markets, will provide adequate resources to fund its operating and financing needs, its access to, and the availability of, financing on acceptable terms in the future will be affected by many factors, including: (i) the Company’s performance, (ii) its credit rating or absence of a credit rating, (iii) the liquidity of the overall capital markets and (iv) the current state of the economy. There can be no assurances that the Company will continue to have access to the capital markets on acceptable terms. See Part I, “Item 1A. Risk Factors” for further discussion. As of June 30, 2017, the Company’s consolidated assets included $1,050 million in cash and cash equivalents that was held by its foreign subsidiaries. $276 million of this amount is cash not readily accessible by the Company as it is held by REA Group, a majority owned but separately listed public company. REA Group must declare a dividend in order for the Company to have access to its share of REA Group’s cash balance. The Company earns income outside the U.S., which is deemed to be permanently reinvested in certain foreign jurisdictions. The Company does not currently intend to repatriate these earnings. Should the Company require more capital in the U.S. than is generated by and/or available to its domestic operations, the Company could elect to transfer funds held in foreign jurisdictions. The transfer of funds from foreign jurisdictions may be cumbersome due to local regulations, foreign exchange controls and taxes. Additionally, the transfer of funds from foreign jurisdictions may result in higher effective tax rates and higher cash paid for income taxes for the Company. The principal uses of cash that affect the Company’s liquidity position include the following: operational expenditures including employee costs and paper purchases; capital expenditures; income tax payments; investments in associated entities and acquisitions. In addition to the acquisitions and dispositions disclosed elsewhere, the Company has evaluated, and expects to continue to evaluate, possible future acquisitions and dispositions of certain businesses. Such transactions may be material and may involve cash, the issuance of the Company’s securities or the assumption of indebtedness. Issuer Purchases of Equity Securities In May 2013, the Company’s Board of Directors (the “Board of Directors”) authorized the Company to repurchase up to an aggregate of $500 million of its Class A Common Stock. On May 10, 2015, the Company announced it had begun repurchasing shares of Class A Common Stock under the stock repurchase program. No stock repurchases were made during the fiscal year ended June 30, 2017. Through August 7, 2017, the Company repurchased approximately 5.2 million shares of Class A Common Stock for an aggregate cost of approximately $71 million. The remaining authorized amount under the stock repurchase program as of August 7, 2017 was approximately $429 million. All decisions regarding any future stock repurchases are at the sole discretion of a duly appointed committee of the Board of Directors and management. The committee’s decisions regarding future stock repurchases will be evaluated from time to time in light of many factors, including the Company’s financial condition, earnings, capital requirements and debt facility covenants, other contractual restrictions, as well as legal requirements, regulatory constraints, industry practice, market volatility and other factors that the committee may deem relevant. The stock repurchase authorization may be modified, extended, suspended or discontinued at any time by the Board of Directors and the Board of Directors cannot provide any assurances that any additional shares will be repurchased. Dividends In August 2016, the Board of Directors declared a semi-annual cash dividend of $0.10 per share for Class A Common Stock and Class B Common Stock. This dividend was paid on October 19, 2016 to stockholders of record at the close of business on September 14, 2016. In February 2017, the Board of Directors declared a semi- 64 annual cash dividend of $0.10 per share for Class A Common Stock and Class B Common Stock. This dividend was paid on April 19, 2017 to stockholders of record as of March 15, 2017. The timing, declaration, amount and payment of future dividends to stockholders, if any, is within the discretion of the Board of Directors. The Board of Directors’ decisions regarding the payment of future dividends will depend on many factors, including the Company’s financial condition, earnings, capital requirements and debt facility covenants, other contractual restrictions, as well as legal requirements, regulatory constraints, industry practice, market volatility and other factors that the Board of Directors deems relevant. Sources and Uses of Cash—Fiscal 2017 versus Fiscal 2016 Net cash provided by operating activities from continuing operations for the fiscal years ended June 30, 2017 and 2016 was as follows (in millions): For the fiscal years ended June 30, 2017 2016 Net cash provided by operating activities from continuing operations . . . . . . . . . . . . . . . . . . . . . . . $499 $952 Net cash provided by operating activities from continuing operations decreased by $453 million for the fiscal year ended June 30, 2017 as compared to fiscal 2016. The decrease was primarily due to higher NAM Group settlement payments of $234 million during the fiscal year ended June 30, 2017, the absence of net proceeds received in fiscal 2016 from the Zillow litigation settlement of $122 million, higher restructuring payments of $41 million during the fiscal year ended June 30, 2017, lower dividends received from Foxtel and other equity method investments of $30 million and higher net tax payments of $30 million in fiscal 2017. Net cash used in investing activities from continuing operations for the fiscal years ended June 30, 2017 and 2016 was as follows (in millions): For the fiscal years ended June 30, 2017 2016 Net cash used in investing activities from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . $(105) $(1,124) The Company had net cash used in investing activities from continuing operations of $105 million for the fiscal year ended June 30, 2017 as compared to net cash used in investing activities from continuing operations of $1,124 million for fiscal 2016. During the fiscal year ended June 30, 2017, the Company used $347 million of cash for acquisitions, primarily for the acquisitions of Wireless Group and ARM. The Company also had capital expenditures of $256 million. The net cash used in investing activities from continuing operations for the fiscal year ended June 30, 2017 was partially offset by the utilization of restricted cash for the Wireless Group acquisition of $315 million and proceeds from the sale of REA Group’s European business of approximately $140 million. During the fiscal year ended June 30, 2016, the Company used $520 million of cash for acquisitions, primarily for the acquisitions of iProperty, Unruly, DIAKRIT, Flatmates and Checkout 51. The Company also had capital expenditures of $256 million in fiscal 2016. Additionally, the Company had set aside $315 million of cash for use in the Wireless Group acquisition as a result of U.K. takeover regulations and classified this as restricted cash as of June 30, 2016. Net cash (used in) provided by financing activities from continuing operations for the fiscal years ended June 30, 2017 and 2016 was as follows (in millions): For the fiscal years ended June 30, 2017 2016 Net cash (used in) provided by financing activities from continuing operations . . . . . . . . . . . . . . . $(217) $150 The Company had net cash used in financing activities from continuing operations of $217 million for the fiscal year ended June 30, 2017 as compared to net cash provided by financing activities from continuing operations of $150 million for fiscal 2016. During the fiscal year ended June 30, 2017, the Company paid dividends of 65 $152 million, primarily to News Corporation stockholders and REA Group minority stockholders, and repaid the debt assumed in the acquisition of Wireless Group of $23 million. During the fiscal year ended June 30, 2016, the Company had proceeds from borrowings under the REA Facility of approximately $340 million. The net cash provided by financing activities from continuing operations for the fiscal year ended June 30, 2016 was partially offset by dividend payments of $147 million, primarily to News Corporation stockholders and REA Group minority stockholders, and repurchases of News Corporation shares for $41 million. Sources and Uses of Cash—Fiscal 2016 versus Fiscal 2015 Net cash provided by operating activities from continuing operations for the fiscal years ended June 30, 2016 and 2015 was as follows (in millions): For the fiscal years ended June 30, 2016 2015 Net cash provided by operating activities from continuing operations . . . . . . . . . . . . . . . . . . . . . . . $952 $988 Net cash provided by operating activities from continuing operations decreased by $36 million for the fiscal year ended June 30, 2016 as compared to fiscal 2015. The decrease was primarily due to lower dividends received from Foxtel and cost method investments of $104 million and higher restructuring payments of $44 million during the fiscal year ended June 30, 2016. The decrease was offset by net proceeds received in fiscal 2016 from the Zillow litigation settlement of $122 million and a benefit in working capital related to the 53rd week. Net cash used in investing activities from continuing operations for the fiscal years ended June 30, 2016 and 2015 was as follows (in millions): For the fiscal years ended June 30, 2016 2015 Net cash used in investing activities from continuing operations . . . . . . . . . . . . . . . . . . . . . . . $(1,124) $(1,671) The Company had net cash used in investing activities from continuing operations of $1,124 million for the fiscal year ended June 30, 2016 as compared to net cash used in investing activities from continuing operations of $1,671 million for fiscal 2015. During the fiscal year ended June 30, 2016, the Company used $520 million of cash for acquisitions, primarily for the acquisitions of iProperty, Unruly, DIAKRIT, Flatmates and Checkout 51. The Company also had capital expenditures of $256 million in fiscal 2016. Additionally, the Company had set aside $315 million of cash for use in the Wireless Group acquisition as a result of U.K. takeover regulations and classified this as restricted cash as of June 30, 2016. During the fiscal year ended June 30, 2015, the Company used $1,190 million of cash for acquisitions, primarily the acquisitions of Move and Harlequin, and used $355 million of cash for investments, primarily consisting of approximately $112 million for its investment in HT&E, $100 million for its investment in iProperty and approximately $67 million for its investment in SEEK Asia. The Company also had capital expenditures of $308 million which included $50 million related to the relocation of the Company’s U.K. operations to a new site in London. The net cash used in investing activities from continuing operations for the fiscal year ended June 30, 2015 was partially offset by proceeds from dispositions of $182 million, primarily resulting from the sale of marketable securities. Net cash provided by (used in) financing activities from continuing operations for the fiscal years ended June 30, 2016 and 2015 was as follows (in millions): For the fiscal years ended June 30, 2016 2015 Net cash provided by (used in) financing activities from continuing operations . . . . . . . . . . . . . . . $150 $(190) 66 The Company had net cash provided by financing activities from continuing operations of $150 million for the fiscal year ended June 30, 2016 as compared to net cash used in financing activities from continuing operations of $190 million for fiscal 2015. During the fiscal year ended June 30, 2016, the Company had proceeds from borrowings under the REA Facility of approximately $340 million. The net cash provided by financing activities from continuing operations for the fiscal year ended June 30, 2016 was partially offset by dividend payments of $147 million to News Corporation stockholders and REA Group minority stockholders and repurchases of News Corporation shares for $41 million. Cash used in financing activities from continuing operations for the fiscal year ended June 30, 2015 was primarily the result of the repayment of debt assumed in the acquisition of Move of approximately $129 million and repurchases of News Corporation shares for $30 million. Reconciliation of Free Cash Flow Available to News Corporation Free cash flow available to News Corporation is a non-GAAP financial measure defined as net cash provided by operating activities from continuing operations, less capital expenditures (“free cash flow”) less REA Group free cash flow, plus cash dividends received from REA Group. Free cash flow available to News Corporation excludes cash flows from discontinued operations. Free cash flow available to News Corporation should be considered in addition to, not as a substitute for, cash flows from continuing operations and other measures of financial performance reported in accordance with GAAP. Free cash flow available to News Corporation may not be comparable to similarly titled measures reported by other companies, since companies and investors may differ as to what items should be included in the calculation of free cash flow. The Company considers free cash flow available to News Corporation to provide useful information to management and investors about the amount of cash that is available to be used to strengthen the Company’s balance sheet and for strategic opportunities including, among others, investing in the Company’s business, strategic acquisitions, dividend payouts and repurchasing stock. A limitation of free cash flow available to News Corporation is that it does not represent the total increase or decrease in the cash balance for the period. Management compensates for the limitation of free cash flow available to News Corporation by also relying on the net change in cash and cash equivalents as presented in the Statements of Cash Flows prepared in accordance with GAAP which incorporate all cash movements during the period. The following table presents a reconciliation of net cash provided by continuing operating activities to free cash flow available to News Corporation: Net cash provided by continuing operating activities . . . . . . . . . . . . . . . . . . . Less: Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: REA Group free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plus: Cash dividends received from REA Group . . . . . . . . . . . . . . . . . . . . . . For the fiscal years ended June 30, 2017 2016 2015 $ 499 (256) 243 (183) 53 (in millions) $ 952 (256) 696 (131) 45 $ 988 (308) 680 (130) 45 Free cash flow available to News Corporation . . . . . . . . . . . . . . . . . . . $ 113 $ 610 $ 595 Free cash flow available to News Corporation decreased $497 million in the fiscal year ended June 30, 2017 to $113 million from $610 million in fiscal 2016. The decrease was primarily due to lower cash provided by continuing operating activities as discussed above, as well as higher REA Group free cash flow. Free cash flow available to News Corporation increased by $15 million in the fiscal year ended June 30, 2016 to $610 million from $595 million in fiscal 2015. The improvement was primarily due to lower capital expenditures 67 due to the absence of costs associated with the relocation of the Company’s operations to a new site in London in fiscal 2015, partially offset by lower cash provided by continuing operating activities as discussed above. Revolving Credit Facility The Company’s Credit Agreement (as amended, the “Credit Agreement”) provides for an unsecured $650 million revolving credit facility (the “Facility”) that can be used for general corporate purposes. The Facility has a sublimit of $100 million available for issuances of letters of credit. Under the Credit Agreement, the Company may request increases in the amount of the Facility up to a maximum amount of $900 million. In October 2015, the Company entered into an amendment to the Credit Agreement (the “Amendment”) which, among other things, extended the original term of the Facility by two years and lowered the commitment fee payable by the Company. As a result of the Amendment, the lenders’ commitments now terminate on October 23, 2020, and any borrowings will be due at that time. The Company may request that the commitments be extended under certain circumstances as set forth in the Credit Agreement for up to two additional one-year periods. The Credit Agreement contains customary affirmative and negative covenants and events of default, with customary exceptions, including limitations on the ability of the Company and its subsidiaries to engage in transactions with affiliates, incur liens, merge into or consolidate with any other entity, incur subsidiary debt or dispose of all or substantially all of its assets or all or substantially all of the stock of its subsidiaries. In addition, the Credit Agreement requires the Company to maintain an adjusted operating income leverage ratio of not more than 3.0 to 1.0 and an interest coverage ratio of not less than 3.0 to 1.0. If any of the events of default occur and are not cured within applicable grace periods or waived, any unpaid amounts under the Credit Agreement may be declared immediately due and payable. As of June 30, 2017, the Company was in compliance with all of the applicable debt covenants. Interest on borrowings under the Facility is based on either (a) a Eurodollar Rate formula or (b) the Base Rate formula, each as set forth in the Credit Agreement. The applicable margin and the commitment fee are based on the pricing grid in the Credit Agreement, which varies based on the Company’s adjusted operating income leverage ratio. As of June 30, 2017, the Company was paying a commitment fee of 0.225% on any undrawn balance and an applicable margin of 0.50% for a Base Rate borrowing and 1.50% for a Eurodollar Rate borrowing. As of the date of this filing, the Company has not borrowed any funds under the Facility. REA Group Unsecured Revolving Loan Facility REA Group entered into an A$480 million unsecured syndicated revolving loan facility agreement in connection with the acquisition of iProperty. The REA Facility consists of three sub facilities of A$120 million, A$120 million and A$240 million which become due in December 2017, December 2018 and December 2019, respectively. In February 2016, REA Group drew down the full A$480 million (approximately $340 million as of such date) available under the REA Facility, and the proceeds, less lenders’ fees of $1 million, were used to fund the iProperty acquisition. Borrowings under the REA Facility bear interest at a floating rate of the Australian BBSY plus a margin in the range of 0.85% and 1.45% depending on REA Group’s net leverage ratio. As of June 30, 2017, REA Group was paying a margin of between 0.85% and 1.05%. REA Group paid approximately $10 million in interest for the fiscal year ended June 30, 2017 at a weighted average interest rate of 2.7%. The REA Facility requires REA Group to maintain a net leverage ratio of not more than 3.25 to 1.0 and an interest coverage ratio of not less than 3.0 to 1.0. As of June 30, 2017, REA Group was in compliance with all of the applicable debt covenants. 68 Commitments The Company has commitments under certain firm contractual arrangements (“firm commitments”) to make future payments. These firm commitments secure the future rights to various assets and services to be used in the normal course of operations. The following table summarizes the Company’s material firm commitments as of June 30, 2017. Purchase obligations(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sports programming rights(b) . . . . . . . . . . . . . . . . . . . . . . . . . . Operating leases(c) Land and buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plant and machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Borrowings(d) As of June 30, 2017 Payments Due by Period Total Less than 1 year $1,105 1,287 $422 223 1-3 years 3-5 years (in millions) $ 350 502 $195 427 More than 5 years $ 138 135 1,641 5 380 157 3 103 285 2 277 222 — — 977 — — Total commitments and contractual obligations . . . . . . . . . . . $4,418 $908 $1,416 $844 $1,250 (a) (b) (c) (d) The Company has commitments under purchase obligations related to printing contracts, capital projects, marketing agreements, production services and other legally binding commitments. The Company has sports programming rights commitments with National Rugby League, Football Federation Australia, Australian Rugby Union and International Cricket as well as certain other broadcast rights which are payable through fiscal 2023. The Company leases office facilities, warehouse facilities, printing plants and equipment. These leases, which are classified as operating leases, are expected to be paid at certain dates through fiscal 2062. This amount includes approximately $210 million of land and office facilities that have been subleased from 21st Century Fox. Primarily represents the REA Facility based on the contractual maturity date of the various sub facilities included within the agreement. (See Note 9—Borrowings in the accompanying Consolidated Financial Statements). The Company has certain contracts to purchase newsprint, ink and plates that require the Company to purchase a percentage of its total requirements for production. Since the quantities purchased annually under these contracts are not fixed and are based on the Company’s total requirements, the amount of the related payments for these purchases is excluded from the table above. The table also excludes the Company’s pension obligations, other postretirement benefits (“OPEB”) obligations and the liabilities for unrecognized tax benefits for uncertain tax positions as the Company is unable to reasonably predict the ultimate amount and timing of the commitments. The Company made contributions of $26 million and $26 million to its pension plans in fiscal 2017 and fiscal 2016, respectively. Future plan contributions are dependent upon actual plan asset returns and interest rates and statutory requirements. The Company anticipates that it will make contributions of approximately $24 million in fiscal 2018, assuming that actual plan asset returns are consistent with the Company’s expected returns in fiscal 2017 and beyond, and that interest rates remain constant. The Company will continue to make voluntary contributions as necessary to improve the funded status of the plans. Payments due to participants under the Company’s pension plans are primarily paid out of underlying trusts. Payments due under the Company’s OPEB plans are not required to be funded in advance, but are paid as medical costs are incurred by covered retiree populations, and are principally dependent upon the future cost of retiree medical benefits under the Company’s OPEB plans. The Company expects its OPEB payments to approximate $9 million in fiscal 2018. (See Note 16—Retirement Benefit Obligations in the accompanying Consolidated Financial Statements). 69 Contingencies The Company routinely is involved in various legal proceedings, claims and governmental inspections or investigations, including those discussed in Note 15 to the Consolidated Financial Statements. The outcome of these matters and claims is subject to significant uncertainty, and the Company often cannot predict what the eventual outcome of pending matters will be or the timing of the ultimate resolution of these matters. Fees, expenses, fines, penalties, judgments or settlement costs which might be incurred by the Company in connection with the various proceedings could adversely affect its results of operations and financial condition. The Company establishes an accrued liability for legal claims when it determines that a loss is both probable and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters. Legal fees associated with litigation and similar proceedings are expensed as incurred. The Company recognizes gain contingencies when the gain becomes realized or realizable. (See Note 15—Commitments and Contingencies in the accompanying Consolidated Financial Statements). The Company’s tax returns are subject to on-going review and examination by various tax authorities. Tax authorities may not agree with the treatment of items reported in the Company’s tax returns, and therefore the outcome of tax reviews and examinations can be unpredictable. The Company believes it has appropriately accrued for the expected outcome of uncertain tax matters and believes such liabilities represent a reasonable provision for taxes ultimately expected to be paid; however, these liabilities may need to be adjusted as new information becomes known and as tax examinations continue to progress. As subsidiaries of 21st Century Fox prior to the Separation, the Company and each of its domestic subsidiaries have joint and several liability with 21st Century Fox for the consolidated U.S. federal income taxes of the 21st Century Fox consolidated group relating to any taxable periods during which the Company or any of the Company’s domestic subsidiaries were a member of the 21st Century Fox consolidated group. Consequently, the Company could be liable in the event any such liability is incurred, and not discharged, by any other member of the 21st Century Fox consolidated group. In conjunction with the Separation, the Company entered into the Tax Sharing and Indemnification Agreement with 21st Century Fox, which requires 21st Century Fox to indemnify the Company for any such liability. Disputes or assessments could arise during future audits by the Internal Revenue Service (“IRS”) or other taxing authorities in amounts that the Company cannot quantify. CRITICAL ACCOUNTING POLICIES An accounting policy is considered to be critical if it is important to the Company’s financial condition and results and if it requires significant judgment and estimates on the part of management in its application. The development and selection of these critical accounting policies have been determined by management of the Company. (See Note 2—Summary of Significant Accounting Policies in the accompanying Consolidated Financial Statements). Long-lived assets The Company’s long-lived assets, include goodwill, finite-lived and indefinite lived intangible assets and property, plant and equipment. Assets acquired in business combinations are recorded at their estimated fair value at the date of acquisition. Goodwill is recorded as the difference between the cost of acquiring an entity and the estimated fair values assigned to its tangible and identifiable intangible net assets and is assigned to one or more reporting units for purposes of testing for impairment. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. Identifying reporting units and assigning goodwill to them requires judgment involving the aggregation of business units with similar 70 economic characteristics and the identification of existing business units that benefit from the acquired goodwill. The judgments made in determining the estimated fair value assigned to each class of long-lived assets acquired, their reporting unit, as well as their useful lives can significantly impact net income. The Company allocates goodwill to disposed businesses using the relative fair value method. Goodwill and Indefinite-lived Intangible Assets The Company tests goodwill and indefinite-lived intangibles for impairment on an annual basis in the fourth quarter and at other times if a significant event or change in circumstances indicates that it is more likely than not that the fair value of these assets has been reduced below their carrying value. The Company uses its judgment in assessing whether assets may have become impaired between annual impairment assessments. Indicators such as unexpected adverse economic factors, unanticipated technological change or competitive activities, loss of key personnel and acts by governments and courts, may signal that an asset has become impaired. During the third quarter of fiscal 2017, the Company early adopted ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”) which eliminates Step 2 from the goodwill impairment test and instead requires an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Under ASU 2017-04, in assessing goodwill for impairment, the Company has the option to first perform a qualitative assessment to determine whether events or circumstances exist that lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company is not required to perform any additional tests in assessing goodwill for impairment. However, if the Company concludes otherwise or elects not to perform the qualitative assessment, then it is required to perform a quantitative analysis to determine the fair value of the business, and compare the calculated fair value of a reporting unit with its carrying amount, including goodwill. In performing the valuation, the Company determines the fair value of a reporting unit primarily by using a discounted cash flow analysis and market-based valuation approach methodologies. Determining fair value requires the exercise of significant judgments, including judgments about appropriate discount rates, long-term growth rates, relevant comparable company earnings multiples and the amount and timing of expected future cash flows. During the fourth quarter of fiscal 2017, as part of the Company’s long- range planning process, the Company completed its annual goodwill and indefinite-lived intangible asset impairment test. The performance of the Company’s annual impairment analysis resulted in $88 million of impairments of goodwill and indefinite-lived intangible assets in fiscal 2017. Significant unobservable inputs utilized in the income approach valuation method were discount rates (ranging from 9.0%-25.0%), long-term growth rates (ranging from 0.0%-3.3%) and royalty rates (ranging from 0.5%-7.5%). Significant unobservable inputs utilized in the market approach valuation method were EBITDA multiples from guideline public companies operating in similar industries and control premiums (ranging from 10%-15%). Significant increases (decreases) in royalty rates, growth rates, control premiums and multiples, assuming no change in discount rates, would result in a significantly higher (lower) fair value measurement. Significant decreases (increases) in discount rates, assuming no changes in royalty rates, growth rates, control premiums and multiples, would result in a significantly higher (lower) fair value measurement. The fair values of the Company’s reporting units in fiscal 2017 exceeded the respective carrying values in a range from approximately 3% to 23%. No material impairments were identified. Any increase in the discount rate or decrease in the projected cash flows terminal growth rate would have resulted in a reporting unit of the News and Information Services segment failing the 2017 impairment analysis, which would have required the 71 company to record an impairment charge equal to the difference between the fair value of the reporting unit and its carrying value. The News and Information Services segment has a reporting unit with goodwill of approximately $1.4 billion at June 30, 2017 that is at-risk for future impairment. Additionally, the Company has certain other reporting units with goodwill balances of $83 million which are considered to be at-risk. The Company will continue to monitor its goodwill for possible future impairment. Property, Plant and Equipment The Company evaluates the carrying value of property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset group may not be recoverable, in accordance with ASC 360, “Property, Plant, and Equipment” (“ASC 360”). An asset group is the lowest level of assets and liabilities for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Events or circumstances that might warrant an impairment recoverability review include, among other things, material declines in operating performance, significant adverse market conditions and planned changes in the use of an asset group. In determining whether the carrying value of an asset group is recoverable, the Company estimates undiscounted future cash flows over the estimated life of the primary asset of the asset group. The estimates of such future cash flows require estimating such factors as future operating performance, market conditions and the estimated holding period of each asset. If all or a portion of the carrying value of an asset group is found to be non- recoverable, the Company records an impairment charge equal to the difference between the asset group’s carrying value and its fair value. The Company generally measures fair value by considering sales prices for similar assets or by discounting estimated future cash flows using an appropriate discount rate. Typical assumptions applied when using a market-based approach include projected EBITDA and related multiples. Typical assumptions applied when using an income approach include projected free cash flows, discount rates and long-term growth rates. All of these assumptions are made by management based on the best available information at the time of the estimates and are subject to deviations from actual results. During the fiscal year ended June 30, 2017, the Company recognized total fixed asset write-downs of $679 million, primarily at News UK and News Corp Australia. During the fourth quarter of fiscal 2017, as part of the Company’s long-range planning process, the Company reduced its outlook for the U.K. newspapers due to the impact of adverse print advertising and print circulation trends on the future expected performance of the business. As a result, the Company recognized a non- cash impairment charge of approximately $360 million related to the write-down of fixed assets at the U.K. newspapers. The write-down was comprised of approximately $252 million related to print sites, $85 million related to printing presses and print related equipment and $23 million related to capitalized software. Significant unobservable inputs utilized in the income approach valuation method were a discount rate of 8.5% and a -1.0% long term growth rate. In the second quarter of fiscal 2017, the Company recognized a non-cash impairment charge of approximately $310 million primarily related to the write-down of fixed assets at the Australian newspapers. The write-down was a result of the impact of adverse trends on the future expected performance of the Australian newspapers, where revenue declines from continued weakness in the print advertising market accelerated during the second quarter. The write-down was comprised of approximately $149 million related to printing presses and print related equipment, $77 million related to facilities, $66 million related to capitalized software and $18 million related to tradenames. Significant unobservable inputs utilized in the income approach valuation method were a discount rate of 11.5% and no long-term growth. As of June 30, 2017, the Company determined that the remaining carrying value of fixed assets reviewed as part of the analysis continue to be recoverable. 72 Income Taxes The Company is subject to income taxes in the U.S. and various foreign jurisdictions in which it operates and records its tax provision for the anticipated tax consequences in its reported results of operations. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining the Company’s tax expense and in evaluating its tax positions including evaluating uncertainties as promulgated under ASC 740, “Income Taxes.” The Company’s annual tax rate is based on its income, statutory tax rates and tax planning strategies available in the various jurisdictions in which it operates. Significant management judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities and the valuation allowance recorded against the Company’s net deferred tax assets, if any. In assessing the likelihood of realization of deferred tax assets, management considers estimates of the amount and character of future taxable income. The Company’s actual effective tax rate and income tax expense could vary from estimated amounts due to the future impacts of various items, including changes in income tax laws, tax planning and the Company’s forecasted financial condition and results of operations in future periods. Although the Company believes current estimates are reasonable, actual results could differ from these estimates. The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the Consolidated Financial Statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Significant management judgment is required to determine whether the recognition threshold has been met and, if so, the appropriate amount of unrecognized tax benefits to be recorded in the Consolidated Financial Statements. Management re-evaluates tax positions each period in which new information about recognition or measurement becomes available. The Company’s policy is to recognize, when applicable, interest and penalties on unrecognized income tax benefits as part of Income tax benefit (expense). Retirement Benefit Obligations The Company’s employees participate in various defined benefit pension and postretirement plans sponsored by the Company and its subsidiaries. (See Note 16—Retirement Benefit Obligations in the accompanying Consolidated Financial Statements). The Company records amounts relating to its pension and other postretirement benefit plans based on calculations specified by GAAP. The measurement and recognition of the Company’s pension and other postretirement benefit plans require the use of significant management judgments, including discount rates, expected return on plan assets, mortality and other actuarial assumptions. Net periodic benefit costs (income) is calculated based upon a number of actuarial assumptions, including a discount rate for plan obligations and an expected rate of return on plan assets. Current market conditions, including changes in investment returns and interest rates, were considered in making these assumptions. In developing the expected long-term rate of return, the pension portfolio’s past average rate of returns, and future return expectations of the various asset classes were considered. The weighted average expected long-term rate of return of 5.1% for fiscal 2018 is based on a weighted average target asset allocation assumption of 22% equities, 62% fixed-income securities and 16% cash and other investments. The Company recorded $1 million, $8 million, and ($4) million in net periodic benefit costs (income) in the Statements of Operations for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. In fiscal 2017, the Company changed the method used to estimate the service and interest cost components of net periodic benefit costs (income) for its pension and other postretirement benefit plans. For fiscal 2016 and previous periods presented, the Company estimated the service and interest cost components of net periodic benefit costs (income) utilizing a single weighted-average discount rate for each country in which the Company has plans derived from 73 a yield curve used to measure the benefit obligation. The new method utilized a full yield curve approach in the estimation of these components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to their underlying projected cash flows. The Company changed to the new method to provide a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows and their corresponding spot rates. The change is accounted for as a change in accounting estimate which is applied prospectively. This change in estimate is not expected to have a material impact on the Company’s pension and postretirement net periodic benefit expense in future periods. Although the discount rate used for each plan will be established and applied individually, a weighted average discount rate of 3.0% will be used in calculating the fiscal 2018 net periodic benefit costs (income). The discount rate reflects the market rate for high-quality fixed-income investments on the Company’s annual measurement date of June 30 and is subject to change each fiscal year. The discount rate assumptions used to account for pension and other postretirement benefit plans reflect the rates at which the benefit obligations could be effectively settled. The rate was determined by matching the Company’s expected benefit payments for the plans to a hypothetical yield curve developed using a portfolio of several hundred high-quality non-callable corporate bonds. The weighted average discount rate is volatile from year to year because it is determined based upon the prevailing rates in the U.S., the U.K., Australia and other foreign countries as of the measurement date. The key assumptions used in developing the Company’s fiscal 2017, 2016 and 2015 net periodic benefit costs (income) for its plans consist of the following: Weighted average assumptions used to determine net periodic benefit costs (income) Discount rate for PBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discount rate for Service Cost Discount rate for Interest on PBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discount rate for Interest on Service Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets: Expected rate of return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actual return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain/(Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . One year actual return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Five year actual return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 2016 2015 (in millions, except %) 3.1% 3.1% 2.6% 2.9% 3.9% 4.2% 3.9% 4.2% 3.9% 4.2% 3.9% 4.2% 5.7% 5.7% 6.3% $ 75 $106 $ 31 $ 81 $121 $ 40 $ 93 $ 96 $ 3 8.2% 8.8% 9.4% 7.2% 7.7% 8.6% The Company will use a weighted average long-term rate of return of 5.1% for fiscal 2018 based principally on a combination of current asset mix and an expectation of future long term investment returns. The accumulated net pre-tax losses on the Company’s pension plans as of June 30, 2017 were approximately $595 million which decreased from approximately $610 million for the Company’s pension plans as of June 30, 2016. This decrease of $15 million was primarily due to favorable asset returns. Lower discount rates increase present values of benefit obligations and increase the Company’s deferred losses and also increase subsequent-year benefit costs. Higher discount rates decrease the present values of benefit obligations and reduce the Company’s accumulated net loss and also decrease subsequent-year benefit costs. These deferred losses are being systematically recognized in future net periodic benefit costs (income) in accordance with ASC 715, “Compensation— Retirement Benefits.” Unrecognized losses for the primary plans in excess of 10% of the greater of the market- related value of plan assets or the plan’s projected benefit obligation are recognized over the average life expectancy for plan participants for the primary plans. The Company made contributions of $26 million, $26 million and $9 million to its funded pension plans in fiscal 2017, 2016 and 2015, respectively. Future plan contributions are dependent upon actual plan asset returns, statutory requirements and interest rate movements. Assuming that actual plan returns are consistent with the 74 Company’s expected plan returns in fiscal 2017 and beyond, and that interest rates remain constant, the Company anticipates that it will make contributions of approximately $24 million in fiscal 2018. The Company will continue to make voluntary contributions as necessary to improve the funded status of the plans. (See Note 16 in the accompanying Consolidated Financial Statements). Changes in net periodic benefit costs may occur in the future due to changes in the Company’s expected rate of return on plan assets and discount rate resulting from economic events. The following table highlights the sensitivity of the Company’s pension obligations and expense to changes in these assumptions, assuming all other assumptions remain constant: Changes in Assumption Impact on Annual Pension Expense 0.25 percentage point decrease in discount rate . . . . . . . . . Increase $2 million 0.25 percentage point increase in discount rate . . . . . . . . . Decrease $2 million 0.25 percentage point decrease in expected rate of return on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase $3 million 0.25 percentage point increase in expected rate of return on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease $3 million Impact on Projected Benefit Obligation Increase $87 million Decrease $79 million — — Recent Accounting Pronouncements See Note 2—Summary of Significant Accounting Policies in the accompanying Consolidated Financial Statements. 75 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has exposure to different types of market risk including changes in foreign currency rates and stock prices. The Company neither holds nor issues financial instruments for trading purposes. The following sections provide quantitative information on the Company’s exposure to foreign currency rate risk and stock price risk. The Company makes use of sensitivity analyses that are inherently limited in estimating actual losses in fair value that can occur from changes in market conditions. Foreign Currency Rates The Company conducts operations in three principal currencies: the U.S. dollar; the Australian dollar; and the British pound sterling. These currencies operate primarily as the functional currency for the Company’s U.S., Australian and U.K. operations, respectively. Cash is managed centrally within each of the three regions with net earnings reinvested locally and working capital requirements met from existing liquid funds. To the extent such funds are not sufficient to meet working capital requirements, funding in the appropriate local currencies is made available from intercompany capital. The Company does not hedge its investments in the net assets of its Australian and U.K. foreign operations. Because of fluctuations in exchange rates, the Company is subject to currency translation exposure on the results of its operations. Foreign currency translation risk is the risk that exchange rate gains or losses arise from translating foreign entities’ statements of earnings and balance sheets from functional currency to the Company’s reporting currency (the U.S. dollar) for consolidation purposes. The Company does not hedge translation risk because it generally generates positive cash flows from its international operations that are typically reinvested locally. Exchange rates with the most significant impact to its translation include the Australian dollar and British pound sterling. As exchange rates fluctuate, translation of its Statements of Operations into U.S. dollars affects the comparability of revenues and operating expenses between years. The table below details the percentage of revenues and expenses by the three principal currencies for the fiscal years ended June 30, 2017 and 2016: Fiscal year ended June 30, 2017 Revenues Operating and Selling, general, and administrative expenses Fiscal year ended June 30, 2016 Revenues Operating and Selling, general, and administrative expenses U.S. Dollars Australian Dollars British Pound Sterling 47% 47% 47% 48% 29% 26% 28% 24% 19% 20% 20% 21% Based on the year ended June 30, 2017, a one cent change in each of the U.S. dollar/Australian dollar and the U.S. dollar/British pound sterling exchange rates would have impacted revenues by approximately $32 million and $12 million, respectively, for each currency on an annual basis, and would have impacted Total Segment EBITDA by approximately $6 million and $0.4 million, respectively, on an annual basis. Stock Prices The Company has common stock investments in publicly traded companies that are subject to market price volatility. These investments had an aggregate fair value of approximately $97 million as of June 30, 2017. A hypothetical decrease in the market price of these investments of 10% would result in a decrease in comprehensive income of approximately $10 million before tax. Any changes in fair value of the Company’s common stock investments are not recognized unless deemed other-than-temporary. 76 Credit Risk Cash and cash equivalents are maintained with multiple financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions of reputable credit and, therefore, bear minimal credit risk. The Company’s receivables did not represent significant concentrations of credit risk as of June 30, 2017 or June 30, 2016 due to the wide variety of customers, markets and geographic areas to which the Company’s products and services are sold. The Company monitors its positions with, and the credit quality of, the financial institutions which are counterparties to its financial instruments. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the agreements. As of June 30, 2017, the Company did not anticipate nonperformance by any of the counterparties. 77 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA NEWS CORPORATION INDEX TO FINANCIAL STATEMENTS Management’s Report on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Operations for the fiscal years ended June 30, 2017, 2016 and 2015 . . . . . . . . . Consolidated Statements of Comprehensive Loss for the fiscal years ended June 30, 2017, 2016 and 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Balance Sheets as of June 30, 2017 and 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2017, 2016 and 2015 . . . . . . . . Consolidated Statements of Equity for the fiscal years ended June 30, 2017, 2016 and 2015 . . . . . . . . . . . . Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 79 80 82 83 84 85 86 87 78 MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management of News Corporation is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. News Corporation’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that: • • • • pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of News Corporation; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America; provide reasonable assurance that receipts and expenditures of News Corporation are being made only in accordance with authorizations of management and directors of News Corporation; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements. Internal control over financial reporting includes the controls themselves, monitoring and internal auditing practices and actions taken to correct deficiencies as identified. Because of its inherent limitations, internal control over financial reporting, no matter how well designed, may not prevent or detect misstatements. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, the assessment of the effectiveness of internal control over financial reporting was made as of a specific date. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management, including the Company’s principal executive officer and principal financial officer, conducted an assessment of the effectiveness of News Corporation’s internal control over financial reporting as of June 30, 2017, based on criteria for effective internal control over financial reporting described in the 2013 “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of News Corporation’s internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Management reviewed the results of its assessment with the Audit Committee of News Corporation’s Board of Directors. Based on this assessment, management determined that, as of June 30, 2017, News Corporation maintained effective internal control over financial reporting. Ernst & Young LLP, the independent registered public accounting firm who audited and reported on the Consolidated Financial Statements of News Corporation included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2017, has audited the Company’s internal control over financial reporting. Their report appears on the following page. 79 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders of News Corporation: We have audited News Corporation’s internal control over financial reporting as of June 30, 2017, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). News Corporation’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, News Corporation maintained, in all material respects, effective internal control over financial reporting as of June 30, 2017, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of News Corporation as of June 30, 2017 and 2016, and the related consolidated statements of operations, comprehensive loss, equity and cash flows for each of the three years in the period ended June 30, 2017 of News Corporation and our report dated August 14, 2017 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP New York, New York August 14, 2017 80 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders of News Corporation: We have audited the accompanying consolidated balance sheets of News Corporation as of June 30, 2017 and 2016, and the related consolidated statements of operations, comprehensive loss, equity and cash flows for each of the three years in the period ended June 30, 2017. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of News Corporation at June 30, 2017 and 2016, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 2017, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), News Corporation’s internal control over financial reporting as of June 30, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated August 14, 2017 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP New York, New York August 14, 2017 81 NEWS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Revenues: Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Circulation and subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NAM Group and Zillow settlements, net . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment and restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity (losses) earnings of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net (Loss) income from continuing operations before income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Loss) income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . . . . . Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Net income attributable to noncontrolling interests . . . . . . For the fiscal years ended June 30, Notes 2017 2016 2015 $ 2,860 2,470 1,573 696 540 $ 3,025 $ 3,349 2,608 1,594 486 487 2,569 1,578 619 501 8,139 (4,529) (2,725) — (449) (927) (295) 39 132 (615) (28) (643) — (643) (95) 8,292 (4,728) (2,722) (158) (505) (89) 30 43 18 181 54 235 15 250 (71) 8,524 (4,952) (2,627) — (498) (84) 58 56 75 552 (185) 367 (445) (78) (69) 15 5, 7, 8 6 20 18 4 Net (loss) income attributable to News Corporation stockholders . . . . . . . $ (738) $ 179 $ (147) Basic and diluted (loss) income earnings per share: 13 (Loss) income from continuing operations available to News Corporation stockholders per share . . . . . . . . . . . . . . . . . . . . . $ (1.27) $ 0.28 $ 0.51 Income (loss) from discontinued operations available to News Corporation stockholders per share . . . . . . . . . . . . . . . . . . . . . — 0.02 (0.77) Net (loss) income available to News Corporation stockholders per share . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1.27) $ 0.30 $ (0.26) Cash dividends declared per share of common stock . . . . . . . . . . . . . . . . . $ 0.20 $ 0.20 $ — The accompanying notes are an integral part of these audited consolidated financial statements. 82 NEWS CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (IN MILLIONS) Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss): For the fiscal years ended June 30, 2017 2016 2015 $(643) $ 250 $ (78) Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized holding (losses) gains on securities, net(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefit plan adjustments, net(b) . . . . . . . Share of other comprehensive (loss) income from equity affiliates, net (c) 84 (25) 8 4 (398) 1 (32) (16) (1,183) (5) (29) 1 Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 (445) (1,216) Comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (572) (195) (1,294) Less: Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . Less: Other comprehensive loss (income) attributable to noncontrolling (95) (71) (69) interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) 1 24 Comprehensive loss attributable to News Corporation stockholders . . . . . . . . . . . . . . . $(676) $(265) $(1,339) (a) Net of income tax (benefit) expense of ($10) million, nil and nil for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. (b) Net of income tax expense (benefit) of $8 million, ($14) million and ($11) million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. (c) Net of income tax expense (benefit) of $2 million, ($7) million and $1 million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. The accompanying notes are an integral part of these audited consolidated financial statements. 83 NEWS CORPORATION CONSOLIDATED BALANCE SHEETS (IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS) Assets: Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current assets: Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities and Equity: Current liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current liabilities: Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retirement benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Redeemable preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Class A common stock(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Class B common stock(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Accumulated deficit) retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total News Corporation stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As of June 30, Notes 2017 2016 2 2 20 6 7 8 8 18 20 20 9 16 18 15 10 $ 2,016 — 1,276 523 3,815 2,027 1,624 2,281 3,838 525 442 $14,552 $ 1,832 315 1,229 513 3,889 2,270 2,405 2,207 3,714 602 396 $15,483 $ 222 1,204 426 600 2,452 $ 217 1,371 388 466 2,442 276 319 61 351 369 350 171 349 20 20 4 2 12,395 (648) (964) 10,789 284 11,073 $14,552 4 2 12,434 150 (1,026) 11,564 218 11,782 $15,483 (a) Class A common stock, $0.01 par value per share (“Class A Common Stock”), 1,500,000,000 shares authorized, 382,294,262 and 380,490,770 shares issued and outstanding, net of 27,368,413 treasury shares at par at June 30, 2017 and June 30, 2016, respectively. (b) Class B common stock, $0.01 par value per share (“Class B Common Stock”), 750,000,000 shares authorized, 199,630,240 shares issued and outstanding, net of 78,430,424 treasury shares at par at June 30, 2017 and June 30, 2016, respectively. The accompanying notes are an integral part of these audited consolidated financial statements. 84 NEWS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS) For the fiscal years ended June 30, Notes 2017 2016 2015 Operating activities: Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . . . . . . (Loss) income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile (loss) income from continuing operations to cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity losses (earnings) of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash distributions received from affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes and taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in operating assets and liabilities, net of acquisitions: 6 8 20 18 Receivables and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . NAM Group settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided by operating activities from continuing operations . . . . . . Net cash used in operating activities from discontinued operations . . . . . . . . Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investing activities: Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in restricted cash for Wireless Group acquisition . . . . . . . . . . . . . . . Acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments in equity affiliates and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from business dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from property, plant and equiptment and other asset dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash used in investing activities from continuing operations . . . . . . . . . . Net cash provided by (used in) investing activities from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financing activities: Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayment of borrowings acquired in acquisitions . . . . . . . . . . . . . . . . . . . . . Repurchase of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash (used in) provided by financing activities from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash used in financing activities from discontinued operations . . . . . . . . Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exchange movement on opening cash balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 $ (643) — (643) $ 250 15 235 $ (78) (445) 367 449 295 4 785 (132) (95) (58) 15 137 (258) 499 (5) 494 (256) 315 (347) (59) (39) 162 109 10 (105) — (105) — (23) — (152) (42) 505 (30) 34 — (18) (147) 22 35 58 258 952 (74) 878 (256) (315) (520) (51) (54) 1 41 30 (1,124) 13 (1,111) 342 — (41) (147) (4) 498 (58) 138 — (75) 59 29 18 12 — 988 (157) 831 (308) — (1,190) (146) (224) — 182 15 (1,671) (70) (1,741) — (129) (30) (30) (1) (217) — (217) 172 1,832 12 $2,016 150 — 150 (83) 1,951 (36) $ 1,832 (190) — (190) (1,100) 3,145 (94) $ 1,951 The accompanying notes are an integral part of these audited consolidated financial statements. 85 NEWS CORPORATION CONSOLIDATED STATEMENTS OF EQUITY (IN MILLIONS) Class A Common Stock Class B Common Stock Shares Amount Shares Amount Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive (Loss) Income Total News Corporation Equity Noncontrolling Interests Total Equity Balance, June 30, 2014 . . . . 379 Net (loss) income . . . . — Other comprehensive 4 200 — — loss . . . . . . . . . . . . . . — Dividends . . . . . . . . . . — Share repurchases . . . . Other . . . . . . . . . . . . . . — — — — (2) — — 5 — — Balance, June 30, 2015 . . . . 382 Net income . . . . . . . . . — Other comprehensive 4 200 — — loss . . . . . . . . . . . . . . — Dividends . . . . . . . . . . — Share repurchases . . . . Other . . . . . . . . . . . . . . — — — — (3) — — 1 — — Balance, June 30, 2016 . . . . 380 Net (loss) income . . . . — Other comprehensive 4 200 — — income . . . . . . . . . . . — Dividends . . . . . . . . . . — Share repurchases . . . . — Other . . . . . . . . . . . . . . — — — — — — 2 — — 2 — — — — — 2 — — — — — 2 — — — — — 12,390 — 237 (147) — — (32) 75 12,433 — — — (39) 40 12,434 — — (58) — 19 — (2) — — 88 179 — (118) — 1 150 (738) — (60) — — 610 — (1,192) — — — (582) — (444) — — — 13,243 (147) (1,192) (2) (32) 75 11,945 179 (444) (118) (39) 41 (1,026) — 11,564 (738) 62 — — — 62 (118) — 19 156 69 (24) (28) — (2) 171 71 (1) (29) — 6 218 95 9 (34) — (4) 13,399 (78) (1,216) (30) (32) 73 12,116 250 (445) (147) (39) 47 11,782 (643) 71 (152) — 15 Balance, June 30, 2017 . . . . 382 $ 4 200 $ 2 12,395 $(648) $ (964) $10,789 $284 $11,073 The accompanying notes are an integral part of these audited consolidated financial statements. 86 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION News Corporation (together with its subsidiaries, “News Corporation,” “News Corp,” the “Company,” “we,” or “us”) is a global diversified media and information services company comprised of businesses across a range of media, including: news and information services, book publishing, digital real estate services, cable network programming in Australia and pay-TV distribution in Australia. During the first quarter of fiscal 2016, management approved a plan to dispose of the Company’s digital education business. As a result of the plan and the discontinuation of further significant business activities in the Digital Education segment, the assets and liabilities of this segment were classified as held for sale and the results of operations have been classified as discontinued operations for all periods presented. Unless indicated otherwise, the information in the notes to the Consolidated Financial Statements relates to the Company’s continuing operations. (See Note 4—Discontinued Operations). Basis of presentation The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The Company’s financial statements as of and for the fiscal years ended June 30, 2017, 2016 and 2015 are presented on a consolidated basis. The consolidated financial statements are referred to herein as the “Consolidated Financial Statements.” The consolidated statements of operations are referred to herein as the “Statements of Operations.” The consolidated balance sheets are referred to herein as the “Balance Sheets.” The consolidated statements of cash flows are referred to herein as the “Statements of Cash Flows.” The Company maintains a 52-53 week fiscal year ending on the Sunday closest to June 30 in each year. Fiscal 2017, fiscal 2016 and fiscal 2015 included 52, 53 and 52 weeks, respectively. All references to the fiscal years ended June 30, 2017, 2016, and 2015 relate to the fiscal years ended July 2, 2017, July 3, 2016, and June 28, 2015, respectively. For convenience purposes, the Company continues to date its consolidated financial statements as of June 30. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The Consolidated Financial Statements include the accounts of all majority-owned and controlled subsidiaries. In addition, the Company evaluates its relationships with other entities to identify whether they are variable interest entities (“VIEs”) as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810-10, “Consolidation” (“ASC 810-10”) and whether the Company is the primary beneficiary. Consolidation is required if both of these criteria are met. All significant intercompany accounts and transactions have been eliminated in consolidation, including the intercompany portion of transactions with equity method investees. Changes in the Company’s ownership interest in a consolidated subsidiary where a controlling financial interest is retained are accounted for as capital transactions. When the Company ceases to have a controlling interest in a consolidated subsidiary the Company will recognize a gain or loss in the Statements of Operations upon deconsolidation. Reclassifications Certain reclassifications have been made to the prior period consolidated financial statements to conform to the fiscal 2017 presentation. Specifically, the Company reclassified its listing revenues generated primarily from 87 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS agents, brokers and developers from advertising revenue to real estate revenue for all periods presented to better reflect the Company’s revenue mix and how management reviews the performance of the Digital Real Estate Services segment. Additionally, in the third quarter of fiscal 2017, the Company revised the Statements of Cash Flows to present cash flow activities from discontinued operations within each of the operating, investing and financing activities categories. Use of estimates The preparation of the Company’s Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts that are reported in the Consolidated Financial Statements and accompanying disclosures. Actual results could differ from those estimates. Cash and cash equivalents Cash and cash equivalents consist of cash on hand and other investments that are readily convertible into cash with original maturities of three months or less. The Company’s cash and cash equivalents balance as of June 30, 2017 and 2016 also includes $276 million and $95 million, respectively, which is not readily accessible by the Company as it is held by REA Group Limited (“REA Group”), a majority owned but separately listed public company. REA Group must declare a dividend in order for the Company to have access to its share of REA Group’s cash balance. The Company classifies cash as restricted when the cash is unavailable for use in its general operations. The restricted cash balance of $315 million as of June 30, 2016 related to cash set aside for the Wireless Group acquisition in order to comply with U.K. takeover regulations. (See Note 3 – Acquisitions, Disposals and Other Transactions). The Company utilized the restricted cash which was specifically set aside at June 30, 2016 for purposes of funding the acquisition and therefore the Company had no restricted cash as of June 30, 2017. Concentration of credit risk Cash and cash equivalents are maintained with multiple financial institutions. The Company has deposits held with banks that exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions of reputable credit and, therefore, bear minimal credit risk. Receivables, net Receivables are presented net of an allowance for returns and doubtful accounts, which is an estimate of amounts that may not be collectible. In determining the allowance for returns, management analyzes historical returns, current economic trends and changes in customer demand and acceptance of the Company’s products. Based on this information, management reserves a percentage of each dollar of product sales that provide the customer with the right of return. The allowance for doubtful accounts is estimated based on historical experience, receivable aging, current economic trends and specific identification of certain receivables that are at risk of not being collected. 88 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Receivables, net consist of: As of June 30, 2017 2016 (in millions) Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowances for sales returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowances for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,484 (166) (42) $1,442 (170) (43) Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,276 $1,229 The Company’s receivables did not represent significant concentrations of credit risk as of June 30, 2017 or June 30, 2016 due to the wide variety of customers, markets and geographic areas to which the Company’s products and services are sold. Inventories Inventories are valued at the lower of cost or market. Cost is determined by the weighted average cost method. The Company records a reserve for excess and obsolete inventory based upon a calculation using the historical usage rates, sales patterns of its products and specifically identified obsolete inventory. Inventory is included within Other current assets on the Balance Sheets. Prepublication costs The Company capitalizes the art, prepress, outside editorial, digital conversion and other costs incurred in the creation of the master copy of a book or other media (the “prepublication costs”). Prepublication costs are amortized from the year of publication over the estimated useful life of the title, using the straight-line method for capitalized costs with an estimated useful life of one year or less and sum of the years’ digits for capitalized costs with an estimated useful life exceeding one year. The Company regularly reviews the recoverability of the capitalized costs based on expected future revenues. Prepublications costs are included in Other non-current assets on the Balance Sheets and were $31 million and $33 million as of June 30, 2017 and 2016, respectively. Amortization of prepublication costs for the fiscal years ended June 30, 2017, 2016 and 2015 was $45 million, $43 million, and $43 million, respectively. Investments The Company makes investments in various businesses in the normal course of business. The Company evaluates its relationships with other entities to identify whether they are VIEs in accordance with ASC 810-10 and whether the Company is the primary beneficiary. In determining whether the Company is the primary beneficiary of a VIE, it assesses whether it has the power to direct matters that most significantly impact the activities of the VIE and has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company would consolidate any investments in which it was determined to be the primary beneficiary of a VIE. Investments in and advances to equity investments or joint ventures in which the Company has significant influence, but is not the primary beneficiary, and has less than a controlling voting interest, are accounted for using the equity method. Significant influence is generally presumed to exist when the Company owns an interest between 20% and 50% or when the Company has the ability to exercise significant influence. Under the equity method of accounting, the Company includes its investments and amounts due to and from its equity method 89 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS investments in its Balance Sheets. The Company’s Statements of Operations include the Company’s share of the investees’ earnings (losses) and the Company’s Statements of Cash Flows include all cash received from or paid to the investee. The difference between the Company’s investment and its share of the fair value of the underlying net assets of the investee upon acquisition is first allocated to either finite-lived intangibles, indefinite-lived intangibles or other assets and liabilities and the balance is attributed to goodwill. The Company follows ASC 350, “Intangibles—Goodwill and Other” (“ASC 350”), which requires that equity method finite-lived intangibles be amortized over their estimated useful life. Such amortization is reflected in Equity (losses) earnings of affiliates in the Statements of Operations. Indefinite-lived intangibles and goodwill are not amortized. Investments in which the Company has no significant influence (generally less than a 20% ownership interest) or does not have the ability to exercise significant influence are designated as available-for-sale investments if readily determinable market values are available. The Company reports available-for-sale investments at fair value based on quoted market prices. Unrealized gains and losses on available-for-sale investments are included in Accumulated other comprehensive loss, net of applicable taxes and other adjustments, until the investment is sold or considered impaired. If an investment’s fair value is not readily determinable, the Company accounts for its investment at cost. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is provided using the straight-line method over an estimated useful life of 3 to 50 years. Leasehold improvements are amortized using the straight-line method over the shorter of their useful lives or the life of the lease. Costs associated with the repair and maintenance of property, plant and equipment are expensed as incurred. Changes in circumstances, such as technological advances or changes to the Company’s business model or capital strategy, could result in the actual useful lives differing from the Company’s estimates. In those cases where the Company determines that the useful life of buildings and equipment should be changed, the Company would depreciate the asset over its revised remaining useful life, thereby increasing depreciation expense. Operating Leases For operating leases, minimum lease payments, including minimum scheduled rent increases, are recognized as rent expense on a straight-line basis over the applicable lease terms. The term used for straight-line rent expense is calculated beginning on the date that the Company obtains possession of the leased premises through the expected lease termination date. Capitalized software In accordance with ASC 350–40 “Internal-use Software,” the Company capitalizes certain costs incurred in connection with developing or obtaining internal use software. Costs incurred in the preliminary project stage are expensed. All direct costs incurred to develop internal use software during the development stage are capitalized and amortized using the straight-line method over the estimated useful life, generally 2 to 10 years. Costs such as maintenance and training are expensed as incurred. Research and development costs are also expensed as incurred. Royalty advances to authors Royalty advances are initially capitalized and subsequently expensed as related revenues are earned or when the Company determines future recovery is not probable. The Company has a long history of providing authors with 90 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS royalty advances, and it tracks each advance earned with respect to the sale of the related publication. Historically, the longer the unearned portion of the advance remains outstanding, the less likely it is that the Company will recover the advance through the sale of the publication. The Company applies this historical experience to its existing outstanding royalty advances to estimate the likelihood of recovery and a provision is established to write-off the unearned advance, usually between 6 and 12 months after publication. Additionally, the Company reviews its portfolio of royalty advances for unpublished titles to determine if individual royalty advances are not recoverable for discrete reasons, such as the death of an author prior to completion of a title or titles, a Company decision to not publish a title, poor market demand or other relevant factors that could impact recoverability. Based on this information, the portion of any advance that the Company believes is not recoverable is expensed. Goodwill and intangible assets The Company has goodwill and intangible assets, including newspaper mastheads, distribution networks, publishing imprints, radio broadcast licenses, trademarks and tradenames, channel distribution agreements, publishing rights and customer relationships. Goodwill is recorded as the difference between the cost of acquiring entities and amounts assigned to their tangible and identifiable intangible net assets. In accordance with ASC 350, the Company’s goodwill and indefinite-lived intangible assets are tested annually during the fourth quarter for impairment or earlier if events occur or circumstances change that would more likely than not reduce the fair values below their carrying amounts. Intangible assets with finite lives are amortized over their estimated useful lives. Goodwill is reviewed for impairment at a reporting unit level. Reporting units are determined based on an evaluation of the Company’s operating segments and the components making up those operating segments. For purposes of its goodwill impairment review, the Company has identified Dow Jones, the Australian newspapers, the U.K. newspapers, News America Marketing, Unruly Holdings Limited (“Unruly”), Storyful Limited (“Storyful”), Wireless Group plc (“Wireless Group), FOX SPORTS Australia, Australia News Channel Pty Ltd (“ANC”), HarperCollins, REA Group, Move, Inc. (“Move”) and DIAKRIT International Limited (“DIAKRIT”), as its reporting units. During the third quarter of fiscal 2017, the Company early adopted ASU 2017- 04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”) which eliminates Step 2 from the goodwill impairment test and instead requires an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Under ASU 2017-04, in assessing goodwill for impairment, the Company has the option to first perform a qualitative assessment to determine whether events or circumstances exist that lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company is not required to perform any additional tests in assessing goodwill for impairment. However, if the Company concludes otherwise or elects not to perform the qualitative assessment, then it is required to perform a quantitative analysis to determine the fair value of the business, and compare the calculated fair value of a reporting unit with its carrying amount, including goodwill. If through a quantitative analysis the Company determines the fair value of a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is considered not to be impaired. If the Company concludes that the fair value of the reporting unit is less than its carrying value, an impairment will be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. 91 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The Company also performs impairment reviews on its indefinite-lived intangible assets, including newspaper mastheads, distribution networks, publishing imprints, radio broadcast licenses and trademarks and tradenames. Newspaper mastheads, radio broadcast licenses and book publishing imprints are reviewed on an aggregated basis in accordance with ASC 350. Distribution networks and trademarks are reviewed individually. In assessing its indefinite-lived intangible assets for impairment, the Company has the option to first perform a qualitative assessment to determine whether events or circumstances exist that lead to a determination that it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If the Company determines that it is not more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, the Company is not required to perform any additional tests in assessing the asset for impairment. However, if the Company concludes otherwise or elects not to perform the qualitative assessment, then it is required to perform a quantitative analysis to determine if the fair value of an indefinite-lived intangible asset is less than its carrying value. If through a quantitative analysis the Company determines the fair value of an indefinite-lived intangible asset exceeds its carrying amount, the indefinite-lived intangible asset is considered not to be impaired. If the Company concludes that the fair value of an indefinite-lived intangible asset is less than its carrying value, an impairment will be recognized for the amount by which the carrying amount exceeds the indefinite-lived intangible asset’s fair value. The methods used to estimate the fair value measurements of the Company’s reporting units and indefinite-lived intangible assets include those based on the income approach (including the discounted cash flow and relief- from-royalty methods) and those based on the market approach (primarily the guideline public company method). The resulting fair value measurements of the assets are considered to be Level 3 measurements. Determining fair value requires the exercise of significant judgments, including judgments about appropriate discount rates, long-term growth rates, relevant comparable company earnings multiples and the amount and timing of expected future cash flows. The cash flows employed in the analyses are based on the Company’s estimated outlook and various growth rates are assumed for years beyond the long-term business plan period. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows of the respective reporting units. In assessing the reasonableness of its determined fair values, the Company evaluates its results against other value indicators, such as comparable public company trading values. When a business within a reporting unit is disposed of, goodwill is allocated to the disposed business using the relative fair value method. Asset impairments Investments Equity method investments are regularly reviewed to determine whether a significant event or change in circumstances has occurred that may impact the fair value of each investment. If the fair value of the investment has dropped below the carrying amount, management considers several factors when determining whether an other-than-temporary decline in market value has occurred, including the length of time and extent to which the market value has been below cost, the financial condition and near-term prospects of the issuer, the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value and other factors influencing the fair market value, such as general market conditions. The Company regularly reviews available-for-sale investment securities for other-than-temporary impairment based on criteria that include the extent to which the investment’s carrying value exceeds its related market value, the duration of the market decline, the Company’s ability to hold until recovery and the financial strength and specific prospects of the issuer of the security. 92 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The Company regularly reviews investments accounted for at cost for other-than-temporary impairment based on criteria that include the extent to which the investment’s carrying value exceeds its related estimated fair value, the duration of the estimated fair value decline, the Company’s ability to hold until recovery and the financial strength and specific prospects of the issuer of the security. Long-lived assets ASC 360, “Property, Plant, and Equipment” (“ASC 360”) and ASC 350 require the Company to periodically review the carrying amounts of its long-lived assets, including property, plant and equipment and finite-lived intangible assets, to determine whether current events or circumstances indicate that such carrying amounts may not be recoverable. If the carrying amount of the asset is greater than the expected undiscounted cash flows to be generated by such asset, an impairment adjustment is recognized if the carrying value of such asset exceeds its fair value. The Company generally measures fair value by considering sale prices for similar assets or by discounting estimated future cash flows using an appropriate discount rate. Considerable management judgment is necessary to estimate the fair value of assets, accordingly, actual results could vary significantly from such estimates. Assets to be disposed of are carried at the lower of their financial statement carrying amount or fair value, less their costs to sell. Treasury Stock The Company accounts for treasury stock using the cost method. Upon the retirement of treasury stock, the Company allocates the value of treasury shares between common stock, additional paid-in capital and retained earnings. All shares repurchased to date have been retired. Revenue recognition Revenue is recognized when persuasive evidence of an arrangement exists, the fees are fixed or determinable, the product or service has been delivered and collectability is reasonably assured. The Company considers the terms of each arrangement to determine the appropriate accounting treatment. News and Information Services Advertising revenues are recognized in the period when advertising is printed, broadcast or placed on digital platforms, net of commissions and provisions for estimated sales incentives including rebates, rate adjustments and discounts. Advertising revenues from integrated marketing services are recognized when free-standing inserts are published or over the time period in which in-store marketing services are performed. Billings to clients and payments received in advance of the performance of services or delivery of products are recorded as deferred revenue until the services are performed or the product is delivered. Circulation and information services revenues include single-copy and subscription revenues. Circulation revenues are based on the number of copies of the printed newspaper (through home-delivery subscriptions and single-copy sales) and digital subscriptions sold and the rates charged to the respective customers. Single-copy revenue is recognized based on date of publication, net of provisions for related returns. Proceeds from print, digital and electronic information services subscription revenues are deferred at the time of sale and are recognized in earnings on a pro rata basis over the terms of the subscriptions. Other revenues are recognized when the related services are performed or the product has been delivered. Book Publishing Revenue from the sale of books for distribution in the retail channel is primarily recognized upon passing of control to the buyer. Revenue for electronic books (“e-books”), which is the net amount received from the 93 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS retailer, is generally recognized upon electronic delivery to the customer by the retailer. Revenue is reported net of any amounts billed to customers for taxes which are remitted to government authorities. Digital Real Estate Services Real estate revenues are derived from the sale of online real estate listing products and services to agents, brokers and developers. Revenues are recognized on the fulfillment of customer service obligations, which may include product performance and/or product service periods. Advertising revenues are recognized in the period when advertising is placed on digital platforms, net of commissions and provisions for estimated sales incentives including rebates, rate adjustments and discounts. Subscription revenues from licensing and advanced reporting products are typically recognized ratably over the service period of the related subscription. Cable Network Programming Affiliate fees received from cable television systems, direct broadcast satellite operators and other distribution systems are recognized as revenue in the period that services are provided. Advertising revenues are recognized, net of agency commissions, in the period that the advertisements are aired. Multiple element arrangements Revenues derived from a single sales contract that contains multiple products and services are allocated based on the relative fair value of each item to be delivered and recognized in accordance with the applicable revenue recognition criteria for the specific unit of accounting. Gross versus net revenue recognition In the normal course of business, the Company acts as or uses an intermediary or agent in executing transactions with third parties. In connection with these arrangements, the Company must determine whether to report revenue based on the gross amount billed to the ultimate customer or on the net amount received from the customer after commissions and other payments to third parties. The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether the Company is acting as the principal or an agent in the transaction. If the Company is acting as a principal in a transaction, the Company reports revenue on a gross basis. If the Company is acting as an agent in a transaction, the Company reports revenue on a net basis. The determination of whether the Company is acting as a principal or an agent in a transaction involves judgment and is based on an evaluation of the terms of the arrangement. The Company serves as the principal in transactions in which it has substantial risks and rewards of ownership. Barter transactions The Company enters into transactions that involve the exchange of advertising, in part, for other products and services, which are recorded at the lesser of estimated fair value of the advertising given or product or service received in accordance with the provisions of ASC 605-20-25, “Advertising Barter Transactions.” Revenue from barter transactions is recognized when advertising is provided, and expenses are recognized when products are received or services are incurred. Revenue from barter transactions included in the Statements of Operations was $48 million, $58 million and $56 million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. Expense from barter transactions included in the Statements of Operations was $48 million, $58 million and $56 million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. 94 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Sales returns Consistent with industry practice, certain of the Company’s products, such as books and newspapers, are sold with the right of return. The Company records, as a reduction of revenue, the estimated impact of such returns. In determining the estimate of product sales that will be returned, management analyzes historical returns, current economic trends, changes in customer demand and acceptance of the Company’s products. Based on this information, management reserves a percentage of each dollar of product sales that provide the customer with the right of return. Advertising expenses The Company expenses advertising costs as incurred in accordance with ASC 720-35, “Other Expenses— Advertising Cost.” Advertising and promotional expenses recognized totaled $587 million, $607 million and $530 million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. Shipping and handling Costs incurred for shipping and handling are reflected in Operating expenses in the Statements of Operations. Translation of foreign currencies The financial results and position of foreign subsidiaries and affiliates are translated into U.S. dollars using the current rate method, whereby operating results are converted at the average rate of exchange for the period and assets and liabilities are converted at the closing rates on the period end date. The resulting translation adjustments are accumulated as a component of Accumulated other comprehensive loss. Gains and losses from foreign currency transactions are generally included in income for the period. Income taxes The Company accounts for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowances are established where management determines that it is more likely than not that some portion or all of a deferred tax asset will not be realized. Deferred taxes have not been provided on the cumulative undistributed earnings of foreign subsidiaries to the extent amounts are expected to be reinvested indefinitely. The Company recognizes interest and penalty charges related to unrecognized tax benefits as income tax expense. Earnings (loss) per share Basic earnings (loss) per share for Class A Common Stock and Class B Common Stock is calculated by dividing Net income (loss) available to News Corporation stockholders by the weighted average number of shares of Class A Common Stock and Class B Common Stock outstanding. Diluted earnings (loss) per share for Class A Common Stock and Class B Common Stock is calculated similarly, except that the calculation includes the dilutive effect of the assumed issuance of shares issuable under the Company’s equity-based compensation plans. (See Note 13—Earnings (loss) per share). 95 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Equity-based compensation Equity-based awards are accounted for in accordance with ASC 718, “Compensation—Stock Compensation” (“ASC 718”). ASC 718 requires that the cost resulting from all share-based payment transactions be recognized in the Consolidated Financial Statements. ASC 718 establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all companies to apply a fair-value-based measurement method in accounting for generally all share-based payment transactions with employees. Retirement Benefit Obligations The Company provides defined benefit pension, postretirement healthcare and defined contribution benefits to the Company’s eligible employees and retirees. The Company accounts for its defined benefit pension, postretirement healthcare and defined contribution plans in accordance with ASC 715, “Compensation— Retirement Benefits” (“ASC 715”). The expense recognized by the Company is determined using certain assumptions, including the discount rate, expected long-term rate of return of pension assets and mortality rates, among others. The Company recognizes the funded status of its defined benefit plans (other than multiemployer plans) as an asset or liability in the Balance Sheets and recognizes changes in the funded status in the year in which the changes occur through Accumulated other comprehensive loss in the Balance Sheets. Fair Value Measurements The Company has various financial instruments that are measured at fair value on a recurring basis, including certain marketable securities and derivatives. The Company also applies the provisions of fair value measurement to various non-recurring measurements for the Company’s non-financial assets and liabilities. With the exception of investments measured using the net asset value per share practical expedient prescribed in ASU 2015-07, the Company measures assets and liabilities in accordance with ASC 820, “Fair Value Measurements” (“ASC 820”), using inputs from the following three levels of the fair value hierarchy: (i) inputs that are quoted prices in active markets for identical assets or liabilities (“Level 1”); (ii) inputs other than quoted prices included within Level 1 that are observable, including quoted prices for similar assets or liabilities (“Level 2”); and (iii) unobservable inputs that require the entity to use its own best estimates about market participant assumptions (“Level 3”). The Company’s assets measured at fair value on a nonrecurring basis include investments, long-lived assets, indefinite-lived intangible assets and goodwill. The Company reviews the carrying amounts of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable or at least annually as of June 30 for indefinite-lived intangible assets and goodwill. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurements of the assets are considered to be Level 3 measurements. Financial instruments and derivatives The carrying value of the Company’s financial instruments, including cash and cash equivalents, approximate fair value. The Company did not estimate the fair value of certain cost method investments because it was not practicable to do so. The fair value of financial instruments is generally determined by reference to market values resulting from trading on a national securities exchange or in an over-the-counter market which are considered to be Level 2 measurements. The Company monitors its positions with, and the credit quality of, the financial institutions which are counterparties to its financial instruments. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the agreements. As of June 30, 2017, the Company did not anticipate nonperformance by any of the counterparties. 96 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ASC 815, “Derivatives and Hedging” (“ASC 815”) requires every derivative instrument (including certain derivative instruments embedded in other contracts) to be recorded on the balance sheet at fair value as either an asset or a liability. ASC 815 also requires that changes in the fair value of recorded derivatives be recognized currently in earnings unless specific hedge accounting criteria are met. The Company uses financial instruments to hedge its limited exposures to foreign currency exchange risks primarily associated with payments made to manufacturers and service providers. These derivative contracts are primarily economic hedges. The Company records the changes in the fair value of these items in current earnings. The fair market value of foreign exchange forward contracts with foreign currency risk outstanding as of June 30, 2017 and June 30, 2016 was not material. Recent Accounting Guidance Adopted In August 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40) (“ASU 2014-15”). ASU 2014-15 is intended to define management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Specifically, ASU 2014-15 provides a definition of the term substantial doubt and requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). It also requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans and requires an express statement and other disclosures when substantial doubt is not alleviated. The adoption did not have an impact on the consolidated financial statements. In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis” (“ASU 2015-02”). ASU 2015-02 is intended to address stakeholder concerns regarding the usefulness of financial statements where a reporting entity is required to consolidate a legal entity where the reporting entity’s contractual rights do not give it the ability to act primarily on its own behalf, the reporting entity does not hold a majority of the legal entity’s voting rights, or the reporting entity is not exposed to a majority of the legal entity’s economic benefits or obligations. The update amends the accounting guidance around the consolidation of limited partnerships, the considerations surrounding the primary beneficiary determination and the consolidation of certain investment funds. As permitted by ASU 2015-02, the Company early-adopted this standard on a prospective basis during the first quarter of fiscal year 2017. The adoption did not have an impact on the Company’s consolidated financial statements. In April 2015, the FASB issued ASU 2015-05, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement” (“ASU 2015-05”). ASU 2015-05 clarifies guidance about whether a customer’s cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU 2015-05 was adopted on a prospective basis for arrangements entered into, or materially modified beginning July 1, 2016. The adoption did not have a material impact on the consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). The amendments in ASU 2017-04 eliminate Step 2 from the goodwill impairment test and instead require an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized 97 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS should not exceed the total amount of goodwill allocated to that reporting unit. As permitted by ASU 2017-04, the Company early-adopted this standard and applied it prospectively to reduce the complexity and costs of evaluating goodwill for impairment during the third quarter of fiscal year 2017. Issued In May 2014, FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014- 09”). ASU 2014-09 removes inconsistencies and differences in existing revenue requirements between GAAP and International Financial Reporting Standards and requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, delaying the effective date for adoption. ASU 2014-09 is now effective for interim and annual reporting periods beginning after July 1, 2018, however, early adoption is permitted. Once effective, ASU 2014-09 can be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initial adoption recognized at the date of initial application. The FASB has also issued several standards which provide additional clarification and implementation guidance on the previously issued ASU 2014-09 and have the same effective date as the original standard. The Company is currently evaluating the overall impact that ASU 2014-09 will have on the Company’s consolidated financial statements, as well as the expected timing and method of adoption. The Company continues to evaluate the available transition methods giving consideration to the comparability of our financial statements and the application of the new standard to our contractual arrangements. We plan to select a transition method by the end of the calendar year 2017. The Company has established an implementation team, including external advisers, and has commenced the review of the Company’s revenue portfolio and related contracts across its various business units and geographies. Discussions regarding changes to the Company’s current accounting policies and practices remain ongoing and preliminary conclusions are subject to change. Based on the current guidance, the new framework will become effective on either a full or modified retrospective basis for the Company on July 1, 2018. In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). The amendments in ASU 2016-01 address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 is effective for the Company for annual and interim reporting periods beginning July 1, 2018. As of June 30, 2017, the Company had $97 million in available-for-sale securities with net unrealized losses of $2 million. In accordance with ASU 2016-01, the cumulative net unrealized gains (losses) contained within Accumulated other comprehensive loss will be reclassified through Retained earnings as of July 1, 2018, and changes in the fair value of available-for-sale securities will be recorded in the Company’s Statement of Operations beginning July 1, 2018. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The amendments in ASU 2016-02 address certain aspects in lease accounting, with the most significant impact for lessees. The amendments in ASU 2016-02 require lessees to recognize all leases on the balance sheet by recording a right-of- use asset and a lease liability, and lessor accounting has been updated to align with the new requirements for lessees. The new standard also provides changes to the existing sale-leaseback guidance. ASU 2016-02 is effective for the Company for annual and interim reporting periods beginning July 1, 2019. The Company is currently evaluating the impact ASU 2016-02 will have on its consolidated financial statements. The Company’s operating lease commitments are presented in Note 15—Commitments and Contingencies. 98 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In March 2016, the FASB issued ASU 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). The amendments in ASU 2016-09 address several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for the Company for annual and interim reporting periods beginning July 1, 2017. The Company does not expect the adoption of ASU 2016-09 to have a significant impact on its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). The amendments in ASU 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for the Company for annual and interim reporting periods beginning July 1, 2020. The Company is currently evaluating the impact ASU 2016-13 will have on its consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)” (“ASU 2016-15”). The amendments in ASU 2016-15 address eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. ASU 2016-15 is effective for the Company for annual and interim reporting periods beginning July 1, 2018. The Company does not expect the adoption of ASU 2016-15 to have a significant impact on its consolidated financial statements. In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory” (“ASU 2016-16”). The amendments in ASU 2016-16 require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in ASU 2016-16 eliminate the exception for an intra-entity transfer of an asset other than inventory. ASU 2016-16 is effective for the Company for annual and interim reporting periods beginning July 1, 2018. The Company does not expect the adoption of ASU 2016-16 to have a material impact on its consolidated financial statements. In October 2016, the FASB issued ASU 2016-17, “Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control” (“ASU 2016-17”). The amendments in ASU 2016-17 require that if a reporting entity satisfies the first condition of a primary beneficiary in a VIE, a reporting entity should include all of its direct variable interests in a VIE and, on a proportionate basis, its indirect variable interests in a VIE held through related parties, including related parties that are under common control with the reporting entity, when assessing whether it satisfies the second characteristic of a primary beneficiary If, after performing that assessment, a reporting entity that is the single decision maker of a VIE concludes that it does not have the characteristics of a primary beneficiary, the amendments continue to require that reporting entity to evaluate whether it and one or more of its related parties under common control, as a group, have the characteristics of a primary beneficiary. If the single decision maker and its related parties that are under common control, as a group, have the characteristics of a primary beneficiary, then the party within the related party group that is most closely associated with the VIE is the primary beneficiary. ASU 2016-17 is effective for the Company for annual and interim reporting periods beginning July 1, 2017. The Company is currently evaluating the impact ASU 2016-17 will have on its consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)” (“ASU 2016-18”). The amendments in ASU 2016-18 99 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for the Company for annual and interim reporting periods beginning July 1, 2018. The Company is currently evaluating the impact ASU 2016-18 will have on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”). The amendments in ASU 2017-01 provide a screen to determine when a set of assets and activities is not a business. Under the screen, when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. ASU 2017-01 is effective for the Company for annual and interim reporting periods beginning July 1, 2018. The Company is currently evaluating the impact ASU 2017-01 will have on its consolidated financial statements. In March 2017, the FASB issued ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU 2017-07”). The amendments in ASU 2017-07 require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost as defined in paragraphs 715-30-35-4 and 715-60-35-9 are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. ASU 2017-07 is effective for the Company for annual and interim reporting periods beginning July 1, 2018. The Company is currently evaluating the impact ASU 2017-07 will have on its consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for the Company for annual and interim reporting periods beginning July 1, 2018. Early adoption of ASU 2017-09 is permitted, including adoption in any interim period, and the standard should be applied prospectively to an award modified on or after the adoption date. The Company does not expect the adoption of ASU 2017-09 to have a significant impact on its consolidated financial statements. NOTE 3. ACQUISITIONS, DISPOSALS AND OTHER TRANSACTIONS Fiscal 2017 Wireless Group plc In September 2016, the Company completed its acquisition of Wireless Group for a purchase price of 315 pence per share in cash, or approximately £220 million (approximately $285 million) in the aggregate, plus $23 million of assumed debt which was repaid subsequent to closing. Wireless Group operates talkSPORT, the leading sports radio network in the U.K., and a portfolio of radio stations in the U.K. and Ireland. The acquisition broadens the Company’s range of services in the U.K., Ireland and internationally, and the Company continues to closely align Wireless Group’s operations with those of The Sun and The Times. The Company utilized the restricted cash 100 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS which was specifically set aside at June 30, 2016 for purposes of funding the acquisition and therefore the Company had no restricted cash as of June 30, 2017. The total transaction value for the Wireless Group acquisition is set forth below (in millions): Cash paid for Wireless Group equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $285 Plus: Assumed debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Total transaction value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $308 Under the acquisition method of accounting, the total consideration is allocated to net tangible and intangible assets based upon the fair value as of the date of completion of the acquisition. The excess of the total consideration over the fair value of the net tangible and intangible assets acquired was recorded as goodwill. The allocation is as follows (in millions): Assets Acquired: Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $220 115 (50) Total net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $285 The acquired intangible assets primarily relate to broadcast licenses, which have a fair value of approximately $185 million, tradenames, which have a fair value of approximately $27 million, and customer relationships with a fair value of approximately $8 million. The broadcast licenses and tradenames have indefinite lives and the customer relationships are being amortized over a weighted-average useful life of approximately 6 years. Wireless Group’s results are included within the News and Information Services segment, and it is considered a separate reporting unit for purposes of the Company’s annual goodwill impairment review. Australian Regional Media In December 2016, the Company acquired Australian Regional Media (“ARM”) from HT&E Limited (formerly APN News and Media Limited) (“HT&E”) for approximately $30 million. ARM operates a portfolio of regional print assets and websites and extends the reach of the Australian newspaper business to new customers in new geographic regions. ARM is a subsidiary of News Corp Australia, and its results are included within the News and Information Services segment. REA Group European Business In December 2016, REA Group, in which the Company holds a 61.6% interest, sold its European business for approximately $140 million (approximately €133 million) in cash, which resulted in a pre-tax gain of $107 million for the fiscal year ended June 30, 2017. The sale allows REA Group to focus on its core businesses in Australia and Asia. Fiscal 2016 Checkout 51 Mobile Apps ULC In July 2015, the Company acquired Checkout 51 Mobile Apps ULC (“Checkout 51”) for approximately $13 million in cash at closing and approximately $10 million in deferred cash consideration which was paid during 101 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS fiscal 2016. Checkout 51 is a data-driven digital incentives company that provides News America Marketing with a leading receipt recognition mobile app which enables packaged goods companies and brands to reach consumers with highly personalized marketing campaigns. Checkout 51’s results are included within the News and Information Services segment. Unruly Holdings Limited On September 30, 2015, the Company acquired Unruly for approximately £60 million (approximately $90 million) in cash and up to £56 million (approximately $86 million) in future cash consideration related to payments primarily contingent upon the achievement of certain performance objectives. As a result of the acquisition, the Company recognized a liability of approximately $40 million related to the contingent consideration. The fair value of the contingent consideration was estimated by applying a probability-weighted income approach. In accordance with ASC 350, $43 million of the purchase price was allocated to acquired technology with a weighted-average useful life of 7 years, $21 million was allocated to customer relationships and tradenames with a weighted-average useful life of 6 years and $68 million was allocated to goodwill. Unruly is a leading global video distribution platform that is focused on delivering branded video advertising across websites and mobile devices. Unruly’s results of operations are included within the News and Information Services segment, and it is considered a separate reporting unit for purposes of the Company’s annual goodwill impairment review. DIAKRIT International Limited In February 2016, the Company acquired a 92% interest in DIAKRIT for approximately $40 million in cash. The Company also has the option to purchase, and the minority shareholders have the option to sell to the Company, the remaining 8% in two tranches over the six years following the closing at fair value. DIAKRIT is a leader in 3D visualization products, digital sales applications and professional services for the real estate industry. DIAKRIT’s results are included within the Digital Real Estate Services segment, and it is considered a separate reporting unit for purposes of the Company’s annual goodwill impairment review. iProperty Group Limited In February 2016, REA Group increased its investment in iProperty Group Limited (“iProperty”) from 22.7% to approximately 86.9% for A$482 million in cash (approximately $340 million). The remaining 13.1% interest will become mandatorily redeemable during fiscal 2018. As a result, the Company recognized a liability of approximately $76 million, which reflected the present value of the amount expected to be paid for the remaining interest based on the formula specified in the acquisition agreement. The acquisition was funded primarily with the proceeds from borrowings under an unsecured syndicated revolving loan facility (the “REA Facility”). (See Note 9—Borrowings). The acquisition of iProperty extends REA Group’s market leading business in Australia to attractive markets throughout Southeast Asia. iProperty is a subsidiary of REA Group, and its results are included within the Digital Real Estate Services segment. In accordance with ASC 805 “Business Combinations” (“ASC 805”), REA Group recognized a gain of $29 million resulting from the revaluation of its previously held equity interest in iProperty in Other, net in the 102 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Statement of Operations for the fiscal year ended June 30, 2016. The total fair value of iProperty at the acquisition date is set forth below (in millions): Cash paid for iProperty equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $340 76 Total consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of previously held iProperty investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416 120 Total fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $536 Under the acquisition method of accounting, the total consideration was allocated to net tangible and intangible assets based upon the fair value as of the date of completion of the acquisition. The excess of the total consideration over the fair value of the net tangible and intangible assets acquired was recorded as goodwill. The allocation is as follows (in millions): Assets Acquired: Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $498 72 (34) Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $536 The acquired intangible assets primarily relate to tradenames which have an indefinite life. Flatmates.com.au Pty Ltd In May 2016, REA Group acquired Flatmates.com.au Pty Ltd (“Flatmates”) for $19 million in cash at closing and up to $15 million in future cash consideration related to payments contingent upon the achievement of certain performance objectives. Flatmates operates the Flatmates.com.au website, which is a market leading share accommodation site in Australia. The acquisition enhances REA Group’s Australian product offering by extending its reach into the quickly growing share accommodation business. Flatmates is a subsidiary of REA Group, and its results are included within the Digital Real Estate Services segment. Fiscal 2015 Harlequin Enterprises Limited In August 2014, the Company acquired Harlequin Enterprises Limited (“Harlequin”) from Torstar Corporation for $414 million in cash, net of $19 million of cash acquired. Harlequin is a leading publisher of women’s fiction and extends HarperCollins’ global platform, particularly in Europe and Asia Pacific. Harlequin is a subsidiary of HarperCollins, and its results are included within the Book Publishing segment. As a result of the acquisition, the Company recorded net tangible assets of approximately $115 million, primarily consisting of accounts receivable, accounts payable, author advances, property, plant and equipment and inventory, at their estimated fair values at the date of acquisition. In addition, the Company recorded approximately $165 million of intangible assets, comprised of approximately $105 million of imprints which have an indefinite life and $60 million related to finite lived intangible assets with a weighted average life of approximately 5 years, and recorded an associated deferred tax liability of approximately $35 million. In accordance with ASC 350, the excess of the purchase price over the fair values of the net tangible and intangible assets of approximately $185 million was recorded as goodwill on the transaction. 103 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Move, Inc. In November 2014, the Company acquired all of the outstanding shares of Move for $21.00 per share in cash. Move is a leading provider of online real estate services, and the acquisition expanded the Company’s digital real estate services business into the U.S., one of the largest real estate markets. Move primarily operates realtor.com®, a premier real estate information and services marketplace. Move also offers a number of professional software and services products, including Top Producer®, FiveStreet® and ListHubTM. Move’s results of operations are included within the Digital Real Estate Services segment, and it is considered a separate reporting unit for purposes of the Company’s annual goodwill impairment review. The aggregate cash payment at closing to acquire the outstanding shares of Move was approximately $864 million, which was funded with cash on hand. The Company also assumed outstanding Move equity-based compensation awards with a fair value of $67 million, consisting of vested and unvested stock options, restricted stock units (“RSUs”) and restricted stock awards. Of the total fair value of the assumed equity-based compensation awards, $28 million was allocated to pre-combination services and included in total consideration transferred and $39 million was allocated to future services and was expensed over the weighted average remaining service period of 2.5 years. (See Note 12— Equity Based Compensation). In addition, following the acquisition, the Company utilized approximately $129 million of cash to settle all of Move’s outstanding indebtedness that was assumed as part of the transaction. The total transaction value for the Move acquisition is set forth below (in millions): Cash paid for Move equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assumed equity-based compensation awards—pre-combination services . . . . . . . . . . . . . . . . . . . . . . . . . . $ 864 28 Total consideration transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plus: Assumed debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plus: Assumed equity-based compensation awards—post-combination services . . . . . . . . . . . . . . . . . . . . . Less: Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 892 129 39 (108) Total transaction value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 952 REA Group acquired a 20% interest in Move upon closing of the transaction. In connection with the acquisition, the Company granted REA Group a put option to require the Company to purchase REA Group’s interest in Move, which can be exercised at any time beginning two years from the date of acquisition at fair value. Under the acquisition method of accounting, the total consideration transferred was allocated to net tangible and intangible assets based upon the fair value as of the date of completion of the acquisition. The excess of the total 104 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS consideration transferred over the fair value of the net tangible and intangible assets acquired was recorded as goodwill. The allocation is as follows (in millions): Assets acquired: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 108 28 216 153 552 69 Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,126 Liabilities assumed: Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50 52 129 3 234 Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 892 The acquired intangible assets relate to the license of the realtor.com® trademark, which has a fair value of approximately $116 million and an indefinite life, and customer relationships, other tradenames and certain multiple listing service agreements with an aggregate fair value of approximately $100 million, which are being amortized over a weighted-average useful life of approximately 15 years. The Company also acquired technology, primarily associated with the realtor.com® website, that has a fair value of approximately $39 million, which is being amortized over 4 years. The acquired technology has been recorded in Property, Plant and Equipment, net in the Consolidated Balance Sheets as of the date of acquisition. Move had U.S. federal net operating loss carryforwards (“NOLs”) of $947 million ($332 million tax-effected) at the date of acquisition. The NOLs are subject to limitations as promulgated under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). Section 382 of the Code limits the amount of acquired NOLs that we can use on an annual basis to offset future U.S. consolidated taxable income. Valuation allowances and unrecognized tax benefits were recorded against these NOLs in the amount of $484 million ($170 million tax- effected) as part of the purchase price allocation. Accordingly, the Company expected approximately $463 million of NOLs could be utilized, and recorded a net deferred tax asset of $162 million as part of the purchase price allocation. As a result of management’s plan to dispose of its digital education business, the Company increased its estimated utilization of Move’s NOLs by $167 million ($58 million tax-effected) and released valuation allowances equal to that amount. Upon filing its fiscal 2015 federal income tax return, the Company reduced Move’s NOLs by $298 million which represents the amount expected to expire unutilized due to the Section 382 limitation discussed above. As of June 30, 2016, the remaining Move NOLs expected to be utilized are $573 million ($201 million tax-effected). The utilization of these NOLs is dependent on generating sufficient U.S. taxable income prior to expiration which begins in varying amounts starting in 2021. The deferred tax assets established for Move’s NOLs, net of valuation allowance and unrecognized tax benefits, are included in Non- current deferred tax assets on the Balance Sheets. 105 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 4. DISCONTINUED OPERATIONS During the first quarter of fiscal 2016, management approved a plan to dispose of the Company’s digital education business. As a result of the plan and the discontinuation of further significant business activities in the Digital Education segment, the assets and liabilities of this segment were classified as held for sale and the results of operations have been classified as discontinued operations for all periods presented in accordance with ASC 205-20, “Discontinued Operations.” In the first quarter of fiscal 2016, the Company recognized a pre-tax non-cash impairment charge of $76 million reflecting a write down of the digital education business to its fair value less costs to sell. The Company completed the sale of the Amplify Insight and Amplify Learning businesses on September 30, 2015 and incurred approximately $17 million in severance and lease termination costs in conjunction with the sale. These amounts are included in Loss before income tax benefit in the table below for the fiscal year ended June 30, 2016. Additionally, during the first quarter of fiscal 2016, the Company recognized a tax benefit of $144 million upon reclassification of the Digital Education segment to discontinued operations. This amount is included in Income tax benefit in the table below for the fiscal year ended June 30, 2016. During the fourth quarter of fiscal 2015, as part of the Company’s long-range planning process, the Company changed its strategy and related outlook with respect to the Amplify reporting unit which resulted in a reduction in expected future cash flows for the business. As a result, the Company determined that the fair value of this reporting unit declined below its carrying value and recorded a non-cash impairment charge of $371 million, with no associated tax impact, in the fiscal year ended June 30, 2015. The charge primarily consisted of a write- down of the Company’s goodwill of $325 million and a write-down of capitalized software development costs of $45 million. Significant unobservable inputs utilized in the income approach valuation method were discount rates (ranging from 12%-45%) and long-term growth rates (ranging from 0%-4%). The impairment charges are included in Loss before income tax benefit in the table below for the fiscal year ended June 30, 2015. The following table summarizes the results of operations from the discontinued segment: Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — (in millions) $ 27 Loss before income tax benefit Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (159) 174 $ 109 (496) 51 Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . $ — $ 15 $(445) For the fiscal years ended June 30, 2017 2016 2015 106 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Liabilities held for sale related to discontinued operations as of June 30, 2016 are included in Other current liabilities in the Balance Sheets as follows: Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net liabilities held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As of June 30, 2017 As of June 30, 2016 (in millions) $ — — $ — — — $ — $ — — — $ $ $ 1 1 7 7 $ (6) NOTE 5. RESTRUCTURING PROGRAMS The Company recorded restructuring charges of $142 million, $89 million and $84 million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively, of which $133 million, $79 million and $75 million related to the News and Information Services segment, respectively. The restructuring charges recorded in fiscal 2017, 2016 and 2015 were primarily for employee termination benefits. In connection with a reorganization at Dow Jones, the Company incurred $38 million of restructuring expense in the fiscal year ended June 30, 2017 which is included in the restructuring charges discussed above. Changes in the restructuring program liabilities were as follows: One-time employee termination benefits Facility related costs Other costs Total Balance, June 30, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, June 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, June 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21 74 (46) (2) $ 47 86 (95) (5) $ 33 137 (135) (2) (in millions) 7 $ 1 (3) — $ — $ 28 84 (52) (2) 9 (3) — $ $ 6 5 1 2 (1) — — $ 5 $ — (1) 2 (2) 6 5 (1) — $ 58 89 (96) (7) $ 44 142 (137) — Balance, June 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33 $ 6 $ 10 $ 49 As of June 30, 2017, restructuring liabilities of approximately $35 million were included in the Balance Sheet in Other current liabilities and $14 million were included in Other non-current liabilities. 107 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 6. INVESTMENTS The Company’s investments were comprised of the following: Ownership Percentage as of June 30, 2017 Equity method investments: Foxtel(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other equity method investments(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loan receivable from Foxtel(c) Available-for-sale securities(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost method investments(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50% various N/A various various Total Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As of June 30, 2017 2016 (in millions) $1,208 133 370 97 219 $1,437 101 338 189 205 $2,027 $2,270 (a) During the second quarter of fiscal 2017, the Company recognized a $227 million non-cash write-down of the carrying value of its investment in Foxtel to fair value. As a result of Foxtel’s performance in the first half of fiscal 2017 and the competitive operating environment in the Australian pay-TV market, the Company revised its future outlook for the business, which resulted in a reduction in expected future cash flows. Based on the revised projections, the Company determined that the fair value of its investment in Foxtel declined below its $1.4 billion carrying value, which includes the gain recognized in connection with the acquisition of Consolidated Media Holdings Ltd. (“CMH”). Significant unobservable inputs utilized in the income approach valuation method were a discount rate of 9.0% and a long-term growth rate of 2.5%. Significant unobservable inputs utilized in the market approach valuation method were EBITDA multiples from guideline public companies operating in similar industries and a control premium of 10%. Any significant shortfall of the expected future cash flows of, or changes in market conditions for, Foxtel could result in additional write downs for which non-cash charges would be required. In November 2012, the Company acquired CMH, a media investment company that operates in Australia. CMH owned a 25% interest in Foxtel through its 50% interest in FOX SPORTS Australia. The CMH acquisition was accounted for in accordance with ASC 805 which requires an acquirer to remeasure its previously held equity interest in an acquiree at its acquisition date fair value and recognize the resulting gain or loss in earnings. The carrying amount of the Company’s previously held equity interest in FOX SPORTS Australia, through which the Company held its indirect 25% interest in Foxtel, was revalued to fair value as of the acquisition date, resulting in a step-up and non-cash gain of approximately $1.3 billion for the fiscal year ended June 30, 2013, of which $0.9 billion related to Foxtel. (b) (c) In January 2017, REA Group acquired an approximate 15% interest in Elara Technologies Pte. Ltd., a leading online real estate services provider in India (“Elara”), for $50 million. Elara operates PropTiger.com, Makaan.com and Housing.com, and the investment further strengthens REA Group’s presence in Asia. Following the completion of the investment and certain related transactions, including Elara’s acquisition of Housing.com, News Corporation’s pre-existing interest in Elara decreased to approximately 23%. In May 2012, Foxtel purchased Austar United Communications Ltd. The transaction was funded by Foxtel bank debt and pro rata capital contributions made by Foxtel shareholders in the form of subordinated shareholder notes based on their respective ownership interests. The Company’s share of the subordinated shareholder notes was approximately A$481 million ($370 million) and A$451 million ($338 million) as of June 30, 2017 and June 30, 2016, respectively. During the three months ended June 30, 2017, the Company capitalized a portion of the interest due from Foxtel which is included in the carrying value of the note 108 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS receivable as of June 30, 2017. The subordinated shareholder notes can be repaid beginning in July 2022 provided that Foxtel’s senior debt has been repaid. The subordinated shareholder notes have a maturity date of July 15, 2027, with interest payable on June 30 each year and at maturity. On June 22, 2016, Foxtel and Foxtel’s shareholders agreed to modify the terms of the loan receivable to reduce the interest rate from 12% to 10.5%, to more closely align with current market rates. Foxtel paid interest at a rate of 10.5% for fiscal 2016. Upon maturity, the principal advanced will be repayable. (d) Available-for-sale securities primarily include the Company’s investment in HT&E. During fiscal 2016, the Company participated in an entitlement offer to maintain its 14.99% interest in HT&E for $20 million. During the second quarter of fiscal 2017, the Company participated in an entitlement offer for $21 million and its interest was diluted from 14.99% to 13.23%. During the fourth quarter of fiscal 2017, the Company’s interest increased from 13.23% to 13.40% as a result of dividend reinvestment. HT&E operates a portfolio of Australian radio and outdoor media assets. (e) Cost method investments primarily include the Company’s investment in SEEKAsia Limited and certain investments in China. The Company measures the fair market values of available-for-sale investments as Level 1 financial instruments under ASC 820 as such investments have quoted prices in active markets. The cost basis, unrealized gains, unrealized losses and fair market value of available-for-sale investments are set forth below: (in millions) $155 $ 99 Cost basis of available-for-sale investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated gross unrealized gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 34 (2) — Accumulated gross unrealized (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of available-for-sale investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 97 $189 Net deferred tax (asset) liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1) $ 13 As of June 30, 2017 2016 Equity (Losses) Earnings of Affiliates The Company’s share of the (losses) earnings of its equity affiliates was as follows: For the fiscal years ended June 30, 2017 2016 2015 Foxtel(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other equity affiliates, net(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(265) (30) (in millions) $38 (8) Total Equity (losses) earnings of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . $(295) $30 $59 (1) $58 (a) During the second quarter of fiscal 2017, the Company recognized a $227 million non-cash write-down of the carrying value of its investment in Foxtel to fair value. The write-down is reflected in Equity (losses) earnings of affiliates in the Statement of Operations for the fiscal year ended June 30, 2017. Refer to the discussion above for further details. Additionally, in accordance with ASC 350, the Company amortized $68 million, $52 million and $57 million related to excess cost over the Company’s proportionate share of its investment’s underlying net assets allocated to finite-lived intangible assets during the fiscal years ended June 30, 2017, 2016 and 2015, respectively. Such amortization is reflected in Equity (losses) earnings of affiliates in the Statements of Operations. 109 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (b) Other equity affiliates, net for the fiscal year ended June 30, 2017 includes losses primarily from the Company’s interest in Elara. Additionally, during the fourth quarter of fiscal 2017, the Company recognized impairments of $9 million on certain other equity method investments. The impairments are reflected in Equity (losses) earnings of affiliates in the Statement of Operations for the fiscal year ended June 30, 2017. Impairments of Other Investments The Company regularly reviews its investments for impairments based on criteria that include the extent to which the investment’s carrying value exceeds its related market value, the duration of the market decline, the Company’s ability to hold its investment until recovery and the investment’s financial strength and specific prospects. The Company recorded write-offs and impairments of certain available-for-sale securities and cost method investments in the fiscal years ended June 30, 2017, 2016 and 2015 of $21 million, $21 million and $5 million, respectively. These write-offs and impairments were reflected in Other, net in the Statements of Operations and were taken either as a result of the deteriorating financial position of the investee or due to an other-than-temporary impairment resulting from sustained losses and limited prospects for recovery. In the fiscal years ended June 30, 2017, 2016 and 2015, write-offs and impairments of $21 million, $17 million and nil, respectively, were reclassified out of accumulated other comprehensive loss and included in Other, net in the Statement of Operations. Summarized Financial Information Summarized financial information for Foxtel, presented in accordance with U.S. GAAP, was as follows: For the fiscal years ended June 30, 2017 2016 2015 Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,411 353 59 (in millions) $2,379 373 180 $2,658 441 232 (a) Includes Depreciation and amortization of $215 million, $231 million and $319 million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. Operating income before depreciation and amortization was $568 million, $604 million, and $760 million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 642 2,517 758 2,557 $ 605 2,470 764 2,534 As of June 30, 2017 2016 (in millions) 110 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 7. PROPERTY, PLANT AND EQUIPMENT Useful Lives As of June 30, 2017 2016 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings and leaseholds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Machinery and equipment(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 to 50 years 3 to 40 years $ $ (in millions) 153 1,733 2,985 153 1,793 2,872 Less: accumulated depreciation and amortization(b) . . . . . . . . . . . . . . . . . . . . . Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,871 (3,339) 4,818 (2,524) 1,532 92 2,294 111 Total Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,624 $ 2,405 (a) (b) Includes capitalized software of approximately $997 million and $950 million as of June 30, 2017 and 2016, respectively. Includes accumulated amortization of capitalized software of approximately $691 million and $498 million as of June 30, 2017 and 2016, respectively. Depreciation and amortization related to property, plant and equipment was $358 million, $415 million, and $407 million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. This includes amortization of capitalized software of $168 million, $194 million and $169 million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. Total operating lease expense was approximately $156 million, $164 million and $195 million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. Fixed Asset Impairment During the fiscal year ended June 30, 2017, the Company recognized total fixed asset impairment charges of $679 million, primarily at News UK and News Corp Australia. During the fourth quarter of fiscal 2017, as part of the Company’s long-range planning process, the Company reduced its outlook for the U.K. newspapers due to the impact of adverse print advertising and print circulation trends on the future expected performance of the business. As a result, the Company recognized a non- cash impairment charge of approximately $360 million related to the write-down of fixed assets at the U.K. newspapers. The write-down was comprised of approximately $252 million related to print sites, $85 million related to printing presses and print related equipment and $23 million related to capitalized software. Significant unobservable inputs utilized in the income approach valuation method were a discount rate of 8.5% and a -1.0% long term growth rate. During the second quarter of fiscal 2017, the Company recognized a non-cash impairment charge of approximately $310 million primarily related to the write-down of fixed assets at the Australian newspapers. The write-down was a result of the impact of adverse trends on the future expected performance of the Australian newspapers, where revenue declines from continued weakness in the print advertising market accelerated during the second quarter. The write-down was comprised of approximately $149 million related to printing presses and print related equipment, $77 million related to facilities, $66 million related to capitalized software and $18 million related to tradenames. Significant unobservable inputs utilized in the income approach valuation method were a discount rate of 11.5% and no long-term growth. 111 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS The carrying values of the Company’s intangible assets and related accumulated amortization for the fiscal years ended June 30, 2017 and June 30, 2016 were as follows: As of June 30, 2017 2016 (in millions) Intangible Assets Not Subject to Amortization Newspaper mastheads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Imprints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Radio broadcast licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trademarks and tradenames . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 299 390 237 185 179 $ 307 391 245 — 191 Total intangible assets not subject to amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,290 1,134 Intangible Assets Subject to Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Channel distribution agreements(a) Publishing rights(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer relationships(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total intangible assets subject to amortization, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335 329 310 17 991 342 365 336 30 1,073 Total Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,281 $2,207 (a) Net of accumulated amortization of $76 million and $58 million as of June 30, 2017 and 2016, respectively. The average useful life of the channel distribution agreements is 25 years primarily based on the period that a majority of the future cash flows from these intangible assets will be generated. (b) Net of accumulated amortization of $181 million and $150 million as of June 30, 2017 and 2016, respectively. The useful lives of publishing rights range from 4 to 30 years primarily based on the weighted- average remaining contractual terms of the underlying publishing contracts and the Company’s estimates of the period within those terms that the asset is expected to generate a majority of its future cash flows. (c) Net of accumulated amortization of $399 million and $363 million as of June 30, 2017 and 2016, respectively. The useful lives of customer relationships range from 2 to 25 years. The useful lives of these assets are estimated by applying historical attrition rates and determining the resulting period over which a majority of the accumulated undiscounted cash flows related to the customer relationships are expected to be generated. (d) Net of accumulated amortization of $83 million and $69 million as of June 30, 2017 and 2016, respectively. The useful lives of other intangible assets range from 2 to 15 years. The useful lives represent the periods over which these intangible assets are expected to contribute directly or indirectly to the Company’s future cash flows. During the fiscal year ended June 30, 2017, the Company recognized impairment charges of $58 million related to trademarks and tradenames. Amortization expense related to amortizable intangible assets was $91 million, $91 million and $90 million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. Based on the current amount of amortizable intangible assets, the estimated amortization expense for each of the succeeding five fiscal years is as follows: 2018—$88 million; 2019—$75 million; 2020—$67 million; 2021— $62 million; and 2022—$57 million. 112 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The changes in the carrying value of goodwill, by segment, are as follows: News and Information Services Book Publishing Digital Real Estate Services Cable Network Programming Other Total Goodwill (in millions) Balance, June 30, 2015 . . . . . . . . . . . . . . . Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency movements . . . . . . . . . . $1,696 80 (11) Balance, June 30, 2016 . . . . . . . . . . . . . . . $1,765 Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairments(a) Dispositions(b) . . . . . . . . . . . . . . . . . . . . . . Foreign currency movements . . . . . . . . . . 136 (20) — 3 $241 31 (12) $260 10 — — 1 $ 636 545 28 $1,209 2 (24) (20) 16 $486 — (10) $476 11 — — 13 $ 4 — — $3,063 656 (5) $ 4 $3,714 — (4) — — 159 (48) (20) 33 Balance, June 30, 2017 . . . . . . . . . . . . . . . $1,884 $271 $1,183 $500 $ — $3,838 (a) In the News and Information Services segment, the write-down of goodwill primarily relates to a reporting unit in the U.K.. In the Digital Real Estate Services segment, the write-down of goodwill relates to the Company’s DIAKRIT reporting unit. (b) Relates to REA Group’s sale of its European business. The carrying amount of goodwill as of June 30, 2017 reflected accumulated impairments, principally relating to the News and Information Services segment, of $3.5 billion. Annual Impairment Assessments Fiscal 2017 In accordance with ASC 350, the Company’s goodwill and indefinite-lived intangible assets are tested annually in the fourth quarter for impairment or earlier if events or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. (See Note 2—Summary of Significant Accounting Policies). The performance of the Company’s annual impairment analysis resulted in impairments of $88 million of goodwill and indefinite-lived intangible assets in fiscal 2017. Significant unobservable inputs utilized in the income approach valuation method were discount rates (ranging from 9.0%-25.0%), long-term growth rates (ranging from 0.0%-3.3%) and royalty rates (ranging from 0.5%-7.5%). Significant unobservable inputs utilized in the market approach valuation method were EBITDA multiples from guideline public companies operating in similar industries and control premiums (ranging from 10%-15%). Significant increases (decreases) in royalty rates, growth rates, control premiums and multiples, assuming no change in discount rates, would result in a significantly higher (lower) fair value measurement. Significant decreases (increases) in discount rates, assuming no changes in royalty rates, growth rates, control premiums and multiples, would result in a significantly higher (lower) fair value measurement. Fiscal 2016 The performance of the Company’s annual impairment analysis did not result in any impairments of goodwill in fiscal 2016. Significant unobservable inputs utilized in the income approach valuation method were discount rates (ranging from 9%-14.5%), long-term growth rates (ranging from 0%-3.5%) and royalty rates (ranging from 0.5%-3.4%). Significant unobservable inputs utilized in the market approach valuation method were EBITDA 113 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS multiples from guideline public companies operating in similar industries and control premiums (ranging from 10%-15%). Significant increases (decreases) in royalty rates, growth rates, control premiums and multiples, assuming no change in discount rates, would result in a significantly higher (lower) fair value measurement. Significant decreases (increases) in discount rates, assuming no changes in royalty rates, growth rates, control premiums and multiples, would result in a significantly higher (lower) fair value measurement. Fiscal 2015 The performance of the Company’s annual impairment analysis did not result in any impairments of goodwill in fiscal 2015. Significant unobservable inputs utilized in the income approach valuation method were discount rates (ranging from 9%-14%), long-term growth rates (ranging from 0%-3%) and royalty rates (ranging from 0.5%-3.3%). Significant unobservable inputs utilized in the market approach valuation method were EBITDA multiples from guideline public companies operating in similar industries and control premiums (ranging from 10%-15%). Significant increases (decreases) in royalty rates, growth rates, control premiums and multiples, assuming no change in discount rates, would result in a significantly higher (lower) fair value measurement. Significant decreases (increases) in discount rates, assuming no changes in royalty rates, growth rates, control premiums and multiples, would result in a significantly higher (lower) fair value measurement. NOTE 9. BORROWINGS The Company’s total borrowings consist of the following: As of June 30, 2017 As of June 30, 2016 (in millions) Facility due December 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Facility due December 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Facility due December 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 92 92 184 11 Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Current portion(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379 (103) $ 90 90 179 13 372 (3) Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 276 $369 (a) The current portion of long term debt is included in Other current liabilities. See Note 20—Additional Financial Information. REA Group Unsecured Revolving Loan Facility REA Group entered into an A$480 million unsecured syndicated revolving loan facility agreement in connection with the acquisition of iProperty. The REA Facility consists of three sub facilities of A$120 million, A$120 million and A$240 million which become due in December 2017, December 2018 and December 2019, respectively. In February 2016, REA Group drew down the full A$480 million (approximately $340 million as of such date) available under the REA Facility, and the proceeds, less lenders’ fees of $1 million, were used to fund the iProperty acquisition. Borrowings under the REA Facility bear interest at a floating rate of the Australian BBSY plus a margin in the range of 0.85% and 1.45% depending on REA Group’s net leverage ratio. As of June 30, 2017, REA Group was paying a margin of between 0.85% and 1.05%. REA Group paid approximately $10 million in interest for the fiscal year ended June 30, 2017 at a weighted average interest rate of 2.7%. The REA Facility requires REA Group to maintain a net leverage ratio of not more than 3.25 to 1.0 and an interest 114 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS coverage ratio of not less than 3.0 to 1.0. As of June 30, 2017, REA Group was in compliance with all of the applicable debt covenants. Revolving Credit Facility The Company’s Credit Agreement (as amended, the “Credit Agreement”) provides for an unsecured $650 million revolving credit facility (the “Facility”) that can be used for general corporate purposes. The Facility has a sublimit of $100 million available for issuances of letters of credit. Under the Credit Agreement, the Company may request increases in the amount of the Facility up to a maximum amount of $900 million. In October 2015, the Company entered into an amendment to the Credit Agreement (the “Amendment”) which, among other things, extended the original term of the Facility by two years and lowered the commitment fee payable by the Company. As a result of the Amendment, the lenders’ commitments now terminate on October 23, 2020, and any borrowings will be due at that time. The Company may request that the commitments be extended under certain circumstances as set forth in the Credit Agreement for up to two additional one-year periods. The Credit Agreement contains customary affirmative and negative covenants and events of default, with customary exceptions, including limitations on the ability of the Company and its subsidiaries to engage in transactions with affiliates, incur liens, merge into or consolidate with any other entity, incur subsidiary debt or dispose of all or substantially all of its assets or all or substantially all of the stock of its subsidiaries. In addition, the Credit Agreement requires the Company to maintain an adjusted operating income leverage ratio of not more than 3.0 to 1.0 and an interest coverage ratio of not less than 3.0 to 1.0. If any of the events of default occur and are not cured within applicable grace periods or waived, any unpaid amounts under the Credit Agreement may be declared immediately due and payable. As of June 30, 2017, the Company was in compliance with all of the applicable debt covenants. Interest on borrowings under the Facility is based on either (a) a Eurodollar Rate formula or (b) the Base Rate formula, each as set forth in the Credit Agreement. The applicable margin and the commitment fee are based on the pricing grid in the Credit Agreement, which varies based on the Company’s adjusted operating income leverage ratio. As of June 30, 2017, the Company was paying a commitment fee of 0.225% on any undrawn balance and an applicable margin of 0.50% for a Base Rate borrowing and 1.50% for a Eurodollar Rate borrowing. As of the date of this filing, the Company has not borrowed any funds under the Facility. Total borrowings, excluding other obligations and debt issuance costs, have the following scheduled maturities for each of the next five fiscal years: Fiscal 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fiscal 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fiscal 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fiscal 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fiscal 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As of June 30, 2017 (in millions) $ 92 92 185 — — — 115 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 10. REDEEMABLE PREFERRED STOCK In connection with the Company’s separation of its businesses (the “Separation”) from Twenty-First Century Fox, Inc. (“21st Century Fox”) on June 28, 2013 (the “Distribution Date”), 21st Century Fox sold 4,000 shares of cumulative redeemable preferred stock with a par value of $5,000 per share of a newly formed U.S. subsidiary of the Company. The preferred stock pays dividends at a rate of 9.5% per annum, payable quarterly, in arrears. The preferred stock is callable by the Company at any time after the fifth year and is puttable at the option of the holder after 10 years. As of June 30, 2017 and 2016, $20 million was included in Redeemable preferred stock on the Balance Sheets. NOTE 11. STOCKHOLDERS’ EQUITY Authorized Capital Stock The Company’s authorized capital stock consists of 1,500,000,000 shares of Class A Common Stock, par value $0.01 per share, 750,000,000 shares of Class B Common Stock, par value $0.01 per share, 25,000,000 shares of Series Common Stock, par value $0.01 per share, and 25,000,000 shares of Preferred Stock, par value $0.01 per share. Common Stock and Preferred Stock Shares Outstanding—As of June 30, 2017, the Company had approximately 380 million shares of Class A Common Stock outstanding at a par value of $0.01 per share and approximately 200 million shares of Class B Common Stock outstanding at a par value of $0.01 per share. As of June 30, 2017, the Company had no shares of Series Common Stock and Preferred Stock outstanding. Dividends—The following table summarizes the dividends declared and paid per share on both the Company’s Class A Common Stock and Class B Common Stock: Cash dividends paid per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.20 2017 2016 $0.20 2015 $ — For the fiscal years ended June 30, The timing, declaration, amount and payment of future dividends to stockholders, if any, is within the discretion of the Company’s Board of Directors (the “Board of Directors”). The Board of Directors’ decisions regarding the payment of future dividends will depend on many factors, including the Company’s financial condition, earnings, capital requirements and debt facility covenants, other contractual restrictions, as well as legal requirements, regulatory constraints, industry practice, market volatility and other factors that the Board of Directors deems relevant. Voting Rights—Holders of the Company’s Class A Common Stock are entitled to vote only in the limited circumstances set forth in the Company’s Restated Certificate of Incorporation (the “Charter”). Holders of the Company’s Class B Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. Liquidation Rights—In the event of a liquidation or dissolution of the Company, holders of Class A Common Stock and Class B Common Stock shall be entitled to receive all of the remaining assets of the Company available for distribution to its stockholders, ratably in proportion to the number of shares held by Class A Common Stock holders and Class B Common Stock holders, respectively. In the event of any merger or 116 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS consolidation with or into another entity, the holders of Class A Common Stock and the holders of Class B Common Stock shall generally be entitled to receive substantially identical per share consideration. Under the Company’s Charter, the Board of Directors is authorized to issue shares of preferred stock or series common stock at any time, without stockholder approval, in one or more series and to fix the number of shares, designations, voting powers, if any, preferences and relative, participating, optional and other rights of such series, as well as any applicable qualifications, limitations or restrictions, to the full extent permitted by Delaware law, subject to the limitations set forth in the Charter, including stockholder approval requirements with respect to the issuance of preferred stock or series common stock entitling holders thereof to more than one vote per share. Stock Repurchases In May 2013, the Board of Directors authorized the Company to repurchase up to an aggregate of $500 million of its Class A Common Stock. On May 10, 2015, the Company announced it had begun repurchasing shares of Class A Common Stock under the stock repurchase program. No stock repurchases were made during fiscal 2017. Through August 7, 2017, the Company repurchased approximately 5.2 million shares of Class A Common Stock for an aggregate cost of approximately $71 million. The remaining authorized amount under the stock repurchase program as of August 7, 2017 was approximately $429 million. All decisions regarding any future stock repurchases are at the sole discretion of a duly appointed committee of the Board of Directors and management. The committee’s decisions regarding future stock repurchases will be evaluated from time to time in light of many factors, including the Company’s financial condition, earnings, capital requirements and debt facility covenants, other contractual restrictions, as well as legal requirements, regulatory constraints, industry practice, market volatility and other factors that the committee may deem relevant. The stock repurchase authorization may be modified, extended, suspended or discontinued at any time by the Board of Directors and the Board of Directors cannot provide any assurances that any additional shares will be repurchased. The total number and value of shares repurchased for the fiscal years ended June 30, 2017, 2016 and 2015 are as follows: Total cost of repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total number of shares repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $— — (in millions) $ 39 3.1 $ 32 2.1 For the fiscal years ended June 30, 2017 2016 2015 Stockholder Rights Agreement During fiscal 2015, the Board of Directors adopted the second amended and restated rights agreement, which is referred to below as the “rights agreement.” Under the rights agreement, each outstanding share of common stock of the Company has attached to it one right. Initially, the rights are represented by the common stock of the Company, are not traded separately from the common stock and are not exercisable. The rights, unless redeemed or exchanged, will become exercisable for common stock of the Company 10 business days after public announcement that a person or group has obtained beneficial ownership (defined to include stock which a person has the right to acquire, regardless of whether such right is subject to the passage of time or the satisfaction of conditions), including by means of a tender offer, of 15% or more of the outstanding shares of the Company’s Class B Common Stock. Following such acquisition of beneficial ownership, each right will entitle its holder (other than the acquiring person or group) to purchase, at the exercise price (subject to adjustments provided in the rights agreement), a number of shares of the Company’s Class A or Class B Common Stock, as applicable, having a then-current market value of twice the exercise price, and in the event of a subsequent merger or other acquisition of the Company or transfer of 50% or more of the Company, to purchase, at the exercise price, a 117 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS number of shares of common stock of the acquiring entity having a then-current market value of twice the exercise price. The exercise price for the Company rights will be $90.00, subject to certain adjustments. The rights will not become exercisable by virtue of (i) any person’s or group’s beneficial ownership, as of the Distribution Date, of 15% or more of the Class B Common Stock of the Company, unless such person or group acquires beneficial ownership of additional shares of the Company’s Class B Common Stock after June 18, 2015; (ii) the repurchase of the Company’s shares that causes a holder to become the beneficial owner of 15% or more of the Company’s Class B Common Stock, unless such holder acquires beneficial ownership of additional shares representing one percent or more of the Company’s Class B Common Stock; (iii) acquisitions by way of a pro rata stock dividend or a stock split; (iv) acquisitions solely as a result of any unilateral grant of any security by the Company or through the exercise of any options, warrants, rights or similar interests (including restricted stock) granted by the Company to its directors, officers and employees pursuant to any equity incentive or award plan; or (v) certain acquisitions determined by the Board of Directors to be inadvertent, provided, that following such acquisition, the acquirer promptly, but in any case within 10 business days, divests a sufficient number of shares so that such person would no longer otherwise qualify as an acquiring person. The rights will expire on June 18, 2018, unless the rights agreement is earlier terminated or such date is advanced or extended by the Company, or the rights are earlier redeemed or exchanged by the Company. NOTE 12. EQUITY-BASED COMPENSATION Employees of the Company participate in the News Corporation 2013 Long-Term Incentive Plan (the “2013 LTIP”) under which equity-based compensation, including stock options, performance stock units (“PSUs”), restricted stock awards, RSUs and other types of awards can be granted. The Company has the ability to award up to 30 million shares of Class A Common Stock under the terms of the 2013 LTIP in addition to awards assumed in connection with the Separation and with acquisitions. In connection with the acquisition of Move in November 2014, the Company assumed Move’s equity incentive plans and substantially all of the awards outstanding under such plans. The stock options, RSUs and restricted stock awards that were assumed continue to have the same terms and conditions that applied to those awards immediately prior to the acquisition, except that such assumed awards were converted into awards with the right to be settled in, or by reference to, the Company’s Class A Common Stock in accordance with the acquisition agreement, using a formula designed to preserve the value of the awards based on the price per share paid in the acquisition. The Company assumed and converted approximately 4.3 million stock options and approximately 2.5 million RSUs and restricted stock awards in connection with the transaction. The following table summarizes the Company’s equity-based compensation expense from continuing operations reported in the Statements of Operations: Total Equity compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total intrinsic value of stock options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . For the fiscal years ended June 30, 2017 2016 2015 (in millions) $55 $ 3 $53 $24 $38 $ 2 As of June 30, 2017, total compensation cost not yet recognized for all plans presented related to unvested awards held by the Company’s employees was approximately $52 million and is expected to be recognized over a weighted average period of between one and two years. 118 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The tax benefit recognized on PSUs and RSUs for the Company’s employees that vested and stock options that were exercised by the Company’s employees during the applicable fiscal year was $17 million, $11 million, and $17 million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. Summary of Incentive Plans The fair value of equity-based compensation granted under the 2013 LTIP is calculated according to the type of award issued. Cash settled awards are marked-to-market at the end of each reporting period. Performance Stock Units PSU awards are grants that entitle the holder to shares of the Company’s Class A Common Stock or the cash equivalent value of such shares based on the achievement of pre-established performance metrics over the applicable performance period. Fair value of PSUs are determined on the date of grant and expensed using a straight-line method as the awards cliff vest at the end of the three-year performance period. The number of PSUs that will vest can range from 0% to 200% of the target award and will be based on the achievement of the performance condition and the Company’s three-year total shareholder return (“TSR”). The expense recorded for the portion of the award that is subject to the performance condition is based on management’s determination of the probable outcome of the performance condition and the corresponding number of shares expected to vest. The Company records a cumulative expense adjustment in periods in which its estimate of the number of shares expected to vest changes. Additionally, the expense recognized is ultimately adjusted to reflect the actual number of shares that vested based on the achievement of the performance condition. The number of awards which vest is also impacted by the Company’s TSR as measured against the three-year TSR of the companies that comprise the Standard and Poor’s 500 Index. The fair value of the TSR condition is determined using a Monte Carlo simulation model. Any person who holds PSUs shall have no ownership interest in the shares or cash to which such PSUs relate unless and until the shares or cash are delivered to the holder. All shares of Class A Common Stock reserved for cancelled or forfeited equity-based compensation awards become available for future grants. In June 2016, the Compensation Committee of the Board of Directors determined to grant dividend equivalents on PSUs, beginning with the fiscal 2017-2019 PSU award. In the first quarters of fiscal 2017, 2016 and 2015, certain employees of the Company each received a grant of PSUs that has a three-year performance measurement period beginning on July 1, 2017, July 1, 2016 and July 1, 2015, respectively. Vesting of the awards is subject to the achievement of the performance condition, consisting of pre-defined targets for cumulative earnings per share and cumulative free cash flow for the applicable performance period, as well as the TSR condition. The majority of these awards will be settled in shares of the Company’s Class A Common Stock subject to the achievement of the relevant performance metrics and participants’ continued employment with the Company. For the fiscal years ended June 30, 2017, 2016 and 2015, the Company granted approximately 5.5 million, 4.2 million and 3.4 million PSUs, respectively, at target to the Company’s employees, of which approximately 4.1 million, 3.0 million and 2.3 million, respectively, will be settled in Class A Common Stock, assuming performance conditions are met, with the remaining having been granted to executive directors and to employees in certain foreign locations, being settled in cash. For the fiscal years ended June 30, 2017, 2016 and 2015, approximately 2.8 million, 1.2 million and 2.0 million PSUs vested, respectively, of which approximately 1.0 million, 0.2 million and 0.5 million PSUs, respectively, were settled in cash for approximately $13.1 million, $3.3 million and $8.2 million before statutory tax withholdings, respectively. 119 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Restricted Stock Units RSU awards are grants that entitle the holder to shares of the Company’s Class A Common Stock. The fair value of RSUs issued under the 2013 LTIP is based upon the fair market value of the shares underlying the awards on the grant date. Any person who holds RSUs shall have no ownership interest in the shares to which such RSUs relate unless and until the shares are delivered to the holder. During fiscal 2017, 2016 and 2015, certain employees of the Company each received a grant of time-vested RSUs. Vesting of the awards is subject to the participants’ continued employment with the Company through the applicable vesting date. During the fiscal years ended June 30, 2017, 2016 and 2015, 0.4 million, 0.3 million and 0.5 million RSUs were granted to the Company’s employees, respectively, which primarily vest over two to four years. The following table summarizes the activity from continuing and discontinued operations related to the target PSUs and RSUs granted to the Company’s employees which will be settled in shares of the Company (PSUs and RSUs in thousands): Fiscal 2017 Fiscal 2016 Fiscal 2015 Number of shares Weighted average grant- date fair value (in US$) Number of shares Weighted average grant- date fair value (in US$) Number of shares Weighted average grant- date fair value (in US$) PSUs and RSUs . . . . . . . . . . Unvested units at beginning of the year Granted(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RSUs assumed in acquisition(b) . . . . . . . . . . . . . . . . . Vested(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cancelled(d) 7,773 4,502 — (2,387) (1,236) $17.34 14.69 — 18.38 17.08 8,355 3,472 — (1,913) (2,141) $16.77 15.51 — 13.56 15.76 7,222 2,975 2,491 (3,131) (1,202) $13.00 17.29 15.20 10.19 11.36 Unvested units at the end of the year(e) . . . . . . . . . . . 8,652 $15.57 7,773 $17.34 8,355 $16.77 (a) For fiscal 2017, includes 4.1 million target PSUs and 0.4 million RSUs granted. For fiscal 2016, includes 3.0 million target PSUs and 0.3 million RSUs granted and a payout adjustment of 0.2 million PSUs due to the actual performance level achieved for PSUs granted in fiscal 2013 that vested during fiscal 2016. For fiscal 2015, includes 2.3 million target PSUs and 0.5 million RSUs granted and a payout adjustment of 0.2 million PSUs due to the actual performance level achieved for PSUs granted in fiscal 2012 that vested during fiscal 2015. (b) Represents RSUs assumed in the Move acquisition. The weighted average grant date fair value for the (c) (d) assumed awards was calculated using the fair value of the awards at the acquisition date. The fair value of PSUs and RSUs held by the Company’s employees that vested during the fiscal years ended June 30, 2017, 2016 and 2015 was $44 million, $26 million and $32 million, respectively. For fiscal 2017, includes 0.7 million of target PSUs and 0.1 million RSUs cancelled and a payout adjustment of 0.4 million PSUs due to the actual performance level achieved for PSUs granted in fiscal 2014 that vested during fiscal 2017. For fiscal 2016, includes 0.8 million of target PSUs and 0.3 million RSUs cancelled and a payout adjustment of 1.0 million PSUs due to the actual performance level achieved for PSUs granted in fiscal 2013 that vested during fiscal 2016. 120 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For fiscal 2015, includes 0.3 million of target PSUs and 0.3 million RSUs cancelled during fiscal 2015 and a payout adjustment of 0.6 million PSUs due to the actual performance level achieved for PSUs granted in fiscal 2012 that vested during fiscal 2015. (e) The intrinsic value of these unvested RSUs and target PSUs was approximately $119 million as of June 30, 2017. Stock Options The following table summarizes information about stock option transactions for the employee stock option plans (options in thousands): Fiscal 2017 Fiscal 2016 Fiscal 2015 Weighted average Weighted average Options exercise price Options exercise price Options Weighted average exercise price Outstanding at the beginning of the year Options assumed in acquisition(a) Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,238 Outstanding at the end of the year(b) . . . . . . Exercisable at the end of the year(c) . . . . . . . (354) (218) 666 585 (in US$) $ 9.03 — 7.78 15.00 $ 7.74 2,008 — (508) (262) 1,238 945 (in US$) $ 8.82 — 7.34 10.75 $ 9.03 (in US$) $6.25 7.46 6.22 8.37 $8.82 263 4,336 (2,521) (70) 2,008 1,117 (a) Represents options assumed in the Move acquisition. The weighted average exercise price for the assumed options was calculated using the converted exercise price at the acquisition date. The converted exercise price was calculated using a formula designed to preserve the value of the awards based on the price per share paid in the acquisition. The intrinsic value of options outstanding held by the Company’s employees as of June 30, 2017, 2016 and 2015 was $4.0 million, $3.0 million and $12.8 million, respectively. The weighted average remaining contractual life of options outstanding as of June 30, 2017 was 5.26 years. The weighted average remaining contractual life of options exercisable as of June 30, 2017 was 5.05 years. (b) (c) 121 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 13. (LOSS) EARNINGS PER SHARE The following tables set forth the computation of basic and diluted (loss) earnings per share under ASC 260, “Earnings per Share”: (Loss) income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . Less: Redeemable preferred stock dividends(a) . . . . . . . . . . . . . . . . . . . . . . . . . (Loss) income from continuing operations available to News Corporation For the fiscal years ended June 30, 2017 2016 2015 (in millions, except per share amounts) $ 367 $ 235 $ (643) (69) (71) (95) (2) (2) (2) stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (740) Income (loss) from discontinued operations, net of tax, available to News Corporation stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 162 15 296 (445) Net (loss) income available to News Corporation stockholders . . . . . . . . . . . . $ (740) $ 177 $ (149) Weighted-average number of shares of common stock outstanding—basic . . . Dilutive effect of equity awards(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 581.4 — 580.6 1.9 581.0 1.6 Weighted-average number of shares of common stock outstanding—diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 581.4 582.5 582.6 (Loss) income from continuing operations available to News Corporation stockholders per share—basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1.27) $ 0.28 $ 0.51 Income (loss) from discontinued operations available to News Corporation stockholders per share—basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 0.02 $ (0.77) Net (loss) income available to News Corporation stockholders per share— basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1.27) $ 0.30 $ (0.26) (a) Refer to Note 10—Redeemable Preferred Stock (b) The dilutive impact of the Company’s PSUs, RSUs and stock options has been excluded from the calculation of diluted (loss) earnings per share for the fiscal year ended June 30, 2017 because their inclusion would have an antidilutive effect on the net loss per share. NOTE 14. RELATED PARTY TRANSACTIONS Related Party Transactions In the ordinary course of business, the Company enters into transactions with related parties, such as equity affiliates, to sell certain broadcast rights and purchase and/or sell advertising and administrative services. The following table sets forth the net revenue from related parties included in the Statements of Operations: Related party revenue, net of expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $307 (in millions) $319 $281 For the fiscal years ended June 30, 2017 2016 2015 122 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following table sets forth the amount of receivables due from and payable to related parties outstanding on the Balance Sheets: As of June 30, 2017 2016 (in millions) Accounts receivable from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes receivable from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 92 370 13 $ 86 338 31 NOTE 15. COMMITMENTS AND CONTINGENCIES Commitments The Company has commitments under certain firm contractual arrangements (“firm commitments”) to make future payments. These firm commitments secure the future rights to various assets and services to be used in the normal course of operations. The following table summarizes the Company’s material firm commitments as of June 30, 2017: As of June 30, 2017 Payments Due by Period Purchase obligations(a) Sports programming rights(b) Operating leases(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,105 1,287 $422 223 Total Less than 1 year 1-3 years 3-5 years (in millions) $ 350 502 $195 427 More than 5 years $ 138 135 Land and buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plant and machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Borrowings(d) 1,641 5 380 157 3 103 285 2 277 222 — — 977 — — Total commitments and contractual obligations . . . . . . . . . . $4,418 $908 $1,416 $844 $1,250 (a) (b) (c) (d) The Company has commitments under purchase obligations related to printing contracts, capital projects, marketing agreements, production services and other legally binding commitments. The Company has sports programming rights commitments with National Rugby League, Football Federation Australia, Australian Rugby Union and International Cricket as well as certain other broadcast rights which are payable through fiscal 2023. The Company leases office facilities, warehouse facilities, printing plants and equipment. These leases, which are classified as operating leases, are expected to be paid at certain dates through fiscal 2062. This amount includes approximately $210 million of land and office facilities that have been subleased from 21st Century Fox. Primarily represents the REA Facility based on the contractual maturity date of the various sub facilities included within the agreement. (See Note 9—Borrowings). Contingencies The Company routinely is involved in various legal proceedings, claims and governmental inspections or investigations, including those discussed below. The outcome of these matters and claims is subject to significant uncertainty, and the Company often cannot predict what the eventual outcome of pending matters will be or the timing of the ultimate resolution of these matters. Fees, expenses, fines, penalties, judgments or settlement costs which might be incurred by the Company in connection with the various proceedings could adversely affect its results of operations and financial condition. 123 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The Company establishes an accrued liability for legal claims when it determines that a loss is both probable and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters. Legal fees associated with litigation and similar proceedings are expensed as incurred. Except as otherwise provided below, for the contingencies disclosed for which there is at least a reasonable possibility that a loss may be incurred, the Company was unable to estimate the amount of loss or range of loss. The Company recognizes gain contingencies when the gain becomes realized or realizable. News America Marketing Valassis Communications, Inc. On November 8, 2013, Valassis Communications, Inc. (“Valassis”) initiated legal proceedings against certain of the Company’s subsidiaries alleging violations of various antitrust laws. These proceedings are described in further detail below. • Valassis previously initiated an action against News America Incorporated (“NAI”), News America Marketing FSI L.L.C. (“NAM FSI”) and News America Marketing In-Store Services L.L.C. (“NAM In- Store Services” and, together with NAI and NAM FSI, the “NAM Parties”), captioned Valassis Communications, Inc. v. News America Incorporated, et al., No. 2:06-cv-10240 (E.D. Mich.) (“Valassis I”), alleging violations of federal antitrust laws, which was settled in February 2010. On November 8, 2013, Valassis filed a motion for expedited discovery in the previously settled case based on its belief that defendants had engaged in activities prohibited under an order issued by the U.S. District Court for the Eastern District of Michigan in connection with the parties’ settlement, which motion was granted by the magistrate judge. Valassis subsequently filed a Notice of Violation of the order issued by the District Court in Valassis I. The Notice re-asserted claims of unlawful bundling and tying which the magistrate judge had previously recommended be dismissed from Valassis II, described below, on the grounds that such claims could only be brought before a panel of antitrust experts previously appointed in Valassis I (the “Antitrust Expert Panel”), and sought treble damages, injunctive relief and attorneys’ fees on those claims. On March 30, 2016, the District Court ordered that the Notice be referred to the Antitrust Expert Panel and further ordered that the case be administratively closed and that it may be re-opened following proceedings before the Antitrust Expert Panel. • On November 8, 2013, Valassis also filed a new complaint in the U.S. District Court for the Eastern District of Michigan against the NAM Group alleging violations of federal and state antitrust laws and common law business torts (“Valassis II”). The complaint sought treble damages, injunctive relief and attorneys’ fees and costs. On December 19, 2013, the NAM Group filed a motion to dismiss the newly filed complaint, and on March 30, 2016, the District Court ordered that Valassis’s bundling and tying claims be dismissed without prejudice to Valassis’s rights to pursue relief for those claims in Valassis I and that all remaining claims in the NAM Group’s motion to dismiss be referred to the Antitrust Expert Panel. The District Court further ordered that the case be administratively closed and that it may be re- opened following proceedings before the Antitrust Expert Panel. The Antitrust Expert Panel was convened and, on February 8, 2017, it recommended that the Notice of Violation in Valassis I be dismissed and the NAM Group’s counterclaims in Valassis II be dismissed with leave to replead three of the four counterclaims. The NAM Group filed an amended counterclaim on February 27, 2017. Valassis did not object to the Antitrust Expert Panel’s recommendation to dismiss Valassis I, and the parties are awaiting 124 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS the District Court’s order of dismissal. However, Valassis filed a motion with the District Court asserting that the referral of Valassis II to the Antitrust Expert Panel is no longer valid and seeking either to re-open Valassis II in the District Court or to transfer the case to the United States District Court for the Southern District of New York. The NAM Group opposed the motion, and the District Court heard arguments on April 13, 2017. While it is not possible at this time to predict with any degree of certainty the ultimate outcome of these actions, the NAM Group believes it has been compliant with applicable laws and intends to defend itself vigorously in both actions. In-Store Marketing and FSI Purchasers On February 29, 2016, the parties agreed to settle the litigation in the U.S. District Court for the Southern District of New York in which The Dial Corporation, Henkel Consumer Goods, Inc., H.J. Heinz Company, H.J. Heinz Company, L.P., Foster Poultry Farms, Smithfield Foods, Inc., HP Hood LLC and BEF Foods, Inc. alleged various claims under federal and state antitrust law against News Corporation, NAI, NAM FSI and NAM In- Store Services (collectively the “NAM Group”). Pursuant to the terms of the settlement, the NAM Group paid the plaintiffs and their attorneys approximately $250 million during the fiscal year ended June 30, 2017, and the litigation was dismissed with prejudice. The NAM Group also settled related claims for approximately $30 million in February 2016. U.K. Newspaper Matters Civil claims have been brought against the Company with respect to, among other things, voicemail interception and inappropriate payments to public officials at the Company’s former publication, The News of the World, and at The Sun, and related matters (the “U.K. Newspaper Matters”). The Company has admitted liability in many civil cases and has settled a number of cases. The Company also settled a number of claims through a private compensation scheme which was closed to new claims after April 8, 2013. In connection with the Separation, the Company and 21st Century Fox agreed in the Separation and Distribution Agreement that 21st Century Fox would indemnify the Company for payments made after the Distribution Date arising out of civil claims and investigations relating to the U.K. Newspaper Matters as well as legal and professional fees and expenses paid in connection with the previously concluded criminal matters, other than fees, expenses and costs relating to employees (i) who are not directors, officers or certain designated employees or (ii) with respect to civil matters, who are not co-defendants with the Company or 21st Century Fox. 21st Century Fox’s indemnification obligations with respect to these matters will be settled on an after-tax basis. The net expense related to the U.K. Newspaper Matters in Selling, general and administrative expenses was $10 million, $19 million and $50 million for the fiscal years ended June 30, 2017, June 30, 2016 and June 30, 2015, respectively. As of June 30, 2017, the Company has provided for its best estimate of the liability for the claims that have been filed and costs incurred, including liabilities associated with employment taxes, and has accrued approximately $132 million, of which approximately $82 million will be indemnified by 21st Century Fox, and a corresponding receivable was recorded in Other current assets on the Balance Sheet as of June 30, 2017. It is not possible to estimate the liability or corresponding receivable for any additional claims that may be filed given the information that is currently available to the Company. If more claims are filed and additional information becomes available, the Company will update the liability provision and corresponding receivable for such matters. The Company is not able to predict the ultimate outcome or cost of the civil claims. It is possible that these proceedings and any adverse resolution thereof could damage its reputation, impair its ability to conduct its business and adversely affect its results of operations and financial condition. 125 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Zillow Settlement On June 6, 2016, the parties agreed to settle the litigation in the Superior Court of the State of Washington in which Move, the National Association of Realtors® (“NAR”) and three related entities filed a complaint against Zillow, Inc. (“Zillow”), Errol Samuelson and Curt Beardsley alleging, among other things, misappropriation of trade secrets, tortious interference, breach of fiduciary duties and breach of contract. Pursuant to the terms of the settlement agreement and release, Zillow paid the plaintiffs $130 million and the pending litigation was dismissed with prejudice. Under the terms of an agreement with Move, NAR received 10% of the settlement proceeds after deduction of Move’s litigation-related costs and fees, and Move received the remainder. As a result, the Company recognized a $122 million gain in NAM Group and Zillow settlements, net in the Company’s Statement of Operations for the fiscal year ended June 30, 2016. Other The Company’s tax returns are subject to on-going review and examination by various tax authorities. Tax authorities may not agree with the treatment of items reported in the Company’s tax returns, and therefore the outcome of tax reviews and examinations can be unpredictable. The Company believes it has appropriately accrued for the expected outcome of uncertain tax matters and believes such liabilities represent a reasonable provision for taxes ultimately expected to be paid; however, these liabilities may need to be adjusted as new information becomes known and as tax examinations continue to progress. As subsidiaries of 21st Century Fox prior to the Separation, the Company and each of its domestic subsidiaries have joint and several liability with 21st Century Fox for the consolidated U.S. federal income taxes of the 21st Century Fox consolidated group relating to any taxable periods during which the Company or any of the Company’s domestic subsidiaries were a member of the 21st Century Fox consolidated group. Consequently, the Company could be liable in the event any such liability is incurred, and not discharged, by any other member of the 21st Century Fox consolidated group. In conjunction with the Separation, the Company entered into the Tax Sharing and Indemnification Agreement with 21st Century Fox, which requires 21st Century Fox to indemnify the Company for any such liability. Disputes or assessments could arise during future audits by the Internal Revenue Service (“IRS”) or other taxing authorities in amounts that the Company cannot quantify. NOTE 16. RETIREMENT BENEFIT OBLIGATIONS The Company’s employees participate in various defined benefit pension and postretirement plans sponsored by the Company and its subsidiaries. Plans in the U.S., U.K., Australia, and other foreign plans are accounted for as defined benefit pension plans. Accordingly, the funded and unfunded position of each plan is recorded in the Balance Sheets. Actuarial gains and losses that have not yet been recognized through income are recorded in Accumulated other comprehensive loss, net of taxes, until they are amortized as a component of net periodic benefit cost. The determination of benefit obligations and the recognition of expenses related to the plans are dependent on various assumptions. The major assumptions primarily relate to discount rates, expected long-term rates of return on plan assets and mortality rates. Management develops each assumption using relevant company experience in conjunction with market-related data for each individual country in which such plans exist. The funded status of the plans can change from year to year, but the assets of the funded plans have been sufficient to pay all benefits that came due in each of fiscal 2017, 2016 and 2015. Summary of Funded Status The Company uses a June 30 measurement date for all pension and postretirement benefit plans. The combined domestic and foreign pension and postretirement benefit plans resulted in a net pension and postretirement 126 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS benefits liability of $312 million and $356 million at June 30, 2017 and 2016, respectively. The Company recognized these amounts in the Balance Sheets at June 30, 2017 and June 30, 2016 as follows: Pension Benefits Domestic Foreign Postretirement benefits Total As of June 30, 2017 2016 2017 2016 2017 2016 2017 2016 (in millions) Other non-current assets . . . . . . . . . . . . . . . . . . Other current liabilities . . . . . . . . . . . . . . . . . . . — Retirement benefit obligations . . . . . . . . . . . . . $ — $ — $ 17 (1) — (120) (109) (91) $ 4 (1) (124) $ — $ — $ 17 $ (9) (117) (10) (319) (9) (108) 4 (10) (350) Net amount recognized . . . . . . . . . . . . . . . . . . . $ (91) $(109) $(104) $(121) $(117) $(126) $(312) $(356) The following table sets forth the change in the projected benefit obligation, change in the fair value of the Company’s plan assets and funded status: Pension Benefits Domestic Foreign Postretirement Benefits Total As of June 30, 2017 2016 2017 2016 2017 2016 2017 2016 (in millions) Projected benefit obligation, beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . $396 Service cost . . . . . . . . . . . . . . . . . . . . . . . . . — 12 Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . (23) Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . (13) Settlements(a) . . . . . . . . . . . . . . . . . . . . . . . . Actuarial loss/(gain)(b) . . . . . . . . . . . . . . . . . (4) Foreign exchange rate changes . . . . . . . . . . — Plan curtailments . . . . . . . . . . . . . . . . . . . . . — Amendments, transfers and other . . . . . . . . — $ 382 — 17 (18) (11) 28 — $1,201 9 29 (39) (23) 54 (15) (2) — — — Projected benefit obligation, end of the $1,272 3 (8) $ 126 10 — 44 (55) (33) — 153 (188) — (2) — (3) — $ 133 — 5 (8) — (2) (2) $1,723 9 44 (70) (36) 47 (15) — $1,787 10 66 (81) (44) 179 (190) (4) (1) — — (1) — year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368 396 1,216 1,201 117 126 1,701 1,723 Change in the fair value of plan assets for the Company’s benefit plans: Fair value of plan assets, beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actual return on plan assets . . . . . . . . . . . . Employer contributions . . . . . . . . . . . . . . . . Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . Settlements(a) . . . . . . . . . . . . . . . . . . . . . . . . Foreign exchange rate changes . . . . . . . . . . — Amendments, transfers and other . . . . . . . . — (23) (13) 302 287 14 23 3 — Fair value of plan assets, end of the year . . 277 (18) (11) — — 287 1,080 83 23 (39) (23) (12) — 1,204 — 107 — 26 — (55) — (33) — (169) — — — 1,112 1,080 — — — — — — — — — 1,367 106 26 (62) (36) (12) — 1,506 121 26 (73) (44) (169) — 1,389 1,367 Funded status . . . . . . . . . . . . . . . . . . . . . . . . $ (91) $(109) $ (104) $ (121) $(117) $(126) $ (312) $ (356) 127 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (a) Amounts related to payments made to former employees of the Company in full settlement of their deferred (b) pension benefits. Fiscal 2017 actuarial losses for the Company’s foreign pension plans are primarily related to the decrease in discount rates used in measuring plan obligations as of June 30, 2017. Fiscal 2017 actuarial gains related to domestic pension plans primarily relate to the increase in discount rates for the U.S. plans used in measuring plan obligations as of June 30, 2017. Fiscal 2016 actuarial losses for the Company’s pension plans are primarily related to the reduction in discount rates used in measuring plan obligations as of June 30, 2016. Amounts recognized in Accumulated other comprehensive loss consist of: Pension Benefits Domestic Foreign Postretirement Benefits Total As of June 30, 2017 2016 2017 2016 2017 2016 2017 2016 Actuarial losses (gains) . . . . . . . . . . . . . . . . . . . . . . . . . $142 Prior service (benefit) cost . . . . . . . . . . . . . . . . . . . . . . — $158 — $453 — (in millions) $452 — $ (1) $ 2 (34) (31) $594 (31) $612 (34) Net amounts recognized . . . . . . . . . . . . . . . . . . . . . . . . $142 $158 $453 $452 $(32) $(32) $563 $578 Amounts in Accumulated other comprehensive loss expected to be recognized as a component of net periodic benefit cost in fiscal 2018 consist of: Pension Benefits Domestic Foreign Postretirement Benefits Total As of June 30, 2017 (in millions) Actuarial losses (gains) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prior service (benefit) cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net amounts recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $ $ 5 5 $ 17 — $ 17 $ — (3) $ (3) $22 (3) $19 Accumulated pension benefit obligations as of June 30, 2017 and 2016 were $1,567 million and $1,588 million, respectively. Below is information about funded and unfunded pension plans. Domestic Pension Benefits Funded Plans Unfunded Plans As of June 30, Total 2017 2016 2017 2016 2017 2016 Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $354 354 277 (in millions) $ 13 $ 14 $383 13 383 14 — 287 — $368 368 277 $396 396 287 128 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Funded Plans Foreign Pension Benefits Unfunded Plans As of June 30, Total 2017 2016 2017 2016 2017 2016 Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,144 1,126 1,112 (in millions) $ 70 $ 72 $1,131 70 1,122 72 — 1,080 — $1,216 1,198 1,112 $1,201 1,192 1,080 The accumulated benefit obligation exceeds the fair value of plan assets for all domestic pension plans. Below is information about foreign pension plans in which the accumulated benefit obligation exceeds the fair value of the plan assets. Funded Plans Unfunded Plans As of June 30, Total 2017 2016 2017 2016 2017 2016 Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $550 550 509 (in millions) $ 70 $ 72 $821 70 821 72 — 773 — $622 622 509 $891 891 773 Summary of Net Periodic Benefit Costs The Company recorded $1 million, $8 million, and ($4) million in net periodic benefit costs (income) in the Statements of Operations for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. In fiscal 2017, the Company changed the method used to estimate the service and interest cost components of net periodic benefit costs (income) for its pension and other postretirement benefit plans. For fiscal 2016 and previous periods presented, the Company estimated the service and interest cost components utilizing a single weighted-average discount rate for each country derived from a yield curve used to measure the benefit obligation. The new method utilized a full yield curve approach in the estimation of these components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to their underlying projected cash flows. The Company changed to the new method to provide a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows and their corresponding spot rates. The change is accounted for as a change in accounting estimate which is applied prospectively. This change in estimate is not expected to have a material impact on the Company’s pension and postretirement net periodic benefit expense in future periods. 129 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The amortization of amounts related to unrecognized prior service costs (credits), deferred losses and settlements, curtailments and other were reclassified out of Other comprehensive income as a component of net periodic benefit costs. The components of net periodic benefits costs (income) were as follows: Pension Benefits Domestic Foreign Postretirement Benefits Total For the fiscal years ended June 30, 2017 2016 2015 2017 2016 2015 2017 2016 2015 2017 2016 2015 (in millions) Service cost benefits earned during the period . . . . . . . . . . . . . . . . . . . $ — $ — $ 1 $ 9 $ 10 $ 11 $ — $ — $ — $ 9 $ 10 $ 12 Interest costs on projected benefit obligations . . . . . . . . . . . . . . . . . . Expected return on plan assets . . . . Amortization of deferred losses . . . Amortization of prior service 12 (18) 5 17 (19) 4 17 (22) 3 29 (57) 16 44 (62) 14 3 49 44 5 (71) — — — (75) 13 — — — 21 6 66 (81) 18 72 (93) 16 costs . . . . . . . . . . . . . . . . . . . . . . . — — — — — — (4) (7) (13) (4) (7) (13) Settlements, curtailments and other . . . . . . . . . . . . . . . . . . . . . . . 3 — 2 3 2 — — — — 6 2 2 Net periodic benefits costs (income) - Total . . . . . . . . . . . . . . $ 2 $ 2 $ 1 $ — $ 8 $ 2 $ (1) $ (2) $ (7) $ 1 $ 8 $ (4) Pension Benefits Domestic Foreign Postretirement Benefits For the fiscal years ended June 30, 2017 2016 2015 2017 2016 2015 2017 2016 2015 Additional information: Weighted-average assumptions used to determine benefit obligations Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rate of increase in future compensation . . . . . . . . . . . N/A N/A 3.0% 2.8% 2.7% 2.9% N/A N/A N/A Weighted-average assumptions used to determine net 3.8% 3.7% 4.5% 2.7% 2.9% 3.7% 3.5% 3.4% 4.2% periodic benefit cost Discount rate for PBO . . . . . . . . . . . . . . . . . . . . . . . . . Discount rate for Service Cost . . . . . . . . . . . . . . . . . . Discount rate for Interest on PBO . . . . . . . . . . . . . . . . Discount rate for Interest on Service Cost . . . . . . . . . Expected return on plan assets . . . . . . . . . . . . . . . . . . Rate of increase in future compensation . . . . . . . . . . . N/A 3.8% 4.5% 4.5% 2.9% 3.7% 4.2% 3.4% 4.2% 4.0% 4.1% 4.5% 4.5% 3.1% 3.7% 4.2% 3.7% 4.2% 4.0% 3.0% 4.5% 4.5% 2.5% 3.7% 4.2% 2.6% 4.2% 4.0% 3.8% 4.5% 4.5% 2.9% 3.7% 4.2% 3.2% 4.2% 4.0% 6.5% 6.5% 7.0% 5.5% 5.5% 6.2% N/A N/A N/A 3.0% 3.0% 2.7% 2.9% 3.6% N/A N/A N/A N/A—not applicable 130 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following assumed health care cost trend rates as of June 30 were also used in accounting for postretirement benefits: Health care cost trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) . . . . . . . . . Year that the rate reaches the ultimate trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8% 4.6% 6.7% 4.5% 2027 2028 Assumed health care cost trend rates could have a significant effect on the amounts reported for the postretirement health care plan. The effect of a one percentage point increase and one percentage point decrease in the assumed health care cost trend rate would have the following effects on the results for fiscal 2017: Postretirement benefits Fiscal 2017 Fiscal 2016 One percentage point increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . One percentage point decrease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ 3 $(2) The following table sets forth the estimated benefit payments for the next five fiscal years, and in aggregate for the five fiscal years thereafter. The expected benefits are estimated based on the same assumptions used to measure the Company’s benefit obligation at the end of the fiscal year and include benefits attributable to estimated future employee service: Service and Interest Costs Benefit Obligation (in millions) Expected Benefit Payments Pension Benefits Domestic Foreign Postretirement Benefits Total (in millions) Fiscal year: 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2023-2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24 21 21 21 21 105 $ 51 48 51 52 55 280 $ 9 9 9 9 9 38 $ 84 78 81 82 85 423 Plan Assets The Company applies the provisions of ASC 715, which requires disclosures including: (i) investment policies and strategies; (ii) the major categories of plan assets; (iii) the inputs and valuation techniques used to measure plan assets; (iv) the effect of fair value measurements using significant unobservable inputs on changes in plan assets for the period; and (v) significant concentrations of risk within plan assets. 131 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The table below presents the Company’s plan assets by level within the fair value hierarchy, as described in Note 2—Summary of Significant Accounting Policies, as of June 30, 2017 and 2016: As of June 30, 2017 Fair Value Measurements at Reporting Date Using As of June 30, 2016 Fair Value Measurements at Reporting Date Using Total Level 1 Level 2 Level 3 NAV Total Level 1 Level 2 Level 3 NAV (in millions) Assets Short-term investments . . . . . . . . . . $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — Pooled funds:(a) Money market funds . . . . . . . . . . Domestic equity funds . . . . . . . . . International equity funds . . . . . . Domestic fixed income funds . . . International fixed income funds . . . . . . . . . . . . . . . . . . . . Balanced funds . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . 1 — 78 — 196 — 151 — 1 — — — — — — — — 78 196 151 — — 81 — 244 — 160 — — — — — — — — — — 81 244 160 642 — 255 — 66 — — 182 — 642 73 11 — 55 — 618 — 251 — 13 — — 188 — 618 63 11 — 2 — Total . . . . . . . . . . . . . . . . . . . . . . . . $1,389 $ 55 $ 183 $ 11 $1,140 $1,367 $ 2 $ 188 $ 11 $1,166 (a) Open-ended pooled funds that are registered and/or available to the general public are valued at the daily published net asset value (“NAV”). Other pooled funds are valued at the NAV provided by the fund issuer. The table below sets forth a summary of changes in the fair value of investments reflected as Level 3 assets as of June 30, 2017 and 2016: Balance, June 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actual return on plan assets: Relating to assets still held at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Relating to assets sold during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchases, sales, settlements and issuances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfers in and out of Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, June 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actual return on plan assets: Relating to assets still held at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Relating to assets sold during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchases, sales, settlements and issuances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfers in and out of Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Level 3 Investments (in millions) $ 12 — — (1) — $ 11 — — — — Balance, June 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11 The Company’s investment strategy for its pension plans is to maximize the long-term rate of return on plan assets within an acceptable level of risk in order to minimize the cost of providing pension benefits while maintaining adequate funding levels. The Company’s practice is to conduct a periodic strategic review of its asset allocation. The Company’s current broad strategic targets are to have a pension asset portfolio comprised of 132 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 22% equity securities, 62% fixed income securities and 16% in cash and other investments. In developing the expected long-term rate of return, the Company considered the pension asset portfolio’s past average rate of returns and future return expectations of the various asset classes. A portion of the other allocation is reserved in cash to provide for expected benefits to be paid in the short term. The Company’s equity portfolios are managed in such a way as to achieve optimal diversity. The Company’s fixed income portfolio is investment grade in the aggregate. The Company does not manage any assets internally. The Company’s benefit plan weighted-average asset allocations, by asset category, are as follows: Pension benefits As of June 30, 2017 2016 Asset Category: Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22% 26% 62% 62% 16% 12% Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100% Required pension plan contributions for the next fiscal year are expected to be approximately $24 million; however, actual contributions may be affected by pension asset and liability valuation changes during the year. The Company will continue to make voluntary contributions as necessary to improve funded status. NOTE 17. OTHER POSTRETIREMENT BENEFITS Multiemployer Pension and Postretirement Plans The Company contributes to various multiemployer defined benefit pension plans under the terms of collective bargaining agreements that cover certain of its union-represented employees, primarily at the newspaper businesses. The risks of participating in these multiemployer pension plans are different from single-employer pension plans in that (i) contributions made by the Company to the multiemployer pension plans may be used to provide benefits to employees of other participating employers; (ii) if the Company chooses to stop participating in certain of these multiemployer pension plans, it may be required to pay those plans an amount based on the underfunded status of the plan, which is referred to as a withdrawal liability; and (iii) actions taken by a participating employer that lead to a deterioration of the financial health of a multiemployer pension plan may result in the unfunded obligations of the multiemployer pension plan being borne by its remaining participating employers. While no multiemployer pension plan that the Company contributed to is individually significant to the Company, the Company was listed on certain Form 5500s as providing more than 5% of total contributions based on the current information available. The financial health of a multiemployer plan is indicated by the zone status, as defined by the Pension Protection Act of 2006, which represents the funded status of the plan as certified by the plan’s actuary. In general, plans in the red zone are less than 65% funded, plans in the yellow zone are between 65% and 80% funded, and plans in the green zone are at least 80% funded. The funded status for two of the plans for which the Company was listed as providing more than 5% of total contributions reported green zone status for the most recent available plan year. The funded status for one of the plans for which the Company was listed as providing more than 5% of total contributions reported red zone status for the most recent available plan year. Total contributions made by the Company to multiemployer pension plans for each of the fiscal years ended June 30, 2017, 2016 and 2015 were approximately $5 million. 133 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Defined Contribution Plans The Company has defined contribution plans for the benefit of substantially all employees meeting certain eligibility requirements. Employer contributions to such plans were $137 million, $132 million and $138 million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. Deferred Compensation Plan The Company has non-qualified deferred compensation plans for the benefit of certain management employees. The investment funds offered to the participants generally correspond to the funds offered in the Company’s 401(k) plan, and the account balance fluctuates with the investment returns on those funds. The unfunded obligations of the plans included in Other liabilities as of June 30, 2017 and 2016 were $40 million and $36 million, respectively, and the majority of these plans are closed to new employees. NOTE 18. INCOME TAXES (Loss) income from continuing operations before income tax expense (benefit) was attributable to the following jurisdictions: U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 84 (699) $(125) $148 404 306 (Loss) income from continuing operations before income tax expense (benefit) . . . . . . . . $(615) $ 181 $552 The significant components of the Company’s income tax expense (benefit) were as follows: For the fiscal years ended June 30, 2017 2016 2015 (in millions) For the fiscal years ended June 30, 2017 2016 2015 (in millions) Current: U.S. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State & local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1 4 118 123 $ 15 $ 35 11 135 5 102 122 181 Deferred: U.S. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State & local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 (1) (151) (71) (106) 1 Total deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (95) (176) 16 1 (13) 4 Total income tax expense (benefit)(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28 $ (54) $185 a) The Company recognized a tax benefit of approximately $144 million upon reclassification of the Digital Education segment to discontinued operations in (Loss) income from discontinued operations, net of tax, in 134 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS the Statement of Operations in fiscal year 2016. In addition, a tax benefit of $30 million related to the operations of the Digital Education segment for the period was recorded to discontinued operations in (Loss) income from discontinued operations, net of tax, in the Statement of Operations in fiscal 2016. The tax expense (benefit) shown above excludes the tax benefit of the Company’s digital education business. The Company will not have a current federal tax expense after accounting for the federal current tax benefits attributed to discontinued operations. The reconciliation between the Company’s actual effective tax rate and the statutory U.S. Federal income tax rate of 35% was: For the fiscal years ended June 30, 2017 2016 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — U.S. federal income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State and local taxes, net Effect of foreign operations(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in valuation allowance(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax audit settlements(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-deductible goodwill and asset impairment(d) Non-deductible compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R&D credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net 1 (2) 35% 35% 35% (8) (1) (62) — — — (17) (7) (10) — (7) — (1) 1 1 3 (2) 5 — 1 (1) Effective tax rate(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5)% (30)% 34% (a) (b) (c) (d) The Company’s effective tax rate is impacted by the geographic mix of its pre-tax income. The Company’s foreign operations are located primarily in Australia and the United Kingdom (“U.K.”) which have lower income tax rates than the U.S. As indicated in the pre-tax income table above, for the fiscal year ended June 30, 2017, the Company recorded a pre-tax loss on a consolidated basis comprised of pre-tax income in the U.S. and pre-tax losses in foreign jurisdictions which includes impairments and write-downs of approximately $1 billion. The losses in our foreign operations had the effect of reducing the tax benefit of consolidated pre-tax losses measured at the U.S. statutory rate by $98 million resulting in a lower effective tax rate. For the fiscal years ended June 30, 2016 and June 30, 2015, the Company recorded pre-tax book income on a consolidated basis with pre-tax income in foreign jurisdictions. Accordingly, the effect of foreign operations at lower tax rates decreased the Company’s effective tax rate. For the fiscal year ended June 30, 2017, valuation allowance increased by $40 million related to foreign net operating losses, which more likely than not will not be utilized. For the fiscal year ended June 30, 2016, included in the change in valuation allowance is a tax benefit of $106 million related to the release of previously established valuation allowances related to certain U.S. Federal net operating losses and state deferred tax assets. This benefit was recognized in conjunction with management’s plan to dispose of the Company’s digital education business during fiscal 2016, as the Company now expects to generate sufficient U.S. taxable income to utilize these deferred tax assets prior to expiration. In the fiscal year ended June 30, 2017, the Company reached an agreement with a foreign tax authority to settle certain tax issues related to fiscal years 2010 through 2015. As a result of the settlement, the Company recorded net income tax expense of $63 million. See Uncertain Tax Positions below. The Company recorded non-cash charges of $48 million related to the impairment of Goodwill, which was non-deductible, and a write-down of $360 million on U.K. fixed assets, a portion of which were non- deductible, which reduced the Company’s tax benefit by $12 million and $29 million, respectively. These impairments and write-downs have an impact on our effective tax rate to the extent a tax benefit is not recorded. 135 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (e) For the fiscal year ended June 30, 2017, the effective tax rate of (5)% represents income tax expense when compared to consolidated pre-tax book loss. For the fiscal year ended June 30, 2016, the effective tax rate of (30)% represents income tax benefit when compared to consolidated pre-tax book income. For the fiscal year ended June 30, 2015, the effective tax rate of 34% represents an income tax expense when compared to consolidated pre-tax book income. As a result, certain reconciling items between the U.S. federal income tax rate and the Company’s effective tax rate may have the opposite impact. The Company recognized current and deferred income taxes in the Balance Sheets at June 30, 2017 and 2016, respectively, as follows: As of June 30, 2017 2016 (in millions) Deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $525 (61) $ 602 (171) Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $464 $ 431 The significant components of the Company’s deferred tax assets and liabilities were as follows: Deferred tax assets: Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retirement benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Business credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As of June 30, 2017 2016 (in millions) $ $ 80 904 101 473 69 284 185 803 112 580 38 213 Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,911 1,931 Deferred tax liabilities: Asset basis difference and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (204) (56) (260) (421) (65) (486) Net deferred tax asset before valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: valuation allowance (See Note 21—Valuation and Qualifying Accounts) 1,651 (1,187) 1,445 (1,014) Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 464 $ 431 As of June 30, 2017, the Company had income tax Net Operating Loss Carryforwards (NOLs) (gross, net of uncertain tax benefits), in various jurisdictions as follows: Jurisdiction Expiration Amount (in millions) U.S. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Various Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K. Other Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Various Indefinite Indefinite 2021 to 2037 $783 530 239 10 388 136 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Utilization of the NOLs is dependent on generating sufficient taxable income from our operations in each of the respective jurisdictions to which the NOLs relate, while taking into account tax filing methodologies and limitations and/or restrictions on our ability to use them. Certain of our U.S. Federal NOLs were acquired as part of the acquisitions of Move and Harlequin and are subject to limitations as promulgated under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). Section 382 of the Code limits the amount of NOL that we can use on an annual basis to offset consolidated U.S. taxable income. The NOLs are also subject to review by relevant tax authorities in the jurisdictions to which they relate. The Company recorded a deferred tax asset of $473 million and $580 million (net of approximately $46 million and $53 million, respectively, of unrecognized tax benefits) associated with its NOLs as of June 30, 2017 and 2016, respectively. Significant judgment is applied in assessing our ability to realize our NOLs and other tax assets. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize existing deferred tax assets within the applicable expiration period. On the basis of this evaluation, valuation allowances of $149 million and $97 million have been established to reduce the deferred tax asset associated with the Company’s NOLs to an amount that will more likely than not be realized as of June 30, 2017 and 2016, respectively. In the fiscal year ended June 30, 2017, the increase in valuation allowance includes $40 million related to certain accumulated net operating losses that were agreed to as part of a settlement with a foreign tax authority. As of June 30, 2017, the Company had approximately $2.0 billion and $1.7 billion of capital loss carryforwards in Australia and the U.K., respectively, which may be carried forward indefinitely and which are subject to tax authority review. Realization of our capital losses is dependent on generating capital gain taxable income and satisfying certain continuity of business requirements. The Company recorded a deferred tax asset of $904 million and $803 million as of June 30, 2017 and 2016, respectively, for these capital loss carryforwards, however, it is more likely than not that the Company will not generate capital gain income in the normal course of business in these jurisdictions. Accordingly, valuation allowances of $904 million and $803 million have been established to reduce the capital loss carryforward deferred tax asset to an amount that will more likely than not be realized as of June 30, 2017 and 2016, respectively. As of June 30, 2017, the Company had approximately $36 million of U.S. Federal tax credit carryforwards which includes $23 million of foreign tax credits and $13 million of research and development credits which begin to expire in 2025 and 2036, respectively. As of June 30, 2017, the Company had approximately $26 million of non-U.S. tax credit carryforwards which expire in various amounts beginning in 2025 and $7 million of state tax credit carryforwards (net of U.S. federal benefit), which expire in various amounts beginning in 2018. In accordance with the Company’s accounting policy, a valuation allowance of $7 million has been established to reduce the deferred tax asset associated with the Company’s non-U.S. and state credit carryforwards to an amount that will more likely than not be realized as of June 30, 2017. Tax Sharing and Indemnification Agreement The Company entered into a Tax Sharing and Indemnification Agreement with 21st Century Fox that governs the Company’s and 21st Century Fox’s respective rights, responsibilities, and obligations with respect to tax liabilities and benefits, tax attributes, tax contests and other matters regarding income taxes, non-income taxes and related tax returns. Among other matters, as subsidiaries of 21st Century Fox prior to the Separation, the Company and each of its domestic subsidiaries have joint and several liability with 21st Century Fox for the consolidated U.S. federal income taxes of the 21st Century Fox consolidated group relating to any taxable 137 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS periods during which the Company or any of such subsidiaries were a member of the 21st Century Fox consolidated group. Under the Tax Sharing and Indemnification Agreement, 21st Century Fox will indemnify the Company for any such liability. The Tax Sharing and Indemnification Agreement provides that the Company will generally indemnify 21st Century Fox against taxes attributable to the Company’s assets or operations for all tax periods or portions thereof after the Separation. For taxable periods or portions thereof prior to the Separation, 21st Century Fox will generally indemnify the Company against U.S. consolidated taxes attributable to such periods, and the Company will indemnify 21st Century Fox against the Company’s separately filed U.S., state, and foreign taxes and foreign consolidated taxes for such periods. Uncertain Tax Positions The following table sets forth the change in the Company’s unrecognized tax benefits, excluding interest and penalties: For the fiscal years ended June 30, 2017 2016 2015 Balance, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions for prior year tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions for current year tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reduction for prior year tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lapse of the statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Settlement—cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Settlement—tax attributes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impact of currency translations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58 79 4 (7) (in millions) $129 6 4 (40) (2) — (2) — — $ 86 107 5 (9) (8) (21) (94) — (2) (5) (9) Balance, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 64 $ 86 $129 The Company recognizes interest and penalty charges related to unrecognized tax benefits as income tax expense, which is consistent with the recognition in prior reporting periods. The Company recognized interest and penalty charges of $11 million and $6 million for the fiscal years ended June 30, 2017 and June 30, 2015, respectively, and a benefit related to interest and penalties of $1 million for the fiscal year ended June 30, 2016. The Company recorded liabilities for accrued interest and penalties of approximately $3 million, $6 million and $8 million as of June 30, 2017, 2016, and 2015, respectively. In fiscal year ended June 30, 2017, the Company reached an agreement with a foreign tax authority to settle certain tax issues related to fiscal years 2010 through 2015. As a result of the settlement, the Company recorded net income tax expense, including interest and penalties of $63 million comprised of a current tax expense of $20 million and a deferred tax expense of $43 million. The Company’s tax returns are subject to on-going review and examination by various tax authorities. Tax authorities may not agree with the treatment of items reported in our tax returns, and therefore the outcome of tax reviews and examinations can be unpredictable. The Company is currently undergoing tax examinations in several states and foreign jurisdictions. The Company believes it has appropriately accrued for the expected outcome of uncertain tax matters and believes such liabilities represent a reasonable provision for taxes 138 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ultimately expected to be paid, however, the Company may need to accrue additional income tax expense and our liability may need to be adjusted as new information becomes known and as these tax examinations continue to progress, or as settlements or litigations occur. The following is a summary of major tax jurisdictions for which tax authorities may assert additional taxes based upon tax years currently under audit and subsequent years that could be audited by the respective taxing authorities. Jurisdiction Fiscal Years Open to Examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. Federal U.S. States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K. 2009-2016 Various 2012-2016 2011-2016 It is reasonably possible that uncertain tax positions may increase or decrease in the next fiscal year, however, actual developments in this area could differ from those currently expected. As of June 30, 2017, approximately $34 million would affect the Company’s effective income tax rate, if and when recognized in future fiscal years. It is reasonably possible, the amount of uncertain tax liabilities which may be resolved within the next fiscal year is between the range of approximately nil and $19 million, a portion of which will affect our effective income tax rate, primarily as a result of the settlement of tax examinations and the lapsing of statutes of limitations. Other The Company has not provided for U.S. taxes on the undistributed earnings of foreign subsidiaries that are considered to be reinvested indefinitely. Calculation of the unrecognized deferred tax liability for temporary differences related to these earnings is not practicable. Undistributed earnings of foreign subsidiaries considered to be indefinitely reinvested amounted to approximately $2.4 billion as of June 30, 2017. The amount of undistributed earnings reflects adjustments related to the Separation from 21st Century Fox that were finalized with the filing of our income tax returns in periods after the Separation. During the fiscal years ended June 30, 2017, 2016 and 2015, the Company paid gross income taxes of $132 million, $103 million and $134 million, respectively, and received income tax refunds of $9 million, $10 million and $8 million, respectively. NOTE 19. SEGMENT INFORMATION The Company manages and reports its businesses in the following five segments: • News and Information Services—The News and Information Services segment includes the Company’s global print, digital and broadcast radio media platforms. These product offerings include the global print and digital versions of The Wall Street Journal and the Dow Jones Media Group, which includes Barron’s and MarketWatch, as well as the Company’s suite of professional information products, including Factiva, Dow Jones Risk & Compliance, Dow Jones Newswires, Dow Jones PEVC and DJX. The Company also owns, among other publications, The Australian, The Daily Telegraph, Herald Sun and The Courier Mail in Australia, The Times, The Sunday Times, The Sun and The Sun on Sunday in the U.K. and the New York Post in the U.S. This segment also includes News America Marketing, a leading provider of home-delivered shopper media, in-store marketing products and services and digital marketing solutions, including Checkout 51’s mobile application, as well as Unruly, a leading global video advertising distribution platform, Wireless Group, operator of talkSPORT, the leading sports radio network in the U.K., and Storyful, a social media content agency. 139 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS • Book Publishing—The Book Publishing segment consists of HarperCollins, the second largest consumer book publisher in the world, with operations in 18 countries and particular strengths in general fiction, nonfiction, children’s and religious publishing. HarperCollins owns more than 120 branded publishing imprints, including Harper, William Morrow, HarperCollins Children’s Books, Avon, Harlequin and Christian publishers Zondervan and Thomas Nelson, and publishes works by well- known authors such as Harper Lee, Patricia Cornwell, Chip and Joanna Gaines, Rick Warren, Sarah Young and Agatha Christie and popular titles such as The Hobbit, Goodnight Moon, To Kill a Mockingbird, Jesus Calling and Hillbilly Elegy. • Digital Real Estate Services—The Digital Real Estate Services segment consists of the Company’s interests in REA Group, Move and DIAKRIT. REA Group is a publicly traded company listed on the Australian Securities Exchange (ASX: REA) that advertises property and property-related services on its websites and mobile applications across Australia and Asia, including iProperty.com. REA Group operates Australia’s leading residential and commercial property websites, realestate.com.au and realcommercial.com.au. The Company holds a 61.6% interest in REA Group. Move is a leading provider of online real estate services in the U.S. and primarily operates realtor.com®, a premier real estate information and services marketplace. Move offers real estate advertising solutions to agents and brokers, including its ConnectionsSM for Buyers and AdvantageSM Pro products. Move also offers a number of professional software and services products, including Top Producer®, FiveStreet® and ListHubTM. The Company owns an 80% interest in Move, with the remaining 20% being held by REA Group. • Cable Network Programming—The Cable Network Programming segment consists of FOX SPORTS Australia and Australian News Channel Pty Ltd (“ANC”). FOX SPORTS Australia is the leading sports programming provider in Australia, with eight high definition television channels distributed via cable, satellite and IP, several interactive viewing applications and broadcast rights to live sporting events in Australia including: National Rugby League, the domestic football league, international cricket, Australian Rugby Union and various motorsports programming. ANC, acquired in December 2016, operates the SKY NEWS network, Australia’s 24-hour multi- channel, multi-platform news service. ANC channels are broadcast throughout Australia and New Zealand and available on Foxtel and Sky Television. ANC also owns and operates the international Australia Channel IPTV service and offers content across a variety of digital media platforms, including mobile, podcasts and social media websites. • Other—The Other segment consists primarily of general corporate overhead expenses, the corporate Strategy and Creative Group and costs related to the U.K. Newspaper Matters. The Company’s corporate Strategy and Creative Group was formed to identify new products and services across its businesses to increase revenues and profitability and to target and assess potential acquisitions, investments and dispositions. Segment EBITDA is defined as revenues less operating expenses and selling, general and administrative expenses and excluding the impact from the NAM Group and Zillow legal settlements. Segment EBITDA does not include: depreciation and amortization, impairment and restructuring charges, equity (losses) earnings of affiliates, interest, net, other, net, income tax (expense) benefit and net income attributable to noncontrolling interests. Segment EBITDA may not be comparable to similarly titled measures reported by other companies, since companies and investors may differ as to what items should be included in the calculation of Segment EBITDA. 140 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Segment EBITDA is the primary measure used by the Company’s chief operating decision maker to evaluate the performance of and allocate resources within the Company’s businesses. Segment EBITDA provides management, investors and equity analysts with a measure to analyze the operating performance of each of the Company’s business segments and its enterprise value against historical data and competitors’ data, although historical results may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences). For the fiscal years ended June 30, 2017 2016 2015 (in millions) Revenues: News and Information Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Book Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Digital Real Estate Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cable Network Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,069 1,636 938 494 2 $5,338 1,646 822 484 2 $5,731 1,667 625 500 1 Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,139 8,292 8,524 Segment EBITDA: News and Information Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Book Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Digital Real Estate Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cable Network Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment and restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity (losses) earnings of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net (Loss) income from continuing operations before income tax (expense) benefit . . . . . Income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 414 199 324 123 (175) (449) (927) (295) 39 132 (615) (28) $ 214 185 344 124 (183) (505) (89) 30 43 18 181 54 $ 603 221 201 135 (215) (498) (84) 58 56 75 552 (185) (Loss) income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (643) $ 235 $ 367 For the fiscal years ended June 30, 2017 2016 2015 (in millions) Depreciation and amortization: News and Information Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Book Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Digital Real Estate Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cable Network Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $283 52 78 32 4 $347 55 69 29 5 $365 52 44 33 4 Total Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $449 $505 $498 141 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the fiscal years ended June 30, 2017 2016 2015 (in millions) Capital expenditures: $165 News and Information Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Book Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Digital Real Estate Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cable Network Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $174 9 64 8 1 $238 12 45 7 6 Total Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $256 $256 $308 Total assets: News and Information Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Book Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Digital Real Estate Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cable Network Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets (a) The Other segment primarily includes Cash and cash equivalents. As of June 30, 2017 2016 (in millions) $ 6,142 1,845 2,307 1,194 1,037 2,027 $ 6,728 1,855 2,158 1,101 1,371 2,270 $14,552 $15,483 As of June 30, 2017 2016 (in millions) Goodwill and intangible assets, net: News and Information Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Book Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Digital Real Estate Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cable Network Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,952 835 1,420 912 — $2,651 869 1,499 898 4 Total Goodwill and intangible assets, net $6,119 $5,921 Geographic Segments Revenues:(a) For the fiscal years ended June 30, 2017 2016 2015 (in millions) U.S. and Canada(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Europe(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australasia and Other(d) $3,880 1,671 2,588 $3,920 1,873 2,499 $3,808 1,982 2,734 Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,139 $8,292 $8,524 142 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (a) Revenues are attributed to region based on location of customer. (b) Revenues include approximately $3.7 billion for fiscal 2017, $3.8 billion for fiscal 2016 and $3.6 billion for fiscal 2015 from customers in the U.S. (c) Revenues include approximately $1.3 billion for fiscal 2017, $1.5 billion for fiscal 2016 and $1.6 billion for fiscal 2015 from customers in the U.K. (d) Revenues include approximately $2.3 billion for fiscal 2017, $2.3 billion for fiscal 2016 and $2.3 billion for fiscal 2015 from customers in Australia. As of June 30, 2017 2016 (in millions) Long-lived assets:(a) U.S. and Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australasia and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 960 560 546 $2,066 $1,058 939 804 $2,801 (a) Reflects total assets less current assets, goodwill, intangible assets, investments and deferred income tax assets. There is no material reliance on any single customer. Revenues are attributed to countries based on location of customers. Australasia comprises Australia, Asia, Papua New Guinea and New Zealand. NOTE 20. ADDITIONAL FINANCIAL INFORMATION Other Current Assets The following table sets forth the components of Other current assets included in the Balance Sheets: Inventory(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts due from 21st Century Fox . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepayments and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As of June 30, 2017 2016 (in millions) $218 $208 55 82 240 233 $513 $523 (a) Inventory as of June 30, 2017 and 2016 was primarily comprised of books, newsprint, printing ink, and programming rights. Other Non-Current Assets The following table sets forth the components of Other non-current assets included in the Balance Sheets: Royalty advances to authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 As of June 30, 2017 2016 (in millions) $311 $298 85 144 $396 $442 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Other Current Liabilities The following table sets forth the components of Other current liabilities: Current tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Royalties and commissions payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As of June 30, 2017 2016 (in millions) $ 33 $ 39 179 152 3 103 251 306 Total Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $600 $466 Other, net The following table sets forth the components of Other, net included in the Statements of Operations: For the fiscal years ended June 30, 2017 2016 2015 (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of REA Group’s European business(a) $107 Gain on iProperty transaction(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Impairment of marketable securities and cost method investments(c) . . . . . . . . . . . . . . . . . . . Gain on sale of other businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of equity method investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of marketable securities(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends received from cost method investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of cost method investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 (21) 19 11 7 3 — — 6 2 — 1 1 7 29 25 15 4 $— $— 29 — (21) (5) Total Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $132 $ 18 $ 75 (a) (b) (c) (d) The Company recognized a pre-tax gain of $107 million for the fiscal year ended June 30, 2017 related to REA Group’s sale of its European business. See Note 3—Acquisitions, Disposals and Other Transactions. See Note 3—Acquisitions, Disposals and Other Transactions. See Note 6—Investments. In August 2014, REA Group completed the sale of a minority interest held in marketable securities for total cash consideration of $104 million. As a result of the sale, REA Group recognized a pre-tax gain of $29 million, which was reclassified out of accumulated other comprehensive loss and included in Other, net in the Statement of Operations. 144 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Accumulated Other Comprehensive Loss The components of Accumulated other comprehensive loss were as follows: For the fiscal years ended June 30, 2017 2016 2015 (in millions) Accumulated other comprehensive loss, net of tax: Unrealized holding gains (losses) on securities: Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fiscal year activity(a) $ Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20 (25) (5) $ 19 1 20 24 (5) 19 Benefit Plan Adjustments: Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fiscal year activity(b) Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency translation adjustments: Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fiscal year activity(c) Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share of other comprehensive income from equity affiliates, net: Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fiscal year activity(d) Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total accumulated other comprehensive loss, net of tax: (445) 8 (437) (585) 75 (510) (16) 4 (12) (413) (32) (445) (188) (397) (585) — (16) (16) (384) (29) (413) 971 (1,159) (188) (1) 1 — Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fiscal year activity, net of income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,026) 62 (582) (444) 610 (1,192) Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (964) $(1,026) $ (582) (a) Net of income tax (benefit) expense of ($10) million, nil and nil for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. (b) Net of income tax expense (benefit) of $8 million, ($14) million and ($11) million for the fiscal years ended (c) June 30, 2017, 2016 and 2015, respectively. Excludes $9 million, ($1) million and ($24) million relating to noncontrolling interests for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. (d) Net of income tax expense (benefit) of $2 million, ($7) million and $1 million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. 145 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 21. VALUATION AND QUALIFYING ACCOUNTS Balance at beginning of year Additions Acquisitions and disposals Utilization Foreign exchange Balance at end of year (in millions) Fiscal 2017 Allowances for returns and doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax valuation allowance . . . . . . . . . $ (213) (1,014) $(603) (92) $ (2) (92) $611 23 $ (1) (12) $ (208) (1,187) Fiscal 2016 Allowances for returns and doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax valuation allowance . . . . . . . . . $ (220) (1,308) $(566) (8) $ (12) 109 $582 114 $ 3 79 $ (213) (1,014) Fiscal 2015 Allowances for returns and doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax valuation allowance . . . . . . . . . $ (175) (1,393) $(573) (102) $ (68) (186) $586 290 $ 10 83 $ (220) (1,308) 146 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 22. QUARTERLY DATA (UNAUDITED) For convenience purposes, all references to September 30, 2016 and September 30, 2015 refer to the three months ended October 2, 2016 and September 27, 2015, respectively. All references to December 31, 2016 and December 31, 2015 refer to the three months ended January 1, 2017 and December 27, 2015, respectively. All references to March 31, 2017 and March 31, 2016 refer to the three months ended April 2, 2017 and March 27, 2016, respectively. Fiscal 2017 Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss from continuing operations attributable to News Corporation stockholders(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from discontinued operations, net of tax(b) . . . . . . . . . . . Net loss attributable to News Corporation stockholders . . . . . . . Loss from continuing operations available to News Corporation stockholders per share—basic and diluted . . . . . . . . . . . . . . . Income from discontinued operations available to News For the three months ended September 30, December 31, March 31, June 30, (in millions, except per share amounts) $1,965 $2,116 $1,978 $2,080 (15) — (15) (289) — (289) (5) — (5) (429) — (429) $ (0.03) $ (0.50) $ (0.01) $ (0.74) Corporation stockholders per share—basic and diluted . . . . . — — — — Loss available to News Corporation stockholders per share— basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.03) $ (0.50) $ (0.01) $ (0.74) Fiscal 2016 Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations attributable to News Corporation stockholders(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from discontinued operations, net of tax(b) . . . . . . Net income (loss) attributable to News Corporation stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations available to News $2,014 $2,161 $1,891 $2,226 129 46 175 87 (24) 63 (147) (2) (149) 95 (5) 90 Corporation stockholders per share—basic and diluted . . . . . $ 0.22 $ 0.15 $ (0.26) $ 0.16 Income (loss) from discontinued operations available to News Corporation stockholders per share—basic and diluted . . . . . 0.08 (0.04) — (0.01) Income (loss) available to News Corporation stockholders per share—basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.30 $ 0.11 $ (0.26) $ 0.15 (a) Income (loss) from continuing operations includes the impact of the following items: • During the second quarter of fiscal 2017, the Company recognized a non-cash impairment charge of approximately $310 million primarily related to the write-down of fixed assets at the Australian newspapers. (See Note 7—Property, Plant and Equipment). The Company also recognized a $227 million non-cash write-down of the carrying value of its investment in Foxtel to fair value. (See Note 6—Investments). During the second quarter of fiscal 2017, REA Group sold its European business which resulted in a pre-tax gain of $120 million. The gain was partially offset in the third quarter of fiscal 2017 by $13 million related to the impact of foreign currency fluctuations on the receipt of the sales proceeds, which were received in February 2017, and certain other currency translation impacts. (See Note 3— Acquisitions, Disposals and other Transactions). (See Note 7—Property, Plant and Equipment). 147 NEWS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS • During the fourth quarter of fiscal 2017, the Company recognized approximately $464 million in impairment charges, primarily related to the write-down of fixed assets at the U.K. newspapers. (See Note 7—Property, Plant and Equipment). • • • The $106 million tax benefit recognized during the first quarter of fiscal 2016 related to the release of previously established valuation allowances related to certain U.S. federal net operating losses and state deferred tax assets. (See Note 18—Income Taxes). In the third quarter of fiscal 2016, the Company recognized one-time costs of approximately $280 million in connection with the settlement of certain litigation and related claims at News America Marketing. (See Note 15—Commitments and Contingencies). In the fourth quarter of fiscal 2016, the Company recognized a gain of $122 million in connection with the settlement of litigation with Zillow, which reflects settlement proceeds received from Zillow of $130 million, less $8 million paid to NAR. (See Note 15—Commitments and Contingencies). (b) Income (loss) from discontinued operations includes the impact of the following items: • In the first quarter of fiscal 2016, the Company recognized a pre-tax non-cash impairment charge of $76 million reflecting a write down of the digital education business to its fair value less costs to sell. Additionally, during the first quarter of fiscal 2016, the Company recognized a tax benefit of $144 million upon reclassification of the Digital Education segment to discontinued operations. (See Note 4—Discontinued Operations and Note 18—Income Taxes). NOTE 23. SUBSEQUENT EVENTS In July 2017, REA Group acquired an 80.3% interest in Smartline Home Loans Pty Limited (“Smartline”) for A$69 million in cash (approximately $55 million). The minority shareholders have the option to sell the remaining 19.7% interest to REA Group beginning three years after closing at a price dependent on the financial performance of Smartline. If the option is not exercised, the minority interest will become mandatorily redeemable four years after closing. As a result, REA Group will recognize a liability in the first quarter of fiscal 2018 for the present value of the amount expected to be paid for the remaining interest based on the formula specified in the acquisition agreement. Smartline is one of Australia’s premier mortgage broking franchise groups, and the investment provides REA Group’s financial services business with greater scale and capability. The Company is currently in the process of evaluating the purchase accounting implications, and as a result, disclosures required under ASC 805-10-50-2(h) cannot be made at this time. In August 2017, the Company declared a semi-annual cash dividend of $0.10 per share for Class A Common Stock and Class B Common Stock. This dividend is payable on October 18, 2017 to stockholders of record as of September 13, 2017. 148 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES Disclosure Controls and Procedures The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective in recording, processing, summarizing and reporting on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and were effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management’s Report on Internal Control Over Financial Reporting Management’s report and the report of the independent registered public accounting firm thereon are set forth on pages 79 and 80, respectively, and are incorporated herein by reference. Changes in Internal Control over Financial Reporting There has been no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Company’s fourth quarter of the fiscal year ended June 30, 2017 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. ITEM 9B. OTHER INFORMATION None 149 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this item with respect to the Company’s Directors is contained in the Proxy Statement for the Company’s 2017 Annual Meeting of Stockholders (the “Proxy Statement”) to be filed with the SEC under the heading “Proposal No. 1: Election of Directors” and is incorporated by reference in this Annual Report. The information required by this item with respect to the Company’s executive officers is contained in the Proxy Statement under the heading “Executive Officers of News Corporation” and is incorporated by reference in this Annual Report. The information required by this item with respect to compliance with Section 16(a) of the Exchange Act is contained in the Proxy Statement under the heading “Section 16(a) Beneficial Ownership Reporting Compliance” and is incorporated by reference in this Annual Report. The information required by this item with respect to the Company’s Standards of Business Conduct and Code of Ethics is contained in the Proxy Statement under the heading “Corporate Governance Matters—Corporate Governance Policies” and is incorporated by reference in this Annual Report. The information required by this item with respect to the procedures by which security holders may recommend nominees to the Board of Directors is contained in the Proxy Statement under the heading “Corporate Governance Matters—Stockholder Recommendation of Director Candidates” and is incorporated by reference in this Annual Report. The information required by this item with respect to the Company’s Audit Committee, including the Audit Committee’s members and its financial expert, is contained in the Proxy Statement under the heading “Corporate Governance Matters—Board Committees” and is incorporated by reference in this Annual Report. ITEM 11. EXECUTIVE COMPENSATION The information required by this item with respect to executive compensation and director compensation is contained in the Proxy Statement under the headings “Compensation Discussion and Analysis,” “Executive Compensation” and “Director Compensation,” respectively, and is incorporated by reference in this Annual Report. The information required by this item with respect to compensation committee interlocks and insider participation is contained in the Proxy Statement under the heading “Compensation Committee Interlocks and Insider Participation” and is incorporated by reference in this Annual Report. The compensation committee report required by this item is contained in the Proxy Statement under the heading “Report of the Compensation Committee” and is incorporated by reference in this Annual Report. The information required by this item with respect to compensation policies and practices as they relate to the Company’s risk management is contained in the Proxy Statement under the heading “Risks Related to Compensation Policies and Practices” and is incorporated by reference in this Annual Report. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item with respect to securities authorized for issuance under the Company’s equity compensation plans is contained in the Proxy Statement under the heading “Equity Compensation Plan Information” and is incorporated by reference in this Annual Report. 150 The information required by this item with respect to the security ownership of certain beneficial owners and management is contained in the Proxy Statement under the heading “Security Ownership of News Corporation” and is incorporated by reference in this Annual Report. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item with respect to transactions with related persons is contained in the Proxy Statement under the heading “Corporate Governance Matters—Related Person Transactions Policy” and is incorporated by reference in this Annual Report. The information required by this item with respect to director independence is contained in the Proxy Statement under the headings “Corporate Governance Matters—Director Independence” and “Corporate Governance Matters—Board Committees” and is incorporated by reference in this Annual Report. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this item is contained in the Proxy Statement under the headings “Fees Paid to Independent Registered Public Accounting Firm” and “Audit Committee Pre-Approval Policies and Procedures” and is incorporated by reference in this Annual Report. 151 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this report: PART IV 1. 2. 3. The Company’s Consolidated Financial Statements required to be filed as part of this Annual Report and the Reports of Independent Registered Public Accounting Firm are included in Part II, Item 8. Financial Statements and Supplementary Data. All other financial statement schedules are omitted because the required information is not applicable, or because the information called for is included in the Company’s Consolidated Financial Statements or the Notes to the Consolidated Financial Statements. Exhibits—The exhibits listed on the accompanying Exhibit Index filed or incorporated by reference as part of this Annual Report and such Exhibit Index is incorporated herein by reference. On the Exhibit Index, a “±” identifies each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report, and such listing is incorporated herein by reference. ITEM 16. FORM 10-K SUMMARY None. 152 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SIGNATURES NEWS CORPORATION (Registrant) By: /s/ Susan Panuccio Susan Panuccio Chief Financial Officer Date: August 14, 2017 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date /s/ Robert J. Thomson Robert J. Thomson Chief Executive Officer and Director (Principal Executive Officer) August 14, 2017 /s/ Susan Panuccio Susan Panuccio /s/ Kevin P. Halpin Kevin P. Halpin /s/ K. Rupert Murdoch K. Rupert Murdoch /s/ Lachlan K. Murdoch Lachlan K. Murdoch /s/ Kelly Ayotte Kelly Ayotte /s/ José María Aznar José María Aznar /s/ Natalie Bancroft Natalie Bancroft /s/ Peter L. Barnes Peter L. Barnes /s/ Joel I. Klein Joel I. Klein /s/ James R. Murdoch James R. Murdoch Chief Financial Officer (Principal Financial Officer) August 14, 2017 Principal Accounting Officer August 14, 2017 Executive Chairman August 14, 2017 Co-Chairman August 14, 2017 Director August 14, 2017 Director August 14, 2017 Director August 14, 2017 Director August 14, 2017 Director August 14, 2017 Director August 14, 2017 153 Signature /s/ Ana Paula Pessoa Ana Paula Pessoa /s/ Masroor Siddiqui Masroor Siddiqui Title Director Date August 14, 2017 Director August 14, 2017 154 [THIS PAGE INTENTIONALLY LEFT BLANK] Stock Performance The following graph compares the cumulative total return to stockholders of a $100 investment in News Corp’s Class A Common Stock and Class B Common Stock (which trade on the NASDAQ Global Select Market (the “NASDAQ”), their principal market, under the symbols “NWSA” and “NWS”, respectively) for the four-year period from July 1, 2013, the date News Corp’s common stock began “regular-way” trading on the NASDAQ, through June 30, 2017, with a similar investment in the Standard & Poor’s (“S&P”) 500 Index, the S&P 500 Publishing & Printing Index, the S&P Australia BMI Media (Subsector) Index and the S&P 1500 Media Index, and assumes reinvestment of dividends. Beginning with the fi scal year ended June 30, 2017, the Company selected for inclusion herein the S&P 1500 Media Index, which includes newspaper companies as well as publishing and general media companies, as a replacement for the S&P 500 Publishing & Printing Index. We believe the S&P 1500 Media Index better represents the diversity of our portfolio of businesses and provides a more meaningful comparison to the Company. Cumulative Stockholder Return for Three-Year Period Ended June 30, 2017 $175 $175 $175 $150 $150 $150 $125 $125 $125 $100 $100 $100 $75 $75 $75 NWSA NWSA NWSA NWS NWS NWS S&P 500 S&P 500 S&P 500 S&P 500 Publishing & Printing S&P 500 Publishing & Printing S&P 500 Publishing & Printing S&P Australia BMI Media S&P Australia BMI Media S&P Australia BMI Media S&P 1500 Media S&P 1500 Media S&P 1500 Media NWSA NWS S&P 500 7/1/2013 6/30/2014 6/30/2015 6/30/2016 6/30/2017 $100 $121 $ 99 $78 $100 $117 $96 $80 $95 $98 $100 $124 $133 $138 $163 S&P 500 Publishing & Printing $100 $126 $122 $97 $119 S&P Australia BMI Media $100 $135 $98 $118 $120 S&P 1500 Media $100 $129 $145 $139 $163 Information on News Corporation’s Common Stock $135 $135 $135 For a list of the benefi cial ownership of both News Corp Class A Common Stock and Class B Common Stock as of August 25, 2017 for: (i) each person who is known by News Corp to own benefi cially more than 5% of the outstanding shares of Class B $125 $125 $125 Common Stock; (ii) each member of the News Corp Board of Directors; (iii) each named executive offi cer (as defi ned under SEC rules) of News Corp; and (iv) all Directors and executive offi cers of News Corp as a group, please refer to News Corp’s $115 $115 $115 Proxy Statement for its 2017 Annual Meeting of Stockholders under the heading “Security Ownership of News Corporation.” As of August 25, 2017, there were 199,630,240 shares of Class B Common Stock outstanding and 382,964,683 shares of $105 $105 $105 Class A Common Stock outstanding, approximately 612 holders of record of Class B Common Stock and 22,612 holders of record of Class A Common Stock and approximately 16,145 holders of record of Class B CDIs and 3,929 holders of record $95 $95 $95 of Class A CDIs. In addition, as of August 25, 2017, there were 221 holders of 649,561 options over Class A Common Stock. Each share of Class B Common Stock entitles the holder to one vote per share on all matters on which stockholders have $85 $85 $85 the right to vote. Shares of Class A Common Stock do not have voting rights. However, holders of shares of Class A Common Stock do have the right to vote, together with holders of shares of Class B Common Stock, in limited circumstances, which $75 $75 $75 are described in News Corp’s Restated Certifi cate of Incorporation. Distribution of stockholders of record and CDI holders of record S&P 500 Publishing & Printing S&P 500 Publishing & Printing S&P 500 Publishing & Printing S&P Australia BMI Media S&P Australia BMI Media S&P Australia BMI Media The following information is provided as of August 25, 2017: S&P 500 S&P 500 S&P 500 NWSA NWSA NWSA NWS NWS NWS S&P 500 S&P 500 S&P 500 Size of holding 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – above Class B Common Stock Class A Common Stock 15,887 749 66 35 20 26,213 281 21 17 9 Based on the market prices of each class of the Company’s Common Stock on August 25, 2017, there were approximately 4,575 holders holding less than a marketable parcel of Class B Common Stock (including CDIs) and approximately 21,355 holders holding less than a marketable parcel of Class A Common Stock (including CDIs). Top twenty stockholders and CDI holders The following information regarding the top twenty stockholders of record and CDI holders of record is based on information provided by News Corp’s transfer agent as of August 25, 2017: Class B Common Stock No. Name No. of shares held % of issued share capital 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 CEDE & CO CHESS DEPOSITARY NOMINEES PTY LIMITED ANN T P ALLEN-STEVENS KENNETH B ULLMAN CHARLES WILSON DAVID HILL WILLIAM A ONEILL + ALENE J ONEILL TR UA 04/01/03 ONEILL FAMILY TRUST JENNIFER ANN THORPE STEVEN JOHN BROWN JACKY BROWN DR BRAHMAVAR RAMANNA SADANANDA DOUGLAS LIPMAN ERIC LIPMAN RAYMOND R CRANBOURNE JULIE BAUMGOLD SHERWIN D FINLAY + JOYCE C FINLAY JT TEN THE CHISHOLM WHITNEY FAMILY THE PUBLIC TR A/C LJOHNSONNO3 BRIAN ROBERT GAMBLE & SANDRA ELAINE GAMBLE & KEITH GEORGE SAVORY 20 MCMAHON INVESTMENTS LIMITED 150,089,418 49,450,501 6,346 3,772 3,560 2,500 2,500 2,101 1,387 1,312 1,250 1,240 1,240 1,222 1,054 1,000 875 850 750 737 199,573,615 75.18 24.77 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 99.97* Class A Common Stock No. Name No. of shares held % of issued share capital CEDE & CO CHESS DEPOSITARY NOMINEES PTY LIMITED ELIAN EMPLOYEE BENEFIT TRUSTEE LTD BRIAN C KELLY ELIAN EMPLOYEE BENEFIT TRUSTEE LIMITED CRUDEN FINANCIAL SERVICES LLC LAUREY J BARNETT DOROTHY FELIX + ANTONE C FELIX III JT TEN EDITH LILLIE BARTLEY DIANE J FRANKEL TR 04/13/93 DIANE J FRANKEL LIV TR 1 2 3 4 5 6 7 8 9 10 11 MILDRED SCHER TR UA 11/24/2010 MILDRED SCHER REVOCABLE TRUST 12 13 14 MICHAEL H LIPTAK SYLVIA HAJIAN 15 BENSON P WELSH 16 SCOTT FRANKO 17 ROY T CAMPBELL JR 18 ROBERT K HURFORD + JEAN HURFORD TR 12/31/90 JEAN HURFORD TR 19 RAYMOND A CONOVER 20 ELEANOR SCHWAM + SHIRLEY SCHWAM JT TEN DORIS KIMMEL + ALAN KIMMEL JT TEN * May not sum due to rounding 367,311,309 14,916,079 154,263 32,885 26,441 14,250 8,813 7,947 7,824 6,781 5,711 5,443 5,111 4,893 4,002 3,859 3,737 3,582 3,573 3,424 382,529,927 95.91 3.89 0.04 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 99.89* Class B CDIs No. Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA LIMITED CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED UBS NOMINEES PTY LTD BNP PARIBAS NOMS PTY LTD CITICORP NOMINEES PTY LIMITED BNP PARIBAS NOMINEES PTY LTD UBS NOMINEES PTY LTD RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED AMP LIFE LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 CS THIRD NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA BRISPOT NOMINEES PTY LTD SHARE DIRECT NOMINEES PTY LTD <10026 A/C> 18 WARBONT NOMINEES PTY LTD 19 20 BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD DRP JMB PTY LIMITED No. of CDIs held 13,334,282 9,202,780 6,271,647 3,593,171 3,237,044 2,267,370 2,109,239 1,417,243 948,005 413,640 393,711 314,494 305,907 245,739 155,649 149,574 110,000 104,927 96,627 71,750 % of issued share capital 6.68 4.61 3.14 1.80 1.62 1.14 1.06 0.71 0.47 0.21 0.20 0.16 0.15 0.12 0.08 0.07 0.06 0.05 0.05 0.04 Class A CDIs No. Name 1 2 3 4 5 6 7 8 9 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA LIMITED NATIONAL NOMINEES LIMITED CITICORP NOMINEES PTY LIMITED BNP PARIBAS NOMS PTY LTD BNP PARIBAS NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA FIFTEENTH SEVRUP PTY LTD CS THIRD NOMINEES PTY LIMITED 10 MRS JANET ELIZABETH PATTERSON 11 MUTUAL TRUST PTY LTD 12 13 14 15 16 17 BRISPOT NOMINEES PTY LTD CS FOURTH NOMINEES PTY LIMITED UBS NOMINEES PTY LTD JIKINTA INVESTMENTS PTY LTD JOHN WICKHAM INVESTMENTS PTY LTD ENBEEAR PTY LTD 18 MRS ANNE KANTOR AO 19 20 SUSAN EWENSON INVIA CUSTODIAN PTY LIMITED * May not sum due to rounding 44,742,799 22.41%* No. of CDIs held 6,125,605 3,048,726 2,726,277 1,121,181 389,238 271,103 39,149 32,513 29,375 25,024 15,827 15,005 15,005 14,375 13,237 12,250 11,250 11,088 10,218 10,134 % of issued share capital 1.60 0.80 0.71 0.29 0.10 0.07 0.01 0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 13,936,580 3.64* Australian Securities Exchange (“ASX”) Corporate Governance Principles and Recommendations Details of News Corp’s compliance with the ASX Corporate Governance Principles and Recommendations during the reporting period are available on the Company’s website at http://newscorp.com/corporate-governance/asx-corporate-governance. Diversity News Corp fosters an environment in which all of our employees can feel valued, included and empowered to bring great ideas to the table. The Company is committed to cultivating diversity and broadening the opportunity for inclusion across News Corp’s companies. We invite you to review our complete Diversity Statement at http://newscorp.com/corporate-gover- nance/corporate-diversity-statement/. ASX Measurable Objectives and Gender Balance The ASX Corporate Governance Principles and Recommendations require an ASX-listed company to set measurable objectives for achieving gender diversity and to assess annually both the objectives and the company’s progress in achieving them, and to make related disclosures in the ASX-listed company’s Annual Report or on its corporate website. News Corp complies with these recommendations and has adopted the following measurable objectives. The Company’s progress toward achieving these objectives is also summarized below. Measurable Objectives Fiscal 2017 Progress Board Committee annual assessment of progress toward expanding diversity across the Company’s businesses. In June 2017, the Nominating and Corporate Governance Committee of the Board conducted its review of diversity initiatives by the Company and was satisfied by the Company’s performance to date. Foster an environment that is an incubator for great ideas and is capable of attracting and developing great diverse talent. Broaden our perspective by understanding the diverse perspectives and experiences that exist within our communities. The Company has identified and invested in our diverse senior management talent pipelines across each operating company. During fiscal 2017, the Company provided a global Leadership Development Series and related initiatives that provided female executives and emerging high performers with opportunities for networking, skill- building and other training relevant to the Company’s businesses. The Company has partnered with community-based orga- nizations that are dedicated to educating, enlightening and empowering young women. As a result of these partner- ships, youth in under-resourced communities have access to mentoring, education programs focused on academic achievement and college preparedness, as well as life skills training and development. As of August 15, 2016, women comprised 48% of the Company’s employees globally and 33% of the Company’s “senior executives” (which is comprised of our Executive Chairman, Co-Chairman, Chief Executive, HQ Leadership Team and Operating Company CEOs, and the direct reports to each of the foregoing). The current membership of the Board is set forth in this Annual Report. Board of Directors as of August 25, 2017 K. Rupert Murdoch Executive Chairman Lachlan K. Murdoch Co-Chairman Executive Chairman, 21st Century Fox Executive Chairman, NOVA Entertainment Group Kelly Ayotte Former United States Senator for the State of New Hampshire José María Aznar President, Foundation for Social Studies and Analysis Former President of Spain Natalie Bancroft Director Peter L. Barnes Lead Director Joel I. Klein Chief Policy & Strategy Officer, Oscar Insurance Corporation James R. Murdoch Chief Executive Officer, 21st Century Fox Ana Paula Pessoa Partner and Chair, Kunumi Inteligencia Artificial SA Masroor Siddiqui Chief Executive Officer, Naya Capital Management UK Limited Robert J. Thomson Chief Executive Executive Officers as of August 25, 2017 K. Rupert Murdoch Executive Chairman Robert J. Thomson Chief Executive Susan Panuccio Chief Financial Officer David B. Pitofsky General Counsel Supplemental Information as of August 25, 2017 Corporate Secretary Michael L. Bunder Head Office 1211 Avenue of the Americas New York, NY 10036 Tel. (212) 416 3400 Registered Office – U.S. 1209 Orange Street Wilmington, DE 19801 Tel. (800) 677 3394 Registered Office – Australia 2 Holt Street Surry Hills, NSW 2010 Australia Tel. +61 (02) 9288 3000 News Corp is incorporated in Delaware, and is not subject to Chapters 6, 6A, 6B and 6C of the Corporations Act of Australia dealing with the acquisition of shares. The acquisition of shares in News Corp is subject to Delaware law and applicable United States securities laws. Auditors Ernst & Young LLP Share Listings Class A Common Stock and Class B Common Stock NASDAQ Global Select Market CDIs representing Class A Common Stock and Class B Common Stock Australian Securities Exchange Share Registers Computershare Trust Company, N.A. P.O. Box 505000 Louisville, KY 40233 Overnight correspondence: 462 South 4th Street, Suite 1600 Louisville, KY 40202 Tel. (877) 660 6642 (U.S. & Canada) Tel. (781) 575 2879 (Outside U.S. & Canada) Computershare Investor Services Pty Ltd Level 5, 115 Grenfell Street Adelaide, SA 5000 Australia Tel. 1300 340 121 (Australia) Tel. +61 (03) 9415 4394 (Outside Australia) Annual Report and Form 10-K Requests United States: 1211 Avenue of the Americas New York, NY 10036 Tel. (212) 416 3400 Australia: Computershare Investor Services Pty Ltd Level 5, 115 Grenfell Street Adelaide, SA 5000 Australia Tel. 1300 721 559 (Australia) Tel. +61 (03) 9946 4461 (Outside Australia) For Further Information http://investors.newscorp.com/investorkit.cfm News Corp Notice of Meeting The Notice of Meeting and Proxy Statement for News Corp’s 2017 Annual Meeting of Stockholders accompany this Annual Report. An electronic version of this Annual Report can be found at: http://newscorp.com/annual-meeting-information/. Our Businesses News Corp is a global diversifi ed media and information services company, which principally consists of the following as of August 25, 2017: News and Information Services Dow Jones Book Publishing HarperCollins Publishers The Wall Street Journal Barron’s MarketWatch The Wall Street Journal Digital Network Factiva Dow Jones PEVC DJX Dow Jones Risk & Compliance Dow Jones Newswires Mansion Global More than 120 branded imprints, including Harper, William Morrow, HarperCollins Children’s Books, Avon, Harlequin, Zondervan and Thomas Nelson Digital Real Estate Services REA Group Limited (61.6%) Move, Inc. (80%) realtor.com® Cable Network Programming FOX SPORTS Australia News Corp Australia The Australian and The Weekend Australian The Daily Telegraph and The Sunday Telegraph Herald Sun and Sunday Herald Sun The Courier Mail and The Sunday Mail The Advertiser and Sunday Mail news.com.au Including eight high-defi nition television channels distributed via cable, satellite and Internet Protocol, and several interactive viewing applications Signifi cant Equity Investments Foxtel (50%) News UK The Sun and The Sun on Sunday The Times and The Sunday Times New York Post News America Marketing Unruly Holdings Limited Storyful Limited Wireless Group plc N E W S C O R P A N N U A L R E P O R T 2 0 1 7 Passionate. Principled. Purposeful.