A letter from Rupert Murdoch

News  Corp. Annual report 2012

http://reports.21cf.com/Report2012/2012AR.pdf

A letter from Rupert Murdoch

It takes no special genius to post Good earnings in a booming economy. It’s the special company that delivers In a bad economic environment.

At a time when the U.S. has been weighed down by its slowest recovery Since the Great Depression, when Europe’s currency threatens its union And, I might add when our critics flood The field with stories that refuse to move Beyond the misdeeds at two of our papers In Britain, I am delighted to report Something about News Corporation you Might not know from the headlines: In 2012, for the second year in a row, we have brought our stockholders double-digit Growth in total segment operating income.

We accomplished this because we do not consider ourselves a conventional Company. A conventional company tends to sit back on the business models that worked for it in the past. Our corporate culture at News Corp. Is very different. We know that business models that work today may be obsolete tomorrow, so we are always investing in the next generation – especially when our established models are doing well. Another way of putting it is this: The growth in earnings that we report today is the result of tough and sometimes unpopular decisions we took in the past.

We’ve just made another one of those big decisions. In June, I announced the board’s approval to pursue a change that will take one of the largest and most successful media enterprises in the world and transform it into two separate, publicly traded companies – one focused on news, publishing and education, the other on media and entertainment. Here’s why: For all the success we have had in building This company (the value of our stock, for example, has increased nearly 25 percent in the last 12 months alone), I believe News Corporation is still undervalued. Our aim is To unlock more value for our stockholders and enable each company to better deliver on its promises to its customers across the globe.

The publishing company will consist of our news and publishing groups, as well As our groundbreaking digital education group. In sum, we have the minds and we Have the assets. While most thinking about newspapers remains stuck on newsprint, We regard our papers as trusted brands that distribute news and views across dozens of different platforms, 24 hours a day. By realigning and re-organizing, we intend to take advantage of the opportunities before us by expanding what we offer and the Ways we offer it.

I know it is fashionable these days to dismiss publishing, especially newspapers. Elites in particular look down on the popular press, but within the U.K., The Sun Has 12 times the circulation of The Guardian and 27 times that of the Financial Times. In Australia, we are the leading publisher of news and have made great Strides to restructure the business as we prepare for the digital future.

For publications that earn the loyalty of their readers, the opportunities are very Real – and someone is going to grasp them. We believe it will be News Corporation. We start with a huge advantage in customer loyalty. And we plan to make full use of digital to reward that loyalty by giving our customers the news, information And entertainment they want, the moment they want it and in the format that Best suits their individual lifestyles. As we embrace this future, the failure of Imagination we see at so many other publishing companies only gives us a greater competitive advantage.

Harper Collins is a highly profitable publisher that already has 25 percent of Its books as ebooks in the U.S., with international moving in the same direction. The Wall Street Journal Digital Network – which also includes Barrons.com – Now boasts 1.3 million paying customers around the world. Meanwhile, our new Education division is well-positioned to do what so many school districts are crying Out for: Revolutionize classrooms around what works so that every schoolchild, No matter where he or she lives, has the opportunity to learn and achieve.

People like to say that the most valuable asset in today’s world is knowledge, And that a free and democratic society depends on an educated public. Well, That’s exactly the business we are in. With our new company, we will help our customers gain the knowledge they need to get ahead in life and make informed Political choices. And we will do it by aggressively growing our businesses across Geographical borders and new global platforms.

As we position ourselves as the world’s most dynamic publishing company, We will also create the world’s top media and entertainment company. This new company will encompass our premier broadcast and cable networks, leading film and television production studios, and our highly successful pay-tv businesses.  Our cable, film and television operations have already proved their ability to Generate increased earnings. From Fox News and our regional sports channels to TV shows such as Modern Family and films such as Rise of the Planet of the Apes And Ice Age, these brands are popular because they have earned a reputation for Quality and creativity.

They also reflect our fundamental investment in content. In sports, the NFL, World Cup and Sky Sports are examples of the exceptional content we deliver To our customers. We are also investing in high-growth markets, and Fox Sports Brazil is a good example of this dynamism. Make no mistake – we won’t be resting on our laurels. Families across The world are consuming content across myriad platforms, and we are more Determined than ever to seize that demand and develop strategies to maximize Our revenues. We will do that by offering our customers the best value for their Money, by taking advantage of new platforms and, most of all, by continuing To produce the compelling, quality programming for which people are willing To pay.

Now, a conventional company might make its play for international markets by trying to guess winners. Our success, by contrast, comes from a considered strategy Of buying up shares in promising companies in countries where we already have A presence. As a global player, we have a key advantage here because we already have people in most of these local markets – for example, Fox Pan American Sports, Where we produce local programming directly within the region. So when we buy a local company, it’s run by people on the ground who know their customers, theirMarket and what they need to do to stay ahead of the competition.

Our international strategy is based on appealing directly to the hearts and Minds of customers, and it is already bearing fruit. The rapid expansion of Fox International Channels is one example. Another is our movie studios, where we are delivering films in local languages in 11 different countries outside the U.S.

Digital is a big part of this future. A perfect example is the $300 million In revenue we reported this year from two on-demand deals with Netflix and amazon.com for our television and films. These deals are important because they allow us to generate significant new revenue streams without cannibalizing our existing businesses.

Like any company, we are proud of the results we have delivered this year. Unlike most companies, we will not allow our success to lull us into complacency. That’s why we continue to invest – in content, in talent, in our businesses, in highgrowth Markets and in more profitable models for the future.

From our modest beginnings in the city of Adelaide to our present status as a global media leader, News Corp. has always had one aim: to deliver the best News and entertainment to our customers and to give it to them at the best price. To do that, and to do it consistently, means hiring the most talented and innovative People in our industry. Our results speak to the creativity, innovation and leadership Of the approximately 48,000 people who make News Corporation their home.

Over the years, I have become accustomed to the noise and negativism of the Naysayers. Time and again we have done what they said was impossible: from Launching the first national newspaper in Australia to building a fourth broadcast Network in America to establishing a great television company in Britain.

So my advice is this: Don’t judge us the way you would a conventional company. We’re a company that thrives on challenges. Our record bears this out. With this newest transformation, we charge into the future as two new companies whose Structures will help each be more nimble, more innovative and more aggressive than Its competitors in the pursuit of value for our investors.

Yours,

Rupert Murdoch

Chairman and Chief Executive Officer

News Corporation

We continue To invest – In content, In talent, in our Businesses, In high-growth Markets and in More profitable Models for the Future

With our new company,  We Will help our Customers gain the Knowledge They need to get Ahead in life and Make informed Political choices.

Our aim  Is to unlock more Value For Our Stockholders

We have no Intention Of resting on Our laurels We are always

Investing In the next generation

The World’s Leader in Quality