Annual Report
2017
Critical Data
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The Wall Street Journal saw strong digital growth
to nearly 1.3 million subscribers, representing
56% of total paid subscribers.
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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.
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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
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t
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e
b
o
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m
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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
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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
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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.
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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
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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
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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
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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
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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.
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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
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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.
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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
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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).
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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.
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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
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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.
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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
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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
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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
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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
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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
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Passionate. Principled. Purposeful.