NWSA

News Corporation (NWSA)

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News Corporation (NWSA)

Morgan Stanley Technology, Media & Telecom Conference

February 25, 2013 12:30 pm ET

Executives

James Rupert Murdoch - Deputy Chief Operating Officer, Director, Chairman of News International and Chief Executive Officer News International

Analysts

Benjamin Swinburne - Morgan Stanley, Research Division

Presentation

Benjamin Swinburne - Morgan Stanley, Research Division

Okay. Good morning, everybody. Thanks for joining us. Quickly get my legal obligation done. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures appear on the Morgan Stanley public website or at the registration desk.

My name is Ben Swinburne. I'm Morgan Stanley's media analyst, and we're particularly thrilled to have with us this morning James Murdoch, Deputy COO for News Corporation, as well as Chairman and CEO of News International. And James is our first keynote speaker of this week's conference.

For those who may not be aware, News Corporation is a $35 billion revenue business across a broad portfolio of businesses and regions. Truly global media firm. Business is concentrated in content production and distribution in television and film. And if James will humor me, I will plug that at the end of the day today, on the Research Insights panel, I will be pitching News Corporation as to why I like the stock and why it's on the Morgan Stanley Best Ideas list. So thanks for letting me do that. I just want to have as many people in that room when I go, as you do here.

James Rupert Murdoch

I'm sure you will.

Benjamin Swinburne - Morgan Stanley, Research Division

So James, thank you so much for being here this morning.

James Rupert Murdoch

Thank you very much for having me, and thanks, everyone, for coming here and hi.

Question-and-Answer Session

Benjamin Swinburne - Morgan Stanley, Research Division

So why don't we just start out and ask you the truly sort of global nature of News Corporation and how you see that, differentiating it versus other media companies? And when you look across the portfolio, where are the biggest opportunities for the company to grow over the next 2 to 3 years from your perspective?

James Rupert Murdoch

Well, I think, a, we definitely view -- we do think about the business globally. We operate the business globally. So there's always things to do. I think for us, the really exciting thing over the next kind of couple of years that we see is really the continued growth of our channels business, both on an international basis or a global basis, but also on a domestic basis as well, I think. The portfolio of the cable channels that we operate is very strong. We invest a lot in quality programming, things that are really differentiated for our customers, and we see continued affiliate growth, affiliate revenue growth, both domestically and overall growth in advertising and affiliate income on a global basis. India is a very important market for us. It's one of our largest international markets. The rest of Asia, particularly Southeast Asia, is very exciting for us. And we've also made great strides in South America over the last few years, particularly the launch of our sports business there. So we're super excited about the cable channels business generally, and we think the portfolio that we're investing in and that we have there is one that we can see a lot of growth to play for right away. I also think our platforms business, the Sky businesses have some really exciting dynamics in them. There's a lot of innovation happening at those businesses, and we just recently consolidated our Sky Deutschland business. And we think that's something that after, really from a standing start just a few years ago, we've been able to stand up as a real kind of 21st century digital TV Company and we think it's going great. That's really exciting. And then sort of I think really just if you look at our just Television production business as well, there's a huge amount for us in the pipeline here domestically that I think we have great visibility on right now, that should provide great growth going forward from things news -- things like Modern Family and Glee entering their syndication runs, but also over the longer term, looking at The Simpsons coming into syndication, looking at things like Homeland or American Horror Story. These are very exciting things that are investments the company has made over the years, and are now really going to start to flow through the P&L.

Benjamin Swinburne - Morgan Stanley, Research Division

Terrific. One of the things that I think really got us excited about the stock in particular is the decision around restructuring and spinning off some of your assets. Can you talk about how you and the management team and the board came to the decision to spinoff the Publishing and Australian media businesses, which I think are sort of on track for this summer? And what's the thought process behind that?

James Rupert Murdoch

Well, first of all, just to step back a little bit, I mean, there's kind of 3 things that I think, kind of, characterize our basic strategy and have over the last few years and hopefully will continue to are: number one, we really want to simplify our operating model of the business and that's around creating, from a structural perspective, either consolidating minority positions, selling out of the minority positions, creating a simpler and easier to operate and understand company, and set of companies for all our shareholders. We think that's been really useful for us, and it's really invigorated the company in a good way. We do think about operating globally as well and really pursuing opportunities in a broad range of territories. And we also think about, sort of, investing upstream. That's investing in really differentiated programming and in an increasingly competitive marketplace. So the first one is simplification. Really, I think the split of the company into primarily Publishing-driven business and then the TV and Film business, the FOX Group business, really made a lot of sense for us, both in terms of having a streamlined kind of unified management structures in each business that could pursue opportunities in each area, really makes a lot of sense for shareholders, given the different natures of those businesses in terms of their use of capital, how they work, the kind of transformations that are going on, on all sides of it. And we think it just makes a much simpler environment both from an operational standpoint but also to align the operations with shareholders much more straightforwardly. So it was a good time to do it. I think it's something that, the senior management team, we discuss a lot, what's the right way to do it, what's the right mix. And the board then really embrace it. So I think it was something that percolated over a period of time, but it seems like coming out of last year, it was about 8 months ago that we announced it, we thought that we're really, having that done, given the dynamics of both businesses over the next 4 or 5 years that we can see, having that done in '13 was the right thing so we pulled the trigger.

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