Edgar Filing: NEWS CORP

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2011

¨	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to

Commission file number 001-32352

NEWS CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Delaware		26-0075658
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1211 Avenue of the Americas, New York, New York		10036
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code (212) 852-7000

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 x 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of October 28, 2011, 1,722,117,353 shares of Class A Common Stock, par value $0.01 per share, and 798,520,953 shares of Class B Common Stock, par value $0.01 per share, were outstanding.

NEWS CORPORATION

FORM 10-Q

TABLE OF CONTENTS


		Page
Part I. Financial Information
Item 1.	Financial Statements
	Unaudited Consolidated Statements of Operations for the three months ended September 30, 2011 and 2010		3
	Consolidated Balance Sheets at September 30, 2011 (unaudited) and June 30, 2011 (audited)		4
	Unaudited Consolidated Statements of Cash Flows for the three months ended September 30, 2011 and 2010		5
	Notes to the Unaudited Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		56
Item 4.	Controls and Procedures		58
Part II. Other Information
Item 1.	Legal Proceedings		58
Item 1A.	Risk Factors		64
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		67
Item 3.	Defaults Upon Senior Securities		68
Item 4.	(Removed and Reserved)		68
Item 5.	Other Information		68
Item 6.	Exhibits		68
Signature			69

NEWS CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)


	For the three months ended September 30,
	2011			2010
Revenues	$	7,959		$	7,426

Operating expenses		(4,753	)		(4,543	)
Selling, general and administrative		(1,527	)		(1,461	)
Depreciation and amortization		(294	)		(274	)
Impairment and restructuring charges		(91	)		(7	)
Equity earnings of affiliates		121			94
Interest expense, net		(258	)		(232	)
Interest income		36			26
Other, net		(130	)		(10	)

Income before income tax expense		1,063			1,019
Income tax expense		(277	)		(210	)

Net income		786			809
Less: Net income attributable to noncontrolling interests		(48	)		(34	)

Net income attributable to News Corporation stockholders	$	738		$	775

Weighted average shares:
Basic		2,607			2,623
Diluted		2,612			2,626

Net income attributable to News Corporation stockholders per share:
Basic	$	0.28		$	0.30
Diluted	$	0.28		$	0.30

The accompanying notes are an integral part of these unaudited consolidated financial statements.

NEWS CORPORATION

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share amounts)


	At September 30, 2011		At June 30, 2011
	(unaudited)		(audited)
Assets:
Current assets:
Cash and cash equivalents	$	11,429	$	12,680
Receivables, net		6,384		6,330
Inventories, net		2,522		2,332
Other		464		442

Total current assets		20,799		21,784

Non-current assets:
Receivables		352		350
Investments		4,367		4,867
Inventories, net		4,461		4,198
Property, plant and equipment, net		6,173		6,542
Intangible assets, net		8,241		8,587
Goodwill		14,364		14,697
Other non-current assets		951		955

Total assets	$	59,708	$	61,980

Liabilities and Equity:
Current liabilities:
Borrowings	$	—	$	32
Accounts payable, accrued expenses and other current liabilities		5,788		5,773
Participations, residuals and royalties payable		1,696		1,511
Program rights payable		1,152		1,298
Deferred revenue		1,005		957

Total current liabilities		9,641		9,571

Non-current liabilities:
Borrowings		15,446		15,463
Other liabilities		2,965		2,908
Deferred income taxes		3,556		3,712
Redeemable noncontrolling interests		244		242
Commitments and contingencies

Equity:
Class A common stock⁽¹⁾		18		18
Class B common stock⁽²⁾		8		8
Additional paid-in capital		16,877		17,435
Retained earnings and accumulated other comprehensive income		10,463		12,045

Total News Corporation stockholders’ equity		27,366		29,506
Noncontrolling interests		490		578

Total equity		27,856		30,084

Total liabilities and equity	$	59,708	$	61,980

⁽¹⁾	Class A common stock, $0.01 par value per share, 6,000,000,000 shares authorized, 1,755,270,853 shares and 1,828,315,242 shares issued and outstanding, net of 1,776,526,187 and 1,776,534,202 treasury shares at par at September 30, 2011 and June 30, 2011, respectively.

⁽²⁾	Class B common stock, $0.01 par value per share, 3,000,000,000 shares authorized, 798,520,953 shares issued and outstanding, net of 313,721,702 treasury shares at par at September 30, 2011 and June 30, 2011, respectively.

The accompanying notes are an integral part of these unaudited consolidated financial statements.

NEWS CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)


	For the three months ended September 30,
	2011			2010
Operating activities:
Net income	$	786		$	809
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		294			274
Amortization of cable distribution investments		24			21
Equity earnings of affiliates		(121	)		(94	)
Cash distributions received from affiliates		64			20
Other, net		130			10
Change in operating assets and liabilities, net of acquisitions:
Receivables and other assets		(275	)		19
Inventories, net		(537	)		(403	)
Accounts payable and other liabilities		59			(157	)

Net cash provided by operating activities		424			499

Investing activities:
Property, plant and equipment, net of acquisitions		(248	)		(264	)
Acquisitions, net of cash acquired		(67	)		(9	)
Investments in equity affiliates		(34	)		(99	)
Other investments		(78	)		(46	)
Proceeds from dispositions		334			7

Net cash used in investing activities		(93	)		(411	)

Financing activities:
Borrowings		—			1
Repayment of borrowings		(32	)		(16	)
Issuance of shares		12			—
Repurchase of shares		(1,272	)		—
Dividends paid		(23	)		(14	)
Purchase of subsidiary shares from noncontrolling interests		—			(104	)

Net cash used in financing activities		(1,315	)		(133	)

Net decrease in cash and cash equivalents		(984	)		(45	)
Cash and cash equivalents, beginning of period		12,680			8,709
Exchange movement on opening cash balance		(267	)		150

Cash and cash equivalents, end of period	$	11,429		$	8,814

The accompanying notes are an integral part of these unaudited consolidated financial statements.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Basis of Presentation

News Corporation, a Delaware corporation, with its subsidiaries (together, “News Corporation” or the “Company”), is a diversified global media company, which manages and reports its businesses in six segments: Cable Network Programming, Filmed Entertainment, Television, Direct Broadcast Satellite Television (“DBS”), Publishing and Other.

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary for a fair presentation have been reflected in these unaudited consolidated financial statements. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2012.

These interim unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2011 as filed with the Securities and Exchange Commission (“SEC”) on August 15, 2011 (the “2011 Form 10-K”).

The consolidated financial statements include the accounts of News Corporation and its subsidiaries. Intercompany transactions and balances have been eliminated. Equity investments in which the Company exercises significant influence but does not exercise control and is not the primary beneficiary are accounted for using the equity method. Investments in which the Company is not able to exercise significant influence over the investee are designated as available-for-sale if readily determinable fair values are available. If an investment’s fair value is not readily determinable, the Company accounts for its investment under the cost method.

The Company has an unconsolidated investment in a variable interest entity (“VIE”) and the Company’s aggregate risk of loss related to this unconsolidated VIE as of September 30, 2011 was approximately $473 million which consisted of debt and equity securities and was included in Investments in the consolidated balance sheets. In addition, the Company has agreed to provide loans to this VIE of approximately $150 million. As of September 30, 2011, funding of these loans had not yet been requested by this VIE.

The Company also has a consolidated investment in a VIE; however, the assets, liabilities, net income and cash flows attributable to this entity were not material to the Company in any of the periods presented.

The preparation of consolidated financial statements in conformity with GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates.

The Company’s fiscal year ends on the Sunday closest to June 30. Fiscal 2012 will include 52 weeks, while fiscal 2011 included 53 weeks with the 53^rd week falling in the fourth fiscal quarter. All references to September 30, 2011 and September 30, 2010 relate to the three month periods ended October 2, 2011 and September 26, 2010, respectively. For convenience purposes, the Company continues to date its financial statements as of September 30.

Certain fiscal 2011 amounts have been reclassified to conform to the fiscal 2012 presentation.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Recently Adopted and Recently Issued Accounting Guidance

Adopted

The Company accounts for programming rights for its multi-year U.S. national sports agreements in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 920, “Entertainment—Broadcasters” (“ASC 920”). Under ASC 920, programming rights are carried at the lower of unamortized cost or estimated net realizable value. At the inception of these contracts, and at least annually, the Company evaluates the recoverability of the total remaining contract costs plus programming rights for each multi-year U.S. national sports agreement using estimated remaining revenues and expenses directly related to each agreement. If such evaluation indicates that an agreement would result in an ultimate loss, the programming rights would be written down to net realizable value. In addition, where the ultimate loss exceeds the recorded asset, an incremental liability would be recorded to currently recognize the estimated future loss.

In the first quarter of fiscal 2012, the Company voluntarily changed its method of recognizing losses on its multi-year U.S. national sports agreements by no longer accruing for estimated future losses. The Company will, however, continue to recognize programming rights at the lower of unamortized cost or estimated net realizable value in accordance with ASC 920. The Company believes that this method is preferable because the change will (1) align the Company’s policy with peer companies in the media industry; (2) result in better correspondence with the substance of the event being recognized as estimated future losses will no longer be recognized; and (3) limit the effect of judgment on any potential impairment loss because the impairment analysis, which involves significant judgment about future revenue and revenue allocations, will only affect programming rights on the balance sheet. Retrospective application of the change in accounting policy had no effect on the consolidated financial statements of the Company for any of the periods presented.

Issued

In May 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”). ASU 2011-04 amended ASC 820 “Fair Value Measurement” (“ASC 820”) to converge the fair value measurement guidance in GAAP and International Financial Reporting Standards (IFRSs). Some of the amendments clarify the application of existing fair value measurement requirements, while other amendments change a particular principle in ASC 820. In addition, ASU 2011-04 requires additional fair value disclosures. The amendments are to be applied prospectively and are effective for the Company beginning January 1, 2012. The Company is currently evaluating the effect that the provisions of ASU 2011-04 will have on the Company’s consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income” (“ASU 2011-05”). ASU 2011-05 eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. Instead, an entity will be required to present either a continuous statement of net income and other comprehensive income or in two separate but consecutive statements. ASU 2011-05 is effective for the Company beginning July 1, 2012 and will only impact presentation.

In September 2011, the FASB issued ASU 2011-08, “Intangibles—Goodwill and Other (Topic 350), Testing Goodwill for Impairment” (“ASU 2011-08”), which permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value before applying the two-step goodwill impairment model that is currently in place. If it is determined through the qualitative assessment that a reporting unit’s fair value is more likely than not greater than its carrying value, the remaining impairment steps would be unnecessary. The qualitative assessment is optional, allowing companies to go

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

directly to the quantitative assessment. ASU 2011-08 is effective for the Company for annual and interim goodwill impairment tests performed beginning July 1, 2012, however, early adoption is permitted. The Company is currently evaluating the impact ASU 2011-08 will have on its consolidated financial statements.

Note 2—Acquisitions, Disposals and Other Transactions

Fiscal 2012

Acquisition

In October 2011, the Company entered into a definitive agreement to purchase Thomas Nelson, Inc., one of the leading trade publishers in the United States for approximately $200 million. The acquisition, which is expected to close by the end of the calendar year, is subject to regulatory clearances and other customary closing conditions.

Disposition

In July 2011, the Company sold its majority interest in its outdoor advertising businesses in Russia and Romania (“News Outdoor Russia”) for cash consideration of approximately $360 million. In connection with the sale, the Company repaid $32 million of News Outdoor Russia debt. (See Note 9—Borrowings) The Company recorded a gain related to the sale of this business, which was included in Other, net in the unaudited consolidated statements of operations for the three months ended September 30, 2011. The gain on the sale and the net income, assets, liabilities and cash flow attributable to the News Outdoor Russia operations were not material to the Company in any of the periods presented and, accordingly, have not been presented separately.

Other

In July 2011, the Company announced that it would close its publication, The News of the World, after allegations of phone hacking and payments to police. As a result of management’s approval of the shutdown of The News of the World, the Company has reorganized portions of the U.K. newspaper business and has recorded a restructuring charge in the first quarter of fiscal 2012 primarily for termination benefits and certain organizational restructuring at the U.K. newspapers. (See Note 4—Restructuring Programs) The Company is subject to several ongoing investigations by U.K. and U.S. regulators and governmental authorities, including investigations into whether similar conduct may have occurred at the Company’s subsidiaries outside of the U.K. The Company is fully cooperating with these investigations. In addition, the Company has admitted liability in a number of civil cases related to the phone hacking allegations and has settled a number of cases. The Company has taken steps to solve the problems relating to The News of the World including the creation of an independently-chaired Management & Standards Committee (the “MSC”), which operates independently from News International Group Limited (“News International”) and has full authority to ensure complete cooperation with all relevant investigations and inquiries into The News of the World matters and all other related issues across News International. The MSC will also conduct its own internal investigation where appropriate. The MSC has an independent Chairman, Lord Grabiner QC, and reports directly to Joel Klein, Executive Vice President and a director of the Company. Mr. Klein reports to the independent members of the Board of Directors (the “Board”) through their representative Viet Dinh, an independent director and Chairman of the Company’s Nominating and Corporate Governance Committee. The independent directors of the Board have retained the firm of Debevoise & Plimpton as independent outside counsel and are actively engaged in these matters. The MSC is conducting an internal investigation of the three other titles at News International and has engaged the law firm Linklaters to advise it on these investigations and all other matters it handles. News International announced that it would implement new compliance, ethics and governance procedures that it hopes will become a standard for the industry. The MSC has hired leading law firm Olswang to recommend a series of policies, practices and systems to create a more robust governance, compliance and legal structure. The Company has engaged outside counsel to assist it in responding to U.K. and U.S. governmental inquiries.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Fiscal 2011

During the first quarter of fiscal 2011, the Company acquired an additional interest in Asianet Communications Limited (“Asianet”), an Asian general entertainment television joint venture, for approximately $92 million in cash. As a result of this transaction, the Company increased its interest in Asianet to 75% from the 51% it owned at June 30, 2010.

In November 2010, the Company formed a joint venture with China Media Capital (“CMC”), a media fund in China, to explore new growth opportunities. The Company transferred the equity and related assets of its STAR China business along with the Fortune Star Chinese movie library with a combined market value of approximately $140 million and CMC paid cash of approximately $74 million to the Company. Following this transaction, CMC holds a 53% controlling stake in the joint venture and the Company holds a 47% stake. The Company’s interest in the joint venture was recorded at fair value of $66 million, which was determined using a discounted cash flow valuation method and is now accounted for under the equity method of accounting. The Company recorded a gain on this transaction of $55 million, which was included in Other, net in the consolidated statements of operations for the fiscal year ended June 30, 2011.

In December 2010, the Company disposed of the Fox Mobile Group (“Fox Mobile”) and recorded a loss of approximately $29 million on the disposition which was included in Other, net in the consolidated statements of operations for the fiscal year ended June 30, 2011. The net income, assets, liabilities and cash flow attributable to the Fox Mobile operations were not material to the Company in any of the periods presented and, accordingly, have not been presented separately.

In fiscal 2011, the Company acquired Wireless Generation, an education technology company, for cash. Total consideration was approximately $390 million, which included the equity purchase and the repayment of Wireless Generation’s outstanding debt.

In April 2011, the Company acquired Shine Limited (“Shine”), an international television production company, for cash. The total consideration for this acquisition included (i) approximately $480 million for the acquisition of the equity, of which approximately $60 million has been set aside in escrow to satisfy any indemnification obligations, (ii) the repayment of Shine’s outstanding debt of approximately $135 million and (iii) net liabilities assumed. Elisabeth Murdoch, Chairman and Chief Executive Officer of Shine, and daughter of Mr. K. R. Murdoch and sister of Messrs. Lachlan and James Murdoch, received approximately $214 million in cash at closing in consideration for her majority ownership interest in Shine, and is entitled to her proportionate share of amounts that are released from escrow.

The aforementioned acquisitions were all accounted for in accordance with ASC 805, “Business Combinations.” In accordance with ASC 350, “Intangibles—Goodwill and Other,” the excess purchase price that has been allocated or has been preliminarily allocated to goodwill is not being amortized for all of the acquisitions noted above. Where the allocation of the excess purchase price is not final, the amount allocated to goodwill is subject to change upon completion of final valuations of certain assets and liabilities. A future reduction in goodwill for additional value to be assigned to identifiable finite-lived intangible assets or tangible assets could reduce future earnings as a result of additional amortization.

In June 2011, the Company transferred the equity and related assets of Myspace to a digital media company in exchange for an equity interest in the acquirer. As a result of this transaction, the Company’s interest in the acquirer, which is not material, was recorded at fair value and is now accounted for under the cost method of accounting. The loss on this transaction was approximately $254 million, net of tax of $61 million, or ($0.10) per diluted share and was included in Loss on disposition of discontinued operations, net of tax in the consolidated

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

statements of operations for the fiscal year ended June 30, 2011. The assets, liabilities and cash flow attributable to the Myspace operations were not material to the Company in any of the periods presented and, accordingly, have not been presented separately. Revenues and operating loss attributable to Myspace for the three months ended September 30, 2010 were $48 million and $49 million, respectively.

Note 3—Receivables, net

Receivables, net 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 paid.

The Company has receivables with original maturities greater than one year in duration principally related to the Company’s sale of program rights in the television syndication markets within the Filmed Entertainment segment. Allowances for credit losses are established against these non-current receivables as necessary. As of September 30, 2011 and June 30, 2011, these allowances were not material.

Receivables, net consisted of:


	At September 30, 2011			At June 30, 2011
	(in millions)
Total receivables	$	7,828		$	7,779
Allowances for returns and doubtful accounts		(1,092	)		(1,099	)

Total receivables, net		6,736			6,680
Less: current receivables, net		(6,384	)		(6,330	)

Non-current receivables, net	$	352		$	350

Note 4—Restructuring Programs

Fiscal 2012

In the three months ended September 30, 2011, the Company recorded restructuring charges of $91 million, of which $88 million related to the newspaper businesses. The Company has reorganized portions of the U.K. newspaper business and has recorded a restructuring charge in the first quarter of fiscal 2012 primarily for termination benefits as a result of the shutdown of The News of the World and certain organizational restructurings at other newspapers.

Fiscal 2011

In fiscal 2011, the Company recorded restructuring charges of approximately $145 million, of which $7 million was recorded during the three months ended September 30, 2010. The restructuring charges primarily consisted of a $115 million charge related to the Company’s digital media properties and $25 million related to termination benefits recorded at the newspaper businesses. The charges at the Company’s digital media properties were a result of an organizational restructuring to align resources more closely with business priorities and consisted of facility related costs of $95 million, termination benefits of $18 million and other associated costs of $2 million.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company expects to record an additional $88 million of restructuring charges, principally related to accretion on facility termination obligations through 2021 and additional termination benefits related to the newspaper businesses. At September 30, 2011, restructuring liabilities of approximately $121 million and $155 million were included in the consolidated balance sheets in other current liabilities and other liabilities, respectively. Amounts included in other liabilities primarily relate to facility termination obligations, which are expected to be paid through fiscal 2021.

Changes in the program liabilities were as follows:


	For the three months ended September 30, 2011												For the three months ended September 30, 2010
	One time termination benefits			Facility related costs			Other costs			Total			One time termination benefits			Facility related costs			Other costs		Total
	(in millions)												(in millions)
Beginning of period	$	27		$	207		$	—		$	234		$	32		$	154		$	6	$	192
Additions		74			3			14			91			5			2			—		7
Payments		(22	)		(10	)		(10	)		(42	)		(20	)		(7	)		—		(27	)
Other		(5	)		1			(3	)		(7	)		1			—			—		1

End of period	$	74		$	201		$	1		$	276		$	18		$	149		$	6	$	173

Note 5—Inventories, net

The Company’s inventories were comprised of the following:


	At September 30, 2011			At June 30, 2011
	(in millions)
Programming rights	$	3,792		$	3,512
Books, DVDs, Blu-rays, paper and other merchandise		405			373
Filmed entertainment costs:
Films:
Released (including acquired film libraries)		735			755
Completed, not released		67			31
In production		777			784
In development or preproduction		119			98

		1,698			1,668

Television productions:
Released (including acquired libraries)		553			617
In production		531			356
In development or preproduction		4			4

		1,088			977

Total filmed entertainment costs, less accumulated amortization^(a)		2,786			2,645

Total inventories, net		6,983			6,530
Less: current portion of inventory, net^(b)		(2,522	)		(2,332	)

Total noncurrent inventories, net	$	4,461		$	4,198

^(a)	Does not include $421 million and $428 million of net intangible film library costs as of September 30, 2011 and June 30, 2011, respectively, which are included in intangible assets subject to amortization in the consolidated balance sheets.

^(b)	Current inventory as of September 30, 2011 and June 30, 2011 was comprised of programming rights ($2,152 million and $1,995 million, respectively), books, DVDs, Blu-rays, paper and other merchandise.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 6—Investments

The Company’s investments were comprised of the following:


		Ownership Percentage			At September 30, 2011		At June 30, 2011
					(in millions)
Equity method investments:
British Sky Broadcasting Group plc^(a)	U.K. DBS operator		39	%	$	1,580	$	1,532
NDS	Digital technology company		49	%		420		423
Sky Network Television Ltd.^(a)	New Zealand media company		44	%		350		424
Sky Deutschland AG^(a)	German pay-TV operator		49.9	%		252		304
Other equity method investments			various			1,023		1,107
Fair value of available-for-sale investments			various			368		652
Other investments			various			374		425

					$	4,367	$	4,867

^(a)	The market value of the Company’s investment in British Sky Broadcasting Group plc (“BSkyB”), Sky Deutschland AG (“Sky Deutschland”) and Sky Network Television Ltd., was $7,099 million, $916 million and $702 million at September 30, 2011, respectively.

The cost basis, unrealized gains, unrealized losses and fair market value of available-for-sale investments are set forth below:


	At September 30, 2011		At June 30, 2011
	(in millions)
Cost basis of available-for-sale investments	$	269	$	269
Accumulated gross unrealized gain		99		383

Fair value of available-for-sale investments	$	368	$	652

Net deferred tax liability^(a)	$	39	$	132

^(a)	The net deferred tax liability includes $48 million and $113 million related to unrealized gains recorded in comprehensive income as of September 30, 2011 and June 30, 2011, respectively.

Fiscal 2012

During fiscal 2010, the Company announced that it had proposed to the board of directors of BSkyB, in which the Company currently has an approximate 39% interest, to make a cash offer of 700 pence per share for the BSkyB shares that the Company does not already own. On July 13, 2011, the Company announced that it no longer intended to make an offer for the BSkyB shares that the Company does not already own. As a result of the July 2011 announcement, the Company paid BSkyB a termination fee of approximately $63 million in accordance with a cooperation agreement between the parties. The termination fee was reflected in Other, net in the unaudited consolidated statements of operations for the three months ended September 30, 2011.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Fiscal 2011

In fiscal 2011, the Company agreed to backstop €400 million (approximately $525 million), of financing measures that were being initiated by Sky Deutschland of which approximately €342 million (approximately $450 million) was raised. As part of these financing measures, the Company acquired 108 million additional shares of Sky Deutschland, increasing its ownership from approximately 45% to 49.9%. The aggregate cost of the shares acquired by the Company was approximately €115 million (approximately $150 million) and the shares were newly registered shares issued pursuant to the total capital increase.

In addition, in accordance with the backstop, the Company agreed with Sky Deutschland to subscribe to a bond issuance that is convertible for up to 53.9 million underlying Sky Deutschland shares. The convertible bond was issued to the Company in January 2011 for approximately €165 million (approximately $225 million). The Company currently has the right to convert the bond into equity, subject to certain black-out periods. If not converted, the Company will have the option to redeem the bond for cash upon its maturity in 4 years. The convertible bond was separated into its host and derivative financial instrument components, both of which are recorded at their estimated fair value in Investments in the consolidated balance sheets. The change in estimated fair value of the derivative instrument of approximately $82 million was recorded in Other, net in the unaudited consolidated statements of operations for the three months ended September 30, 2011. The change in estimated fair value of the host was not material for the three months ended September 30, 2011.

The remaining amount under the backstop of approximately €58 million (approximately $75 million), must be funded prior to December 2011 and will be provided as a loan to the extent Sky Deutschland does not generate other proceeds through capital increases or convertible bond issuances. The Company has also agreed to loan Sky Deutschland approximately $70 million to support the launch of a sports news channel. The Company expects to fund these amounts in fiscal 2012.

In August 2010, the Company increased its investment in Tata Sky Ltd. (“Tata Sky”) for approximately $88 million in cash. As a result of this transaction, the Company increased its interest in Tata Sky to approximately 30% from the 20% it owned at June 30, 2010.

Note 7—Fair Value

In accordance with ASC 820, fair value measurements are required to be disclosed using a three-tiered fair value hierarchy which distinguishes market participant assumptions into the following categories: (i) inputs that are quoted prices in active markets (“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) inputs that require the entity to use its own assumptions about market participant assumptions (“Level 3”). Additionally, in accordance with ASC 815 “Derivatives and Hedging” (“ASC 815”), the Company has included additional disclosures about the Company’s derivatives and hedging activities (Level 2).

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The tables below present information about financial assets and liabilities carried at fair value on a recurring basis:


	Fair Value Measurements
	September 30, 2011
Description	Total			Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
Assets
Available-for-sale securities⁽¹⁾	$	368		$	174	$	194	$	—
Derivatives⁽²⁾		28			—		28		—
Redeemable noncontrolling interests⁽³⁾		(244	)		—		—		(244	)

Total	$	152		$	174	$	222	$	(244	)


	June 30, 2011
Description	Total			Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(in millions)
Assets
Available-for-sale securities⁽¹⁾	$	652		$	360	$	292		$	—
Liabilities
Derivatives⁽²⁾		(22	)		—		(22	)		—
Redeemable noncontrolling interests⁽³⁾		(242	)		—		—			(242	)

Total	$	388		$	360	$	270		$	(242	)

⁽¹⁾	See Note 6—Investments.

⁽²⁾	Represents derivatives associated with the Company’s foreign exchange forward contracts designated as hedges.

⁽³⁾

The Company accounts for the redeemable noncontrolling interests in accordance with ASC 480-10-S99-3A “Distinguishing Liabilities from Equity” (“ASC 480-10-S99-3A”) because their exercise is outside the control of the Company and, accordingly, as of September 30, 2011 and June 30, 2011, has included the fair value of the redeemable noncontrolling interests in the consolidated balance sheets. The majority of redeemable noncontrolling interests recorded at fair value are put arrangements held by the noncontrolling interests in one of the Company’s majority-owned Regional Sports Network (“RSN”) and in one of the Company’s Asian general entertainment television joint ventures.

The fair value of the redeemable noncontrolling interest in the Company’s RSN was determined by using a discounted earnings before interest, taxes, depreciation and amortization (“EBITDA”) valuation model, assuming a 9% discount rate.

The fair value of the redeemable noncontrolling interest in the Asian general entertainment television joint venture was determined using a discounted cash flow analysis assuming a multiple of ten times terminal year EBITDA.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The changes in redeemable noncontrolling interests classified as Level 3 measurements were as follows:


	For the three months ended September 30,
	2011			2010
	(in millions)
Beginning of period	$	(242	)	$	(325	)
Total gains (losses) included in net income		(7	)		(7	)
Total gains (losses) included in other comprehensive income		—			—
Other		5			8

End of period	$	(244	)	$	(324	)

Financial Instruments

The carrying value of the Company’s financial instruments, including cash and cash equivalents, receivables, payables and cost investments, approximates fair value.

The aggregate fair value of the Company’s borrowings at September 30, 2011 was approximately $17,309 million compared with a carrying value of $15,446 million and, at June 30, 2011, was approximately $17,152 million compared with a carrying value of $15,495 million. Fair value is generally determined by reference to market values resulting from trading on a national securities exchange or in an over-the-counter market.

Foreign Currency Forward Contracts

The Company uses financial instruments designated as cash flow hedges primarily to hedge certain exposures to foreign currency exchange risks associated with the cost for producing or acquiring films and television programming abroad. The notional amount of foreign exchange forward contracts with foreign currency risk outstanding at September 30, 2011 and June 30, 2011 was $647 million and $766 million, respectively. As of September 30, 2011 and June 30, 2011, the fair values of the foreign exchange forward contracts of approximately $28 million and $(22) million, respectively, were recorded in the underlying hedged balances. The Company’s foreign currency forward contracts are valued using an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount.

The effective changes in fair value of derivatives designated as cash flow hedges for the three months ended September 30, 2011 of $46 million were recorded in accumulated other comprehensive income with foreign currency translation adjustments. The ineffective changes in fair value of derivatives designated as cash flow hedges were immaterial. Amounts are reclassified from accumulated other comprehensive income when the underlying hedged item is recognized in earnings. During the three months ended September 30, 2011 and 2010, the Company reclassified (losses) gains of approximately $(4) million and $9 million, respectively, from other comprehensive income to net income. The Company expects to reclassify the cumulative change in fair value included in other comprehensive income within the next 24 months. Cash flows from the settlement of foreign exchange forward contracts offset cash flows from the underlying hedged item and are included in operating activities in the consolidated statements of cash flows.

Concentrations of Credit Risk

Cash and cash equivalents are maintained with several 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.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company’s receivables did not represent significant concentrations of credit risk at September 30, 2011 or June 30, 2011 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. At September 30, 2011, the Company did not anticipate nonperformance by any of the counterparties.

Note 8—Goodwill and Other Intangible Assets

The decrease in the carrying value of goodwill during the three months ended September 30, 2011 was primarily due to foreign currency adjustments and the News Outdoor Russia disposition in July 2011.

Note 9—Borrowings

Notes due 2021 and 2041

In February 2011, News America Incorporated (“NAI”), a wholly-owned subsidiary of the Company, issued $1.0 billion of 4.50% Senior Notes due 2021 and $1.5 billion of 6.15% Senior Notes due 2041. The net proceeds of $2.5 billion will be used for general corporate purposes, including the recent refinancing of near term maturities.

LYONs

In February 2001, NAI issued Liquid Yield Option^TMNotes (“LYONs”) which pay no interest and had an aggregate principal amount at maturity of $1,515 million, representing a yield of 3.5% per annum on the issue price. The notes were recorded at a discount and were being accreted using the effective interest rate method. On February 28, 2006, 92% of the LYONs were redeemed for cash at the specified redemption amount of $594.25 per LYON. Accordingly, NAI paid an aggregate of approximately $831 million to the holders of the LYONs that had exercised this redemption option.

The remaining notes were redeemable at the option of the holders on February 28, 2011 at a price of $706.82 per LYON. During fiscal 2011, the outstanding LYONs were redeemed for cash of approximately $82 million.

Other

In August 2006, the Company entered into a loan agreement with Raiffeisen Zentralbank Österreich AG (“RZB”), which was subsequently amended in September 2009. As of June 30, 2011, $32 million was outstanding under this loan agreement which was classified as current borrowings. The Company repaid this amount in July 2011 in connection with the disposal of News Outdoor Russia. (See Note 2 Acquisitions, Disposals and Other Transactions)

In February 2011, NAI completed a tender offer on a portion of the $500 million of 9.25% Senior Debentures due February 1, 2013 and retired, at a premium, an aggregate principal amount of approximately $227 million. The loss on early extinguishment of debt was approximately $36 million which was included in Other, net in the consolidated statements of operations for the fiscal year ended June 30, 2011.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 10—Film Production Financing

The Company enters into arrangements with third parties to co-produce certain of its theatrical productions. These arrangements, which are referred to as co-financing arrangements, take various forms. The parties to these arrangements include studio and non-studio entities, both domestic and international. In several of these agreements, other parties control certain distribution rights. The Filmed Entertainment segment records the amounts received for the sale of an economic interest as a reduction of the cost of the film, as the investor assumes full risk for that portion of the film asset acquired in these transactions. The substance of these arrangements is that the third-party investors own an interest in the film and, therefore, receive a participation based on the third-party investor’s contractual interest in the profits or losses incurred on the film. Consistent with the requirements of ASC 926, “Entertainment—Films,” the estimate of the third-party investor’s interest in profits or losses incurred on the film is determined by reference to the ratio of actual revenue earned to date in relation to total estimated ultimate revenues.

Note 11—Equity

The following table summarizes changes in equity:


	For the three months ended September 30,
	2011									2010
	News Corporation Stockholders			Noncontrolling Interests			Total Equity			News Corporation Stockholders			Noncontrolling Interests			Total Equity
	(in millions)
Balance, beginning of period	$	29,506		$	578		$	30,084		$	25,113		$	428		$	25,541
Net income		738			41	^(a)		779			775			27	^(a)		802
Other comprehensive (loss) income		(1,315	)		(9	)^(b)		(1,324	)		971			4	^(b)		975
(Cancellation) issuance of shares, net		(1,204	)		—			(1,204	)		51			—			51
Dividends declared		(246	)		—			(246	)		(197	)		—			(197	)
Other		(113	)		(120	)^(c)		(233	)		(140	)		(23	)^(c)		(163	)

Balance, end of period	$	27,366		$	490		$	27,856		$	26,573		$	436		$	27,009

^(a)	Net income attributable to noncontrolling interests excludes $7 million for both the three months ended September 30, 2011 and 2010 relating to redeemable noncontrolling interests which are reflected in temporary equity.

^(b)	Other comprehensive (loss) income attributable to noncontrolling interests excludes nil for both the three months ended September 30, 2011 and 2010 relating to redeemable noncontrolling interests.

^(c)

The activity for the three months ended September 30, 2011 primarily relates to the disposal of News Outdoor Russia. Other activity attributable to noncontrolling interests excludes $ (5) million and $(8) million for the three months ended September 30, 2011 and 2010, respectively, relating to redeemable noncontrolling interests.

Dividends

The Company declared a dividend of $0.095 per share on both the Class A common stock, par value $0.01 per share (“Class A Common Stock”) and the Class B common stock, par value $0.01 per share (“Class B Common Stock”) in the three months ended September 30, 2011, which was paid in October 2011 to stockholders of record on September 14, 2011. The related total aggregate dividend paid to stockholders in October 2011 was approximately $246 million.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company declared a dividend of $0.075 per share on both the Class A Common Stock and the Class B Common Stock in the three months ended September 30, 2010, which was paid in October 2010 to stockholders of record on September 8, 2010. The total aggregate dividend paid to stockholders in October 2010 was approximately $197 million.

Stock Repurchase Program

The Board had authorized a total stock repurchase program of $6 billion with a remaining authorized amount under the program of approximately $1.8 billion, excluding commissions as of June 30, 2011. In July 2011, the Company announced that the Board had authorized increasing the total amount of the stock repurchase program remaining by approximately $3.2 billion to $5 billion. The remaining authorized amount under the Company’s stock repurchase program at September 30, 2011, excluding commissions, was approximately $3.7 billion.

Note 12—Equity-Based Compensation

The following table summarizes the Company’s equity-based compensation transactions:


	For the three months ended September 30,
	2011		2010
	(in millions)
Equity-based compensation	$	51	$	45

Cash received from exercise of equity-based compensation	$	1	$	—

At September 30, 2011, the Company’s total compensation cost related to non-vested stock options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) not yet recognized for all equity-based compensation plans was approximately $285 million, the majority of which is expected to be recognized over the next three fiscal years. Compensation expense on all equity-based awards is generally recognized on a straight-line basis over the vesting period of the entire award. However, certain performance based awards are recognized on an accelerated basis.

Stock option activity during the three months ended September 30, 2011 and 2010 was not material.

At September 30, 2011 and June 30, 2011, the liability for cash-settled awards was approximately $51 million and $58 million, respectively.

The Company recognized a tax benefit (expense) on vested RSUs and stock options exercised of approximately $10 million and $(3) million for the three months ended September 30, 2011 and 2010, respectively.

Performance Stock Units

PSUs are fair valued 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 Company also estimates the number of shares expected to vest which is based on management’s determination of the probable outcome of the performance condition, which requires considerable judgment. The Company records a cumulative adjustment in periods that the Company’s estimate of the number of shares expected to vest changes. Additionally, the Company ultimately adjusts the expense recognized to reflect the actual vested shares following the resolution of the performance conditions.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

In the first quarter of fiscal 2012, certain executives of the Company responsible for various business units within the Company received a grant of PSUs that have a three year performance measurement period beginning in July 2011. The awards are subject to the achievement of pre-defined goals for operating profit, cash flow and key divisional performance indicators for the applicable performance period. The awards are settled in shares of Class A Common Stock.

In August 2011 and 2010, the Compensation Committee approved the grant of PSUs that have a three year performance measurement period beginning for the fiscal year ending June 30, 2012 and 2011, respectively. For executive directors of the Company, each PSU represents the right to receive the U.S. dollar value of one share of Class A Common Stock in cash after the completion of the three year performance period, subject to the satisfaction of one or more pre-established objective performance measures determined by the Compensation Committee. These awards have a graded vesting and the expense recognition is accelerated.

In fiscal 2012 and 2011, a total of 8.6 million and 1.8 million target PSUs were issued, respectively, of which 6.6 million and nil, respectively, will be settled in Class A Common Stock.

Restricted Stock Units

During the three months ended September 30, 2011 and 2010, approximately 6.5 million and 12.9 million RSUs were issued, respectively, of which 6.3 million and 10.4 million, respectively, will be settled in Class A Common Stock. RSUs granted to executive directors and certain awards granted to employees in certain foreign locations are settled in cash.

During the three months ended September 30, 2011 and 2010, approximately 8.0 million and 8.3 million RSUs vested, respectively, of which approximately 6.9 million and 7.0 million, respectively, were settled in Class A Common Stock, before statutory tax withholdings. The fair value of RSUs settled in Class A Common Stock was approximately $113 million and $89 million for the three months ended September 30, 2011 and 2010, respectively. The remaining 1.1 million and 1.3 million RSUs settled during the three months ended September 30, 2011 and 2010, respectively, were settled in cash of approximately $18 million in both periods, before statutory tax withholdings.

Note 13—Commitments and Guarantees

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. Other than as previously disclosed in these notes to the Company’s unaudited consolidated financial statements, the Company’s commitments have not changed significantly from the disclosures included in the 2011 Form 10-K.

Guarantees

The Company’s guarantees have not changed significantly from the disclosures included in the 2011 Form 10-K.

Note 14—Contingencies

Intermix

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

members of the board of directors of Intermix Media, Inc. (“Intermix”), including Mr. Rosenblatt, Intermix’s former Chief Executive Officer, and certain entities affiliated with VantagePoint Venture Partners (“VantagePoint”), a former major Intermix stockholder. The complaints alleged that, in pursuing the transaction whereby Intermix was to be acquired by Fox Interactive Media, a subsidiary of the Company (the “FIM Transaction”), and approving the related merger agreement, the director defendants breached their fiduciary duties to Intermix stockholders by, among other things, engaging in self-dealing and failing to obtain the highest price reasonably available for Intermix and its stockholders. The complaints further alleged that the merger agreement resulted from a flawed process and that the defendants tailored the terms of the merger to advance their own interests. The FIM Transaction was consummated on September 30, 2005. The Friedmann and Sheppard lawsuits were subsequently consolidated and, on January 17, 2006, a consolidated amended complaint was filed (the “Intermix Media Shareholder Litigation”). The plaintiffs in the consolidated action sought various forms of declaratory relief, damages, disgorgement and fees and costs. On March 20, 2006, the court ordered that substantially identical claims asserted in a separate state action filed by Brad Greenspan, captioned Greenspan v. Intermix Media, Inc., et al., be severed and related to the Intermix Media Shareholder Litigation. The defendants filed demurrers seeking dismissal of all claims in the Intermix Media Shareholder Litigation and the severed Greenspan claims. On October 6, 2006, the court sustained the demurrers without leave to amend. On December 13, 2006, the court dismissed the complaints and entered judgment for the defendants. Greenspan and plaintiffs in the Intermix Media Shareholder Litigation filed notices of appeal. The Court of Appeal heard arguments on the fully briefed appeal on October 23, 2008. On November 11, 2008, the Court of Appeal issued an unpublished opinion affirming the lower court’s dismissal on all counts. On December 19, 2008, stockholder appellants filed a Petition for Review with the California Supreme Court. The California Supreme Court denied review on February 18, 2009 and the judgment is now final.

In November 2005, plaintiff in a derivative action captioned LeBoyer v. Greenspan et al. pending against various former Intermix directors and officers in the United States District Court for the Central District of California filed a First Amended Class and Derivative Complaint (the “Amended Complaint”). The original derivative action was filed in May 2003 and arose out of Intermix’s restatement of quarterly financial results for its fiscal year ended March 31, 2003. A substantially similar derivative action filed in Los Angeles Superior Court was dismissed based on the inability of the plaintiffs to plead adequately demand futility. The Amended Complaint added various allegations and purported class claims arising out of the FIM Transaction that are substantially similar to those asserted in the Intermix Media Shareholder Litigation. The Amended Complaint also added as defendants the individuals and entities named in the Intermix Media Shareholder Litigation that were not already defendants in the matter. On October 16, 2006, the court dismissed the fourth through seventh claims for relief, which related to the 2003 restatement, finding that the plaintiff is precluded from relitigating demand futility. At the same time, the court asked for further briefing regarding plaintiffs’ standing to assert derivative claims based on the FIM Transaction, including for alleged violation of Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the effect of the state judge’s dismissal of the claims in the Greenspan case and the Intermix Media Shareholder Litigation on the remaining direct class action claims alleging breaches of fiduciary duty and other common law claims leading up to the FIM Transaction. The parties filed the requested additional briefing in which the defendants requested that the court stay the direct LeBoyer claims pending the resolution of any appeal in the Greenspan case and the Intermix Media Shareholder Litigation. By order dated May 22, 2007, the court granted defendants’ motion to dismiss the derivative claims arising out of the FIM Transaction, and denied the defendants’ request to stay the two remaining direct claims. As explained in more detail in the next paragraph, the court subsequently consolidated this case with the Brown v. Brewer action also pending before the court. On July 11, 2007, plaintiffs filed the consolidated first amended complaint under the Brown case title. See the discussion of the Brown case below for the subsequent developments in the consolidated case.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

On June 14, 2006, a purported class action lawsuit, captioned Jim Brown v. Brett C. Brewer, et al., was filed against certain former Intermix directors and officers in the United States District Court for the Central District of California. The plaintiff asserted claims for alleged violations of Section 14(a) of the Exchange Act and SEC Rule 14a-9, as well as control person liability under Section 20(a) of the Exchange Act. The plaintiff alleged that certain defendants disseminated false and misleading definitive proxy statements on two occasions: one on December 30, 2003 in connection with the stockholder vote on January 29, 2004 on the election of directors and ratification of financing transactions with certain entities of VantagePoint; and another on August 25, 2005 in connection with the stockholder vote on the FIM Transaction. The complaint named as defendants certain VantagePoint related entities, the former general counsel and the members of the Intermix Board who were incumbent on the dates of the respective proxy statements. Intermix was not named as a defendant, but has certain indemnity obligations to the former officer and director defendants in connection with these claims and allegations. On August 25, 2006, plaintiff amended his complaint to add certain investment banks (the “Investment Banks”) as defendants. Intermix has certain indemnity obligations to the Investment Banks as well. Plaintiff amended his complaint again on September 27, 2006, which defendants moved to dismiss. On February 9, 2007, the case was transferred to Judge George H. King, the judge assigned to the LeBoyer action, on the grounds that it raises substantially related questions of law and fact as LeBoyer, and would entail substantial duplication of labor if heard by different judges. On June 11, 2007, Judge King ordered the Brown case be consolidated with the LeBoyer action, ordered plaintiffs’ counsel to file a consolidated first amended complaint, and further ordered the parties to file a joint brief on defendants’ contemplated motion to dismiss the consolidated first amended complaint. On July 11, 2007, plaintiffs filed the consolidated first amended complaint, which defendants moved to dismiss. By order dated January 17, 2008, Judge King granted defendants’ motion to dismiss the 2003 proxy claims (concerning VantagePoint transactions) and the 2005 proxy claims (concerning the FIM Transaction), as well as a claim against the VantagePoint entities alleging unjust enrichment. The court found it unnecessary to rule on dismissal of the remaining claims, which are related to the 2005 FIM Transaction, because the dismissal disposed of those claims. On February 8, 2008, plaintiffs filed a consolidated second amended complaint, which defendants moved to dismiss on February 28, 2008. By order dated July 15, 2008, the court granted in part and denied in part defendants’ motion to dismiss. The 2003 claims and the claims against the Investment Banks were dismissed with prejudice. The Section 14(a), Section 20(a) and the breach of fiduciary duty claims related to the FIM Transaction remain against the officer and director defendants and the VantagePoint defendants. On November 14, 2008, plaintiff filed a motion for class certification to which defendants filed their opposition on January 14, 2009. On June 22, 2009, the court granted plaintiff’s motion for class certification, certifying a class of all holders of Intermix common stock from July 18, 2005 through consummation of the FIM Transaction, who were allegedly harmed by defendants’ improper conduct as set forth in the complaint. The parties have completed fact and expert discovery. On June 17, 2010, the court granted in part and denied in part defendants’ summary judgment motion filed on October 19, 2009. Specifically, the court denied plaintiff’s motion for summary adjudication of a factual issue and denied defendants’ motion to exclude plaintiff’s damages expert, which was filed on November 30, 2009. In the court’s June 17 order, the court found that plaintiff could not proceed on any fiduciary duty claim based upon alleged violations of the duty of care, but found material issues of fact prohibiting summary judgment on alleged violations of fiduciary duty of loyalty. On plaintiff’s Section 14(a) claim, the court found material issues of fact that prohibited summary judgment on the entire claim, but granted defendants’ motion as to certain purported omissions, finding the allegedly omitted information immaterial. Further, the court granted defendants’ motion as to two damage theories for the Section 14(a) claim, finding benefit of the bargain damages not viable and lost opportunity damages too speculative, and permitting plaintiff to proceed only based upon a theory of out-of-pocket damages. No trial date was set. On October 21, 2010, the parties agreed to a settlement of the action, which is subject to approval by the court. A formal stipulation of settlement was submitted to the court for its approval on December 28, 2010. Accordingly, the Company has recognized the terms of this settlement, which was not material to the Company, in its results of operations. On February 18, 2011, the court granted

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

preliminary approval of the settlement. Plaintiff’s counsel supervised notice of the settlement to the class. The notice provided class members with an opportunity to object. Two shareholders filed objections to the settlement with the court in April 2011. Both objectors had counsel appear on their behalf at a hearing on May 16, 2011 where the court considered plaintiff’s motion for final approval of the settlement and plaintiff’s counsel’s motion for attorneys’ fees, which will come out of the settlement funds. At the hearing, the court did not rule on the motions and instead ordered that plaintiff, objector Trafelet & Co., and defendants submit joint briefing with respect to certain of Trafelet’s objections. The joint brief was filed on June 10, 2011. The joint brief narrowed the objections to allocation of the settlement amount and sufficiency of the notice as it pertains to how the settlement funds will be allocated. The joint brief contained no objection to the settlement itself. On September 29, 2011, the court entered an order rejecting the settlement in so far as the court found that the proposed plan of allocation was not fair, adequate and reasonable because certain members of the certified class are releasing their claims under the settlement, but under the proposed plan, they will not be receiving any of the settlement proceeds. The court ordered the parties to submit a new plan of allocation within 30 days and stated that it will issue appropriate orders after reviewing the new plan. The court order has no effect on the settlement amount.

Shareholder Litigation

On March 16, 2011, a complaint seeking to compel the inspection of the Company’s books and records pursuant to 8 Del. C. § 220, captioned Central Laborers Pension Fund v. News Corporation, was filed in the Delaware Court of Chancery. The plaintiff requested the Company’s books and records to investigate alleged possible breaches of fiduciary duty by the directors of the Company in connection with the Company’s purchase of Shine (the “Shine Transaction”). The Company moved to dismiss the action, and briefing on the Company’s motion to dismiss has been completed. An oral argument on the Company’s motion to dismiss took place August 11, 2011.

Also on March 16, 2011, two purported shareholders of the Company, one of which was Central Laborers Pension Fund, filed a derivative action in the Delaware Court of Chancery, captioned The Amalgamated Bank v. Murdoch, et al. (the “Amalgamated Bank Litigation”). The plaintiffs alleged that both the directors of the Company and Rupert Murdoch as a “controlling shareholder” breached their fiduciary duties in connection with the Shine Transaction. The suit named as defendants all directors of the Company, and named the Company as a nominal defendant. Similar claims against the same group of defendants were filed in the Delaware Court of Chancery by a purported shareholder of the Company, New Orleans Employees’ Retirement System, on March 25, 2011 (the “New Orleans Employees’ Retirement Litigation”). Both the Amalgamated Bank Litigation and the New Orleans Employees’ Retirement Litigation were consolidated on April 6, 2011 (the “Consolidated Action”), with The Amalgamated Bank’s complaint serving as the operative complaint. The Consolidated Action was captioned In re News Corp. Shareholder Derivative Litigation. On April 9, 2011, the court entered a scheduling order governing the filing of an amended complaint and briefing on potential motions to dismiss.

Thereafter, the plaintiffs in the Consolidated Action filed a Verified Consolidated Shareholder Derivative and Class Action Complaint (the “Consolidated Complaint”) on May 13, 2011, seeking declaratory relief and damages. The Consolidated Complaint largely restated the claims in The Amalgamated Bank’s initial complaint and also raised a direct claim on behalf of a purported class of Company shareholders relating to the possible addition of Elisabeth Murdoch to the Company’s Board. The defendants filed opening briefs in support of motions to dismiss the Consolidated Complaint on June 10, 2011, as contemplated by the court’s scheduling order. On July 8, 2011, the plaintiffs filed a Verified Amended Consolidated Shareholder Derivative and Class Action Complaint (the “Amended Complaint”). In addition to the claims that were previously raised in the Consolidated Complaint, the Amended Complaint brought claims relating to the alleged acts of voicemail interception at The News of the World (the “NoW Matter”). Specifically, the plaintiffs claimed in the Amended Complaint that the directors of the Company failed in their duty of oversight regarding the NoW Matter.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

On September 29, 2011, the plaintiffs filed a Verified Second Amended Consolidated Shareholder Derivative and Class Action Complaint (“Second Amended Complaint”). In the Second Amended Complaint, the plaintiffs removed their claims involving the possible addition of Elisabeth Murdoch to the Company’s Board, added some factual allegations to support their remaining claims and added a claim seeking to enjoin a buyback of Common B shares to the extent it would result in a change of control. The Second Amended Complaint seeks declaratory relief, an injunction preventing the buyback of Class B shares, damages, pre- and post-judgment interest, fees and costs.

The court has entered a renewed scheduling order whereby the defendants are scheduled to move to dismiss the Second Amended Complaint, and file opening briefs in support of such motions, by November 14, 2011.

On July 15, 2011, another purported stockholder of the Company filed a derivative action captioned Massachusetts Laborers’ Pension & Annuity Funds v. Murdoch, et al., in the Delaware Court of Chancery (the “Mass. Laborers Litigation”). The complaint names as defendants the directors of the Company and the Company as a nominal defendant. The plaintiffs’ claims are substantially similar to those raised by the Amended Complaint in the Consolidated Action. Specifically, the plaintiff alleged that the directors of the Company have breached their fiduciary duties by, among other things, approving the Shine Transaction and for failing to exercise proper oversight in connection with the NoW Matter. The plaintiff also brought a breach of fiduciary duty claim against Rupert Murdoch as “controlling shareholder,” and a waste claim against the directors of the Company. The action seeks as relief damages, injunctive relief, fees and costs. On July 25, 2011, the plaintiffs in the Consolidated Action requested that the court consolidate the Mass. Laborers Litigation into the Consolidated Action. On August 24, 2011, the Mass. Laborers Litigation was consolidated with the Consolidated Action.

On July 18, 2011, a purported shareholder of the Company filed a derivative action captioned Shields v. Murdoch, et al. (“Shields Litigation”), in the United States District Court for the Southern District of New York. The plaintiff alleged violations of Section 14(a) of the Securities Exchange Act, as well as state law claims for breach of fiduciary duty, gross mismanagement, waste, abuse of control and contribution/indemnification arising from, and in connection with, the NoW Matter. The complaint names the directors of the Company as defendants and names the Company as a nominal defendant, and seeks damages and costs. On August 4, 2011, the plaintiff filed an amended complaint. The plaintiff seeks compensatory damages, an order declaring the October 15, 2010 shareholder vote on the election of the Company’s directors void; an order setting an emergency shareholder vote date for election of new directors; an order requiring the Company to take certain specified corporate governance actions; and an order (i) putting forward a shareholder vote resolution for amendments to the Company’s Article of Incorporation and (ii) taking such other action as may be necessary to place before shareholders for a vote on corporate governance policies that: (a) appoint a non-executive Chair of the Board who is not related to the Murdoch family or extended family; (b) appoint an independent Chair of the Board’s Audit Committee; (c) appoint at least three independent directors to the Governance and Nominating Committees; (d) strengthen the Board’s supervision of financial reporting processes and implement procedures for greater shareholder input into the policies and guidelines of the Board; and (e) appropriately test and strengthen the internal and audit control functions.

On July 19, 2011, a purported class action lawsuit captioned Wilder v. News Corp., et al. (“Wilder Litigation”), was filed on behalf of all purchasers of the Company’s common stock between March 3, 2011 and July 11, 2011, in the United States District Court for the Southern District of New York. The plaintiff brought claims under Section 10(b) and Section 20(a) of the Securities Exchange Act, alleging that false and misleading statements were issued regarding the NoW Matter. The suit names as defendants the Company, Rupert Murdoch, James Murdoch and Rebekah Brooks, and seeks compensatory damages, rescission for damages sustained, and costs.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

On July 22, 2011, a purported shareholder of the Company filed a derivative action captioned Stricklin v. Murdoch, et al. (“Stricklin Litigation”), in the United States District Court for the Southern District of New York. The plaintiff brought claims for breach of fiduciary duty, gross mismanagement, and waste of corporate assets in connection with, among other things, (i) the NoW Matter; (ii) News America’s purported payments to settle allegations of anti-competitive behavior; and (iii) the Shine Transaction. The action names as defendants the Company, Les Hinton, Rebekah Brooks, Paul Carlucci and the directors of the Company. On August 3, 2011, the plaintiff served a motion for expedited discovery and to appoint a conservator over the Company, which defendants objected to. The motion has not been formally calendared and there is no briefing schedule yet. On August 16, 2011, the plaintiffs filed an amended complaint. The plaintiff seeks various forms of relief including compensatory damages, injunctive relief, disgorgement, the award of voting rights to Class A shareholders, the appointment of a conservator over the Company to oversee the Company’s responses to investigations and litigation related to the NoW Matter, fees and costs.

On August 10, 2011, a purported shareholder of the Company filed a derivative action captioned Iron Workers Mid-South Pension Fund v. Murdoch, et. al. (“Iron Workers Litigation”), in the United States District Court for the Southern District of New York. The plaintiff brought claims for breach of fiduciary duty, waste of corporate assets, unjust enrichment and alleged violations of Section 14(a) of the Securities Exchange Act in connection with the NoW Matter. The action names as defendants the Company, Les Hinton, Rebekah Brooks and the directors of the Company. The plaintiff seeks various forms of relief including compensatory damages, voiding the election of the director defendants, an order requiring the Company to take certain specified corporate governance actions, injunctive relief, restitution, fees and costs.

The Wilder Litigation, the Stricklin Litigation and the Iron Workers Litigation are all now before the judge in the Shields Litigation.

The Company and its Board of Directors believe these shareholder claims are entirely without merit, and intend to vigorously defend these actions.

The News of the World Investigations and Litigation

U.K. and U.S. regulators and governmental authorities are conducting investigations after allegations of phone hacking and inappropriate payments to police at our former publication, The News of the World, and other related matters, including investigations into whether similar conduct may have occurred at the Company’s subsidiaries outside of the U.K. The Company is cooperating fully with these investigations. It is possible that these proceedings could damage our reputation and might impair our ability to conduct our business.

The Company is not able to predict the ultimate outcome or cost associated with these investigations. Violations of law may result in civil, administrative or criminal fines or penalties. The Company has admitted liability in a number of civil cases related to the phone hacking allegations and has settled a number of cases. As of September 30, 2011, the Company has provided for its best estimate of the liability for the claims that have been filed. The Company has announced a process under which parties can pursue claims against the Company, and management believes that it is probable that additional claims will be filed. It is not possible to estimate the liability for such additional claims given the early stage of this matter and 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 for such matters. Any fees, expenses, fines, penalties, judgments or settlements which might be incurred by the Company in connection with the various proceedings could affect the Company’s results of operations and financial condition.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

HarperCollins

Commencing on August 9, 2011, twenty-three purported consumer class actions have been filed in the U.S. District Courts for the Southern District of New York and for the Northern District of California, which relate to the decisions by certain publishers, including HarperCollins Publishers L.L.C. (“HarperCollins”), to begin selling their eBooks pursuant to an agency relationship. While the complaints contain some substantive differences, the cases are similar and all involve allegations that certain named defendants in the book publishing and distribution industry, including HarperCollins, violated the antitrust and unfair competition laws by virtue of the switch to the agency model for eBooks. The actions seek as relief treble damages, injunctive relief and attorneys’ fees. The defendants have filed a motion with the Judicial Panel on Multidistrict Litigation to transfer and consolidate these various class actions in the Southern District of New York. That motion to transfer and consolidate is scheduled to be heard by the Judicial Panel on Multidistrict Litigation on December 1, 2011.

In addition, certain federal and state agencies in the United States and governmental competition agencies in the United Kingdom and European Union are conducting investigations into the same alleged conduct by certain publishers, including HarperCollins. HarperCollins currently is cooperating with these investigations.

While it is not possible to predict with any degree of certainty the ultimate outcome of the class actions and investigations, especially given their early stages, HarperCollins believes it was compliant with applicable antitrust and competition laws and intends to defend itself vigorously.

News America Marketing

Insignia Systems, Inc

On September 23, 2004, Insignia Systems, Inc. (“Insignia”) filed an action against News America Marketing In-Store Inc. (“News America”) in the United States District Court for the District of Minnesota. The operative complaint alleges, among other things, disparagement of Insignia by News America in violation of the Lanham Act and Minnesota state law and various federal and state antitrust violations arising out of Insignia’s and News America’s competition in the domestic in-store advertising market. The trial began on February 8, 2011. On February 9, 2011, the parties settled the lawsuit. Under the terms of the settlement, which included no admission of liability, News America paid Insignia $125 million, which was recorded in Selling, General and Administrative expenses during the fiscal year ended June 30, 2011. In addition, Insignia paid News America $4 million in relation to a 10-year exclusive business arrangement between the companies.

Other

Other than previously disclosed in the notes to these consolidated financial statements, the Company is party to several purchase and sale arrangements which become exercisable over the next ten years by the Company or the counter-party to the agreement. In the next twelve months, none of these arrangements that become exercisable are material. Purchase arrangements that are exercisable by the counter-party to the agreement, and that are outside the sole control of the Company are accounted for in accordance with ASC 480-10-S99-3A. Accordingly, the fair values of such purchase arrangements are classified in Redeemable noncontrolling interests.

The Company’s operations are subject to tax in various domestic and international jurisdictions and as a matter of course, the Company is regularly audited by federal, state and foreign tax authorities. The Company believes it has appropriately accrued for the expected outcome of all pending tax matters and does not currently anticipate that the ultimate resolution of pending tax matters will have a material adverse effect on its consolidated financial condition, future results of operations or liquidity.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 15—Pension and Other Postretirement Benefits

The Company sponsors non-contributory pension plans and retiree health and life insurance benefit plans covering specific groups of employees which are closed to new participants (with the exception of groups covered by collective bargaining agreements). The benefits payable for the Company’s non-contributory pension plans are based primarily on a formula factoring both an employee’s years of service and pay near retirement. Participant employees are vested in the pension plans after five years of service. The Company’s policy for all pension plans is to fund amounts, at a minimum, in accordance with statutory requirements. Plan assets consist principally of common stocks, marketable bonds and government securities. The retiree health and life insurance benefit plans offer medical and/or life insurance to certain full-time employees and eligible dependents that retire after fulfilling age and service requirements.

The components of net periodic benefits costs were as follows:


	Pension Benefits						Postretirement Benefits
	For the three months ended September 30,
	2011			2010			2011			2010
	(in millions)
Service cost benefits earned during the period	$	24		$	24		$	1		$	1
Interest costs on projected benefit obligation		44			42			4			4
Expected return on plan assets		(46	)		(42	)		—			—
Amortization of deferred losses		13			15			—			—
Other		4			1			(4	)		(4	)

Net periodic costs	$	39		$	40		$	1		$	1

Cash contributions	$	16		$	14		$	5		$	4

Note 16—Segment Information

The Company is a diversified global media company, which manages and reports its businesses in the following six segments:

•

Cable Network Programming, which principally consists of the production and licensing of programming distributed through cable television systems and direct broadcast satellite operators primarily in the United States, Latin America, Europe and Asia.

•

Filmed Entertainment, which principally consists of the production and acquisition of live-action and animated motion pictures for distribution and licensing in all formats in all entertainment media worldwide, and the production and licensing of television programming worldwide.

•

Television, which principally consists of the broadcasting of network programming in the United States and the operation of 27 full power broadcast television stations, including 9 duopolies, in the United States (of these stations, 17 are affiliated with the FOX Broadcasting Company (“FOX”) and 10 are affiliated with Master Distribution Service, Inc. (“MyNetworkTV”)).

•

Direct Broadcast Satellite Television, which consists of the distribution of basic and premium programming services via satellite and broadband directly to subscribers in Italy.

•

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

and a national newspaper (with international editions) in the United States and the provision of information services. The book publishing business consists of the publication of English language books throughout the world and the integrated marketing services business consists of the publication of free-standing inserts and the provision of in-store marketing products and services in the United States and Canada.

•

Other, which principally consists of the Company’s digital media properties and Wireless Generation, the Company’s education technology business.

The Company’s operating segments have been determined in accordance with the Company’s internal management structure, which is organized based on operating activities. The Company evaluates performance based upon several factors, of which the primary financial measures are segment operating income (loss) and segment operating income (loss) before depreciation and amortization.

Segment operating income (loss) does not include: Impairment and restructuring charges, equity earnings of affiliates, interest expense, net, interest income, other, net, income tax expense and net income attributable to noncontrolling interests. The Company believes that information about segment operating income (loss) assists all users of the Company’s consolidated financial statements by allowing them to evaluate changes in the operating results of the Company’s portfolio of businesses separate from non-operational factors that affect net income, thus providing insight into both operations and the other factors that affect reported results.

Segment operating income (loss) before depreciation and amortization is defined as segment operating income (loss) plus depreciation and amortization and the amortization of cable distribution investments and eliminates the variable effect across all business segments of depreciation and amortization. Depreciation and amortization expense includes the depreciation of property and equipment, as well as amortization of finite-lived intangible assets. Amortization of cable distribution investments represents a reduction against revenues over the term of a carriage arrangement and, as such, it is excluded from segment operating income (loss) before depreciation and amortization.

Total segment operating income and segment operating income (loss) before depreciation and amortization are non-GAAP measures 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, these measures do not reflect cash available to fund requirements. These measures exclude items, such as impairment and restructuring charges, which are significant components in assessing the Company’s financial performance. Segment operating income (loss) before depreciation and amortization also excludes depreciation and amortization which are also significant components in assessing the Company’s financial performance.

Management believes that total segment operating income and segment operating income (loss) before depreciation and amortization are appropriate measures for evaluating the operating performance of the Company’s business. Total segment operating income and segment operating income (loss) before depreciation and amortization provide management, investors and equity analysts measures to analyze operating performance of the Company’s business and its enterprise value against historical data and competitors’ data, although historical results, including total segment operating income and segment operating income (loss) before depreciation and amortization, may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences).

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	For the three months ended September 30,
	2011			2010
	(in millions)
Revenues:
Cable Network Programming	$	2,120		$	1,872
Filmed Entertainment		1,778			1,503
Television		923			851
Direct Broadcast Satellite Television		922			856
Publishing		2,069			2,046
Other		147			298

Total revenues	$	7,959			7,426

Segment operating income (loss):
Cable Network Programming	$	775		$	659
Filmed Entertainment		347			280
Television		133			105
Direct Broadcast Satellite Television		119			82
Publishing		110			178
Other		(99	)		(156	)

Total segment operating income		1,385			1,148

Impairment and restructuring charges		(91	)		(7	)
Equity earnings of affiliates		121			94
Interest expense, net		(258	)		(232	)
Interest income		36			26
Other, net		(130	)		(10	)

Income before income tax expense		1,063			1,019
Income tax expense		(277	)		(210	)

Net income		786			809
Less: Net income attributable to noncontrolling interests		(48	)		(34	)

Net income attributable to News Corporation stockholders	$	738			775

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Intersegment revenues, generated primarily by the Filmed Entertainment segment, of approximately $256 million and $168 million for the three months ended September 30, 2011 and 2010, respectively, have been eliminated within the Filmed Entertainment segment. Intersegment operating profit generated primarily by the Filmed Entertainment segment of approximately $39 million and $16 million for the three months ended September 30, 2011 and 2010, respectively, have been eliminated within the Filmed Entertainment segment.


	For the three months ended September 30, 2011
	Segment operating income (loss)			Depreciation and amortization		Amortization of cable distribution investments		Segment operating income (loss) before depreciation and amortization
	(in millions)
Cable Network Programming	$	775		$	37	$	24	$	836
Filmed Entertainment		347			39		—		386
Television		133			21		—		154
Direct Broadcast Satellite Television		119			74		—		193
Publishing		110			107		—		217
Other		(99	)		16		—		(83	)

Total	$	1,385		$	294	$	24	$	1,703


	For the three months ended September 30, 2010
	Segment operating income (loss)			Depreciation and amortization		Amortization of cable distribution investments		Segment operating income (loss) before depreciation and amortization
	(in millions)
Cable Network Programming	$	659		$	37	$	21	$	717
Filmed Entertainment		280			23		—		303
Television		105			21		—		126
Direct Broadcast Satellite Television		82			61		—		143
Publishing		178			93		—		271
Other		(156	)		39		—		(117	)

Total	$	1,148		$	274	$	21	$	1,443

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	At September 30, 2011		At June 30, 2011
	(in millions)
Total assets:
Cable Network Programming	$	12,898	$	12,666
Filmed Entertainment		8,204		8,015
Television		6,261		6,062
Direct Broadcast Satellite Television		2,840		3,098
Publishing		14,189		14,915
Other		10,949		12,357
Investments		4,367		4,867

Total assets	$	59,708	$	61,980

Goodwill and Intangible assets, net:
Cable Network Programming	$	6,812	$	6,808
Filmed Entertainment		2,482		2,552
Television		4,319		4,320
Direct Broadcast Satellite Television		586		636
Publishing		7,106		7,377
Other		1,300		1,591

Total goodwill and intangible assets, net	$	22,605	$	23,284

Note 17—Additional Financial Information

Supplemental Cash Flows Information


	For the three months ended September 30,
	2011			2010
	(in millions)
Supplemental cash flows information:
Cash paid for income taxes	$	(171	)	$	(211	)
Cash paid for interest		(255	)		(206	)
Sale of other investments		—			12
Purchase of other investments		(78	)		(58	)

Supplemental information on businesses acquired:
Fair value of assets acquired		67			9
Cash acquired		2			—
Liabilities assumed		—			1
Noncontrolling interest increase		—			(1	)
Cash paid		(69	)		(9	)

Fair value of stock consideration	$	—		$	—

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Other, net consisted of the following:


	For the three months ended September 30,
	2011			2010
	(in millions)
Change in fair value of SkyD convertible securities^(a)	$	(82	)	$	—
BSkyB termination fee^(a)		(63	)		—
Other		15			(10	)

Total Other, net	$	(130	)	$	(10	)

^(a)	See Note 6—Investments.

In accordance with ASC 220 “Comprehensive Income,” total comprehensive (loss) income for the Company consisted of the following:


	For the three months ended September 30,
	2011			2010
	(in millions)
Net income, as reported	$	786		$	809
Other comprehensive income:
Foreign currency translation adjustments		(1,216	)		912
Unrealized holding (losses) gains on securities, net of tax		(122	)		60
Benefit plan adjustments		14			3

Total comprehensive (loss) income		(538	)		1,784

Less: net income attributable to noncontrolling interests^(a)		(48	)		(34	)
Less: foreign currency translation adjustments attributable to noncontrolling interests^(a)		9			(4	)

Comprehensive (loss) income attributable to News Corporation stockholders	$	(577	)	$	1,746

^(a)	Includes amounts relating to noncontrolling interests classified as equity and redeemable noncontrolling interests.

Note 18—Supplemental Guarantor Information

In May 2007, NAI, a 100% owned subsidiary of the Company as defined in Rule 3-10(h) of Regulation S-X, entered into a credit agreement (the “Credit Agreement”), among NAI as Borrower, the Company as Parent Guarantor, the lenders named therein (the “Lenders”), Citibank, N.A. as Administrative Agent and JPMorgan Chase Bank, N.A. as Syndication Agent. The Credit Agreement provides a $2.25 billion unsecured revolving credit facility with a sub-limit of $600 million available for the issuance of letters of credit and has a maturity date of May 2012. Borrowings are in U.S. dollars only, while letters of credit are issuable in U.S. dollars or Euros. The significant terms of the agreement include the requirement that the Company maintain specific leverage ratios and limitations on secured indebtedness. NAI pays a facility fee of 0.08% regardless of facility usage. NAI pays interest for borrowings at LIBOR plus 0.27% and pays commission fees on letters of credit at 0.27%. NAI pays an additional fee of 0.05% if borrowings under the facility exceed 50% of the committed facility. The interest and fees are based on the Company’s current debt rating.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Parent Guarantor presently guarantees the senior public indebtedness of NAI and the guarantee is full and unconditional. The supplemental condensed consolidating financial information of the Parent Guarantor should be read in conjunction with these consolidated financial statements.

In accordance with rules and regulations of the SEC, the Company uses the equity method to account for the results of all of the non-guarantor subsidiaries, representing substantially all of the Company’s consolidated results of operations, excluding certain intercompany eliminations.

The following condensed consolidating financial statements present the results of operations, financial position and cash flows of NAI, the Company and the subsidiaries of the Company and the eliminations and reclassifications necessary to arrive at the information for the Company on a consolidated basis.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Operations

For the three months ended September 30, 2011

(in millions)


	News America Incorporated			News Corporation			Non-Guarantor			Reclassifications and Eliminations			News Corporation and Subsidiaries
Revenues	$	—		$	—		$	7,959		$	—		$	7,959
Expenses		(77	)		—			(6,588	)		—			(6,665	)
Equity earnings (losses) of affiliates		(2	)		—			123			—			121
Interest expense, net		(372	)		(336	)		(3	)		453			(258	)
Interest income		1			2			486			(453	)		36
Earnings (losses) from subsidiary entities		113			1,137			—			(1,250	)		—
Other, net		13			(65	)		(78	)		—			(130	)

Income (loss) before income tax expense		(324	)		738			1,899			(1,250	)		1,063
Income tax (expense) benefit		84			—			(495	)		134			(277	)

Net income (loss)		(240	)		738			1,404			(1,116	)		786
Less: Net income attributable to noncontrolling interests		—			—			(48	)		—			(48	)

Net income (loss) attributable to News Corporation stockholders	$	(240	)	$	738		$	1,356		$	(1,116	)	$	738

See notes to supplemental guarantor information

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Operations

For the three months ended September 30, 2010

(in millions)


	News America Incorporated			News Corporation			Non-Guarantor			Reclassifications and Eliminations			News Corporation and Subsidiaries
Revenues	$	—		$	—		$	7,426		$	—		$	7,426
Expenses		(82	)		—			(6,203	)		—			(6,285	)
Equity earnings (losses) of affiliates		(2	)		—			96			—			94
Interest expense, net		(347	)		(263	)		(4	)		382			(232	)
Interest income		1			1			406			(382	)		26
Earnings (losses) from subsidiary entities		213			1,044			—			(1,257	)		—
Other, net		(23	)		(7	)		20			—			(10	)

Income (loss) before income tax expense		(240	)		775			1,741			(1,257	)		1,019
Income tax (expense) benefit		49			—			(358	)		99			(210	)

Net income (loss)		(191	)		775			1,383			(1,158	)		809
Less: Net income attributable to noncontrolling interests		—			—			(34	)		—			(34	)

Net income (loss) attributable to News Corporation stockholders	$	(191	)	$	775		$	1,349		$	(1,158	)	$	775

See notes to supplemental guarantor information

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Balance Sheet

At September 30, 2011

(in millions)


	News America Incorporated		News Corporation		Non-Guarantor			Reclassifications and Eliminations			News Corporation and Subsidiaries
ASSETS:
Current assets:
Cash and cash equivalents	$	762	$	6,548	$	4,119		$	—		$	11,429
Receivables, net		28		—		6,356			—			6,384
Inventories, net		—		—		2,522			—			2,522
Other		30		22		412			—			464

Total current assets		820		6,570		13,409			—			20,799

Non-current assets:
Receivables		—		—		352			—			352
Inventories, net		—		—		4,461			—			4,461
Property, plant and equipment, net		105		—		6,068			—			6,173
Intangible assets, net		—		—		8,241			—			8,241
Goodwill		—		—		14,364			—			14,364
Other		337		4		610			—			951
Investments
Investments in associated companies and other investments		124		39		4,204			—			4,367
Intragroup investments		50,318		48,221		—			(98,539	)		—

Total investments		50,442		48,260		4,204			(98,539	)		4,367

TOTAL ASSETS	$	51,704	$	54,834	$	51,709		$	(98,539	)	$	59,708

LIABILITIES AND EQUITY
Current liabilities:
Borrowings	$	—	$	—	$	—		$	—		$	—
Other current liabilities		62		245		9,334			—			9,641

Total current liabilities		62		245		9,334			—			9,641
Non-current liabilities:
Borrowings		15,446		—		—			—			15,446
Other non-current liabilities		332		—		6,189			—			6,521
Intercompany		27,432		27,223		(54,655	)		—			—
Redeemable noncontrolling interests		—		—		244			—			244
Equity		8,432		27,366		90,597			(98,539	)		27,856

TOTAL LIABILITIES AND EQUITY	$	51,704	$	54,834	$	51,709		$	(98,539	)	$	59,708

See notes to supplemental guarantor information

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Balance Sheet

At June 30, 2011

(in millions)


	News America Incorporated		News Corporation		Non-Guarantor			Reclassifications and Eliminations			News Corporation and Subsidiaries
ASSETS
Current Assets:
Cash and cash equivalents	$	360	$	7,816	$	4,504		$	—		$	12,680
Receivables, net		14		—		6,316			—			6,330
Inventories, net		—		—		2,332			—			2,332
Other		15		—		427			—			442

Total current assets		389		7,816		13,579			—			21,784

Non-current assets:
Receivables		—		—		350			—			350
Inventories, net		—		—		4,198			—			4,198
Property, plant and equipment, net		100		—		6,442			—			6,542
Intangible assets, net		—		—		8,587			—			8,587
Goodwill		—		—		14,697			—			14,697
Other		323		—		632			—			955
Investments
Investments in associated companies and other investments		125		52		4,690			—			4,867
Intragroup investments		50,146		48,502		—			(98,648	)		—

Total investments		50,271		48,554		4,690			(98,648	)		4,867

TOTAL ASSETS	$	51,083	$	56,370	$	53,175		$	(98,648	)	$	61,980

LIABILITIES AND EQUITY
Current liabilities:
Borrowings	$	—	$	—	$	32		$	—		$	32
Other current liabilities		91		22		9,426			—			9,539

Total current liabilities		91		22		9,458			—			9,571
Non-current liabilities:
Borrowings		15,463		—		—			—			15,463
Other non-current liabilities		202		—		6,418			—			6,620
Intercompany		25,884		26,842		(52,726	)		—			—
Redeemable noncontrolling interests		—		—		242			—			242
Total equity		9,443		29,506		89,783			(98,648	)		30,084

TOTAL LIABILITIES AND EQUITY	$	51,083	$	56,370	$	53,175		$	(98,648	)	$	61,980

See notes to supplemental guarantor information

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Cash Flows

For the three months ended September 30, 2011

(in millions)


	News America Incorporated			News Corporation			Non-Guarantor			Reclassifications and Eliminations		News Corporation and Subsidiaries
Operating activities:
Net cash provided by (used in) operating activities	$	412		$	44		$	(32	)	$	—	$	424

Investing and other activities:
Property, plant and equipment		(8	)		—			(240	)		—		(248	)
Investments		(2	)		(63	)		(114	)		—		(179	)
Proceeds from dispositions		—			11			323			—		334

Net cash used in investing activities		(10	)		(52	)		(31	)		—		(93	)

Financing activities:
Borrowings		—			—			—			—		—
Repayment of borrowings		—			—			(32	)		—		(32	)
Issuance of shares		—			12			—			—		12
Repurchase of shares		—			(1,272	)		—			—		(1,272	)
Dividends paid		—			—			(23	)		—		(23	)

Net cash (used in) provided by financing activities		—			(1,260	)		(55	)		—		(1,315	)

Net (decrease) increase in cash and cash equivalents		402			(1,268	)		(118	)		—		(984	)
Cash and cash equivalents, beginning of period		360			7,816			4,504			—		12,680
Exchange movement on opening cash balance		—			—			(267	)		—		(267	)

Cash and cash equivalents, end of period	$	762		$	6,548		$	4,119		$	—	$	11,429

See notes to supplemental guarantor information

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Cash Flows

For the three months ended September 30, 2010

(in millions)


	News America Incorporated			News Corporation		Non-Guarantor			Reclassifications and Eliminations		News Corporation and Subsidiaries
Operating activities:
Net cash provided by (used in) operating activities	$	(2,381	)	$	2,398	$	482		$	—	$	499

Investing activities:
Property, plant and equipment		(4	)		—		(260	)		—		(264	)
Investments		(1	)		—		(153	)		—		(154	)
Proceeds from dispositions		—			—		7			—		7

Net cash used in investing activities		(5	)		—		(406	)		—		(411	)

Financing activities:
Borrowings		—			—		1			—		1
Repayment of borrowings		—			—		(16	)		—		(16	)
Dividends paid		—			—		(14	)		—		(14	)
Purchase of subsidiary shares from noncontrolling interest		—			—		(104	)		—		(104	)

Net cash used in financing activities		—			—		(133	)		—		(133	)

Net (decrease) increase in cash and cash equivalents		(2,386	)		2,398		(57	)		—		(45	)
Cash and cash equivalents, beginning of period		5,331			—		3,378			—		8,709
Exchange movement on opening cash balance		—			—		150			—		150

Cash and cash equivalents, end of period	$	2,945		$	2,398	$	3,471		$	—	$	8,814

See notes to supplemental guarantor information

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Notes to Supplemental Guarantor Information

(1)

Investments in the Company’s subsidiaries, for purposes of the supplemental consolidating presentation, are accounted for by their parent companies under the equity method of accounting whereby earnings of subsidiaries are reflected in the respective parent company’s investment account and earnings.

(2)

The guarantees of NAI’s senior public indebtedness constitute senior indebtedness of the Company, and rank pari passu with all present and future senior indebtedness of the Company. Because the factual basis underlying the obligations created pursuant to the various facilities and other obligations constituting senior indebtedness of the Company differ, it is not possible to predict how a court in bankruptcy would accord priorities among the obligations of the Company.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This document contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. 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 News Corporation, its directors or its officers with respect to, among other things, trends affecting News Corporation’s financial condition or results of operations. The readers of this document 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 factors is set forth under the heading Part II “Other Information,” Item 1A “Risk Factors” in this report. News Corporation 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 News Corporation with the Securities and Exchange Commission (“SEC”). This section should be read together with the unaudited consolidated financial statements of News Corporation and related notes set forth elsewhere herein and News Corporation’s Annual Report on Form 10-K for the fiscal year ended June 30, 2011 as filed with the SEC on August 15, 2011 (the “2011 Form 10-K”).

INTRODUCTION

Management’s discussion and analysis of financial condition and results of operations is intended to help provide an understanding of News Corporation and its subsidiaries’ (together, “News Corporation” or the “Company”) 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 have occurred to date during fiscal 2012 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 months ended September 30, 2011 and 2010. This analysis is presented on both a consolidated and a segment basis. In addition, a brief description is provided of significant transactions and events that have an impact on the comparability of the results being analyzed.

•

Liquidity and Capital Resources—This section provides an analysis of the Company’s cash flows for the three months ended September 30, 2011 and 2010. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to fund the Company’s future commitments and obligations, as well as a discussion of other financing arrangements.

OVERVIEW OF THE COMPANY’S BUSINESS

The Company is a diversified global media company, which manages and reports its businesses in the following six segments:

•

Direct Broadcast Satellite Television, which consists of the distribution of basic and premium programming services via satellite and broadband directly to subscribers in Italy.

•

Publishing, which principally consists of the Company’s newspapers and information services, book publishing and integrated marketing services businesses. The newspapers and information services business principally consists of the publication of national newspapers in the United Kingdom, the publication of approximately 146 newspapers in Australia, the publication of a metropolitan newspaper and a national newspaper (with international editions) in the United States and the provision of information services. The book publishing business consists of the publication of English language books throughout the world and the integrated marketing services business consists of the publication of free-standing inserts and the provision of in-store marketing products and services in the United States and Canada.

•

Other, which principally consists of the Company’s digital media properties and Wireless Generation, the Company’s education technology business.

Television and Cable Network Programming

The Company’s television operations primarily consist of FOX, MyNetworkTV and the 27 television stations owned by the Company.

The television operations derive revenues primarily from the sale of advertising and to a lesser extent retransmission compensation. Adverse changes in general market conditions for advertising may affect revenues. The U.S. television broadcast environment is highly competitive and the primary methods of competition are the development and acquisition of popular programming. Program success is measured by ratings, which are an indication of market acceptance, with the top rated programs commanding the highest advertising prices. FOX is a broadcast network and MyNetworkTV is a programming distribution service, airing original and off-network programming. FOX and MyNetworkTV compete with broadcast networks, such as ABC, CBS, NBC and The CW, independent television stations, cable and DBS program services, as well as other media, including DVDs, Blu-rays, video games, print and the Internet for audiences, programming and, in the case of FOX, advertising revenues. In addition, FOX and MyNetworkTV compete with the other broadcast networks and other programming distribution services to secure affiliations with independently owned television stations in markets across the country.

Retransmission consent rules provide a mechanism for the television stations owned by the Company to seek and obtain payment from multi-channel video programming distributors who carry broadcasters’ signals. Retransmission compensation consists of per subscriber-based compensatory fees paid to the Company from cable and satellite distribution systems as well as a portion of the retransmission revenue the affiliates generate for their retransmission of FOX and MyNetworkTV.

The television stations owned by the Company compete for programming, audiences and advertising revenues with other television stations and cable networks in their respective coverage areas and, in some cases, with respect to programming, with other station groups, and in the case of advertising revenues, with other local and national media. The competitive position of the television stations owned by the Company is largely influenced by the quality and strength of FOX and MyNetworkTV programming, and, in particular, the prime-time viewership of the respective network.

The Company’s U.S. cable network operations primarily consist of the Fox News Channel (“FOX News”), the FX Network (“FX”), Regional Sports Networks (“RSNs”), the National Geographic Channels, SPEED and

the Big Ten Network. The Company’s international cable networks consist of the Fox International Channels (“FIC”) and STAR. FIC produces and distributes entertainment, factual, sports, and movie channels through television channels in Europe, Africa, Asia and Latin America using several brands, including Fox, Fox Crime, Fox Life and National Geographic Channel. STAR’s owned and affiliated channels are distributed in the following countries and regions: India; Greater China; Indonesia; the rest of South East Asia; Pakistan; the Middle East and Africa; the United Kingdom and Europe; and North America.

Generally, the Company’s cable networks, which target various demographics, derive a majority of their revenues from monthly affiliate fees received from cable television systems and direct broadcast satellite operators based on the number of their subscribers. Affiliate fee revenues are net of the amortization of cable distribution investments (capitalized fees paid to a cable operator or direct broadcast satellite operator to facilitate the launch of a cable network). The Company defers the cable distribution investments and amortizes the amounts on a straight-line basis over the contract period. Cable television and direct broadcast satellite are currently the predominant means of distribution of the Company’s program services in the United States. Internationally, distribution technology varies region by region.

The Company’s cable networks compete for carriage on cable television systems, direct broadcast satellite systems and other distribution systems with other program services. A primary focus of competition is for distribution of the Company’s cable network channels that are not already distributed by particular cable television or direct broadcast satellite systems. For such program services, distributors make decisions on the use of bandwidth based on various considerations, including amounts paid by programmers for launches, subscription fees payable by distributors and appeal to the distributors’ subscribers.

The most significant operating expenses of the Television segment and 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 broadcaster or cable network. Other expenses include promotional expenses related to improving the market visibility and awareness of the broadcaster or cable network and its programming. Additional expenses include sales commissions paid to the in-house advertising sales force, as well as salaries, employee benefits, rent and other routine overhead expenses.

The Company has several multi-year sports rights agreements, including contracts with the National Football League (“NFL”) through fiscal 2014, contracts with the National Association of Stock Car Auto Racing (NASCAR) for certain races and exclusive rights for certain ancillary content through calendar year 2014 and a contract with Major League Baseball (“MLB”) through calendar year 2013. These contracts provide the Company with the broadcast rights to certain U.S. national sporting events during their respective terms. The costs of these sports contracts are charged to expense based on the ratio of each period’s operating profit to estimated total operating profit for the remaining term of the contract.

The profitability of these long-term U.S. national sports contracts is based on the Company’s best estimates at September 30, 2011 of attributable revenues and costs; such estimates may change in the future and such changes may be significant. Should revenues decline from estimates applied at September 30, 2011, additional amortization of rights may be recorded. Should revenues improve as compared to estimated revenues, the Company may have an improved operating profit related to the contract, which may be recognized over the remaining contract term.

While the Company seeks to ensure compliance with federal indecency laws and related Federal Communications Commission (“FCC”) regulations, the definition of “indecency” is subject to interpretation and there can be no assurance that the Company will not broadcast programming that is ultimately determined by the FCC to violate the prohibition against indecency. Such programming could subject the Company to regulatory review or investigation, fines, adverse publicity or other sanctions, including the loss of station licenses.

Filmed Entertainment

The Filmed Entertainment segment derives revenue from the production and distribution of feature motion pictures and television series. In general, motion pictures produced or acquired for distribution by the Company are exhibited in U.S. and foreign theaters, followed by home entertainment, including sale and rental of DVDs and Blu-rays, video-on-demand and pay-per-view television, on-line and mobile distribution, premium subscription television, network television and basic cable and syndicated television exploitation. Television series initially produced for the networks and first-run syndication are generally licensed to domestic and international markets concurrently and subsequently released in seasonal DVD and Blu-ray box sets. More successful series are later syndicated in domestic markets. The length of the revenue cycle for television series will vary depending on the number of seasons a series remains in active production and, therefore, may cause fluctuations in operating results. License fees received for television exhibition (including international and U.S. premium television and basic cable television) are recorded as revenue in the period that licensed films or programs are available for such exhibition, which may cause substantial fluctuations in operating results.

The revenues and operating results of the Filmed Entertainment segment are significantly affected by the timing of the Company’s theatrical and home entertainment releases, the number of its original and returning television series that are aired by television networks and the number of its television series in off-network syndication. Theatrical and home entertainment release dates are determined by several factors, including timing of vacation and holiday periods and competition in the marketplace. The distribution windows for the release of motion pictures theatrically and in various home entertainment products and services (including subscription rentals, rental kiosks and Internet streaming services), have been compressing and may continue to change in the future. A further reduction in timing between theatrical and home entertainment releases could adversely affect the revenues and operating results of this segment.

The Company enters into arrangements with third parties to co-produce many of its theatrical productions. These arrangements, which are referred to as co-financing arrangements, take various forms. The parties to these arrangements include studio and non-studio entities, both domestic and foreign. In several of these agreements, other parties control certain distribution rights. The Filmed Entertainment segment records the amounts received for the sale of an economic interest as a reduction of the cost of the film, as the investor assumes full risk for that portion of the film asset acquired in these transactions. The substance of these arrangements is that the third-party investors own an interest in the film and, therefore, receive a participation based on the respective third-party investor’s interest in the profits or losses incurred on the film. Consistent with the requirements of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 926 “Entertainment—Films” (“ASC 926”), the estimate of a third-party investor’s interest in profits or losses incurred on the film is determined by reference to the ratio of actual revenue earned to date in relation to total estimated ultimate revenues.

Operating costs incurred by the Filmed Entertainment segment include: exploitation costs, primarily theatrical prints and advertising and home entertainment marketing and manufacturing costs; amortization of capitalized production, overhead and interest costs; and participations and talent residuals. Selling, general and administrative expenses include salaries, employee benefits, rent and other routine overhead.

The Company competes with other film studios, such as Disney, Paramount, Sony, Universal, Warner Bros. and independent film producers in the production and distribution of motion pictures, DVDs, and Blu-rays. As a producer and distributor of television programming, the Company competes with studios, television production groups and independent producers and syndicators, such as Disney, Sony, NBC Universal, Warner Bros. and Paramount Television, to sell programming both domestically and internationally. The Company also competes to obtain creative talent and story properties, which are essential to the success of the Company’s filmed entertainment businesses.

Direct Broadcast Satellite Television

The Direct Broadcast Satellite Television (“DBS”) segment’s operations consist of SKY Italia, which provides basic and premium programming services via satellite and broadband directly to subscribers in Italy. SKY Italia derives revenues principally from subscriber fees. The Company believes that the quality and variety of programming, audio and interactive programming including personal video recorders, quality of picture including high definition channels, access to service, customer service and price are the key elements for gaining and maintaining market share. SKY Italia’s competition includes companies that offer video, audio, interactive programming, telephony, data and other information and entertainment services, including broadband Internet providers, digital terrestrial transmission (“DTT”) services, wireless companies and companies that are developing new media technologies. Since 2003, SKY Italia had been prohibited from owning a DTT frequency or providing a pay television DTT offer under a commitment made to the European Commission (the “EC”) through December 31, 2011. In July 2010, the EC modified such commitment to allow SKY Italia to bid for one DTT frequency. However, if SKY Italia were to successfully bid for such a DTT frequency, the EC would limit SKY Italia’s use of such frequency to exclusively free-to-air channels for 5 years subsequent to its acquisition.

SKY Italia’s most significant operating expenses are those related to the acquisition of entertainment, movie and sports programming and subscribers and the production and expenses related to operating the technical facilities. Operating expenses related to sports programming are generally recognized over the course of the related sport season, which may cause fluctuations in the operating results of this segment.

Publishing

The Company’s Publishing segment consists of the Company’s newspapers and information services, book publishing and integrated marketing services businesses.

Revenue is derived from the sale of advertising space, newspapers, books and subscriptions, as well as licensing. Adverse changes in general market conditions for advertising may affect revenues. 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, editorial, commissions and royalties. Selling, general and administrative expenses include promotional expenses, salaries, employee benefits, rent and other routine overhead. The Company expects that advancements in technology will introduce new challenges and opportunities for digital distribution by the publishing businesses.

The Publishing segment’s advertising volume, 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, circulation and paper prices in managing its businesses to maximize operating profit during expanding and contracting economic cycles. Paper is a basic commodity and its price is sensitive to the balance of supply and demand. The Company’s costs and expenses are affected by the cyclical increases and decreases in the price of paper. The Publishing segment’s products compete for readership and advertising with local and national competitors and also compete with other media alternatives in their respective markets. Competition for circulation and subscriptions are based on the content of the products provided, service, pricing and, from time to time, various promotions. The success of these products 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 readership demographics. The Company believes that competition from new media formats and sources and shifting consumer preferences will continue to pose challenges for the Publishing segment’s businesses.

Other

The Other segment consists primarily of:

Digital Media Group

The Company sells advertising, sponsorships and subscription services on the Company’s various digital media properties. Significant expenses associated with the Company’s digital media properties include development costs, advertising and promotional expenses, salaries, employee benefits and other routine overhead.

Wireless Generation

Wireless Generation is the Company’s education technology business that develops innovative tools to help teachers teach with excellence. The Company’s education technology business provides data systems and professional services that enable teachers to use data to assess student progress and deliver individualized instruction. Significant expenses associated with the Company’s education technology business include salaries, employee benefits and other routine overhead.

Other Business Developments

In June 2010, the Company announced that it had proposed to the board of directors of British Sky Broadcasting Group plc (“BSkyB”), in which the Company currently has an approximate 39% interest, to make a cash offer of 700 pence per share for the BSkyB shares that the Company does not already own. Following the allegations regarding The News of the World, on July 13, 2011, the Company announced that it no longer intended to make an offer for the BSkyB shares that the Company does not already own. As a result of the July 2011 announcement, the Company paid BSkyB a termination fee of approximately $63 million in accordance with a cooperation agreement between the parties.

RESULTS OF OPERATIONS

Results of Operations—For the three months ended September 30, 2011 versus the three months ended September 30, 2010.

The following table sets forth the Company’s operating results for the three months ended September 30, 2011, as compared to the three months ended September 30, 2010.


	For the three months ended September 30,
	2011			2010			% Change
	(in millions, except %)
Revenues	$	7,959		$	7,426			7	%

Operating expenses		(4,753	)		(4,543	)		5	%
Selling, general and administrative		(1,527	)		(1,461	)		5	%
Depreciation and amortization		(294	)		(274	)		7	%
Impairment and restructuring charges		(91	)		(7	)		*	*
Equity earnings of affiliates		121			94			29	%
Interest expense, net		(258	)		(232	)		11	%
Interest income		36			26			38	%
Other, net		(130	)		(10	)		*	*

Income before income tax expense		1,063			1,019			4	%
Income tax expense		(277	)		(210	)		32	%

Net income		786			809			(3	)%
Less: Net income attributable to noncontrolling interests		(48	)		(34	)		41	%

Net income attributable to News Corporation stockholders	$	738		$	775			(5	)%

**	not meaningful

Overview—The Company’s revenues increased 7% for the three months ended September 30, 2011, as compared to the corresponding period of fiscal 2011. The increase was primarily due to revenue increases at the Cable Network Programming and Filmed Entertainment segments. The Cable Network Programming segment’s revenues increased primarily due to increases in net affiliate and advertising revenues. The increase at the Filmed Entertainment segment was primarily due to higher licensing and worldwide theatrical revenues as well as the inclusion of revenues from Shine Limited (“Shine”) which was acquired in fiscal 2011. These revenue increases were partially offset by a revenue decrease at the Other segment primarily resulting from the disposals of Myspace and Fox Mobile in fiscal 2011 and News Outdoor Russia in July 2011.

Operating expenses increased 5% for the three months ended September 30, 2011, as compared to the corresponding period of fiscal 2011, primarily due to higher operating expenses at the Filmed Entertainment and Cable Network Programming segments. The increase at the Filmed Entertainment segment primarily reflects the inclusion of operating expenses related to Shine which was acquired in fiscal 2011. The Cable Network Programming segment operating expense increase was primarily due to higher programming costs. These increases were offset by decreased operating expenses at the Other segment resulting from the disposals of Myspace, Fox Mobile and News Outdoor Russia.

Selling, general and administrative expenses increased 5% for the three months ended September 30, 2011 as compared to the corresponding period of fiscal 2011, primarily due to the inclusion of expenses of Shine

which was acquired in fiscal 2011 and higher personnel costs. These increases were offset by decreased operating expenses at the Other segment resulting from the disposals of Myspace, Fox Mobile and News Outdoor Russia.

Depreciation and amortization increased 7% for the three months ended September 30, 2011 as compared to the corresponding period of fiscal 2011, primarily due to additional depreciation and amortization from the fiscal 2011 acquisition of Shine at the Filmed Entertainment segment and higher set-top box depreciation at the DBS segment, partially offset by lower depreciation and amortization at the Other segment due to the disposals of Myspace, Fox Mobile and News Outdoor Russia.

Impairment and restructuring charges—During the three months ended September 30, 2011, the Company recorded approximately $91 million of restructuring charges in the unaudited consolidated statements of operations, of which $88 million related to the newspaper businesses. The Company has reorganized portions of the U.K. newspaper business and has recorded a restructuring charge in the first quarter of fiscal 2012 primarily for termination benefits as a result of the shutdown of The News of the World and certain organizational restructurings at other newspapers.

During the three months ended September 30, 2010, the Company recorded approximately $7 million of restructuring charges in the unaudited consolidated statements of operations. The restructuring charges reflect a $5 million charge related to a restructuring program at the international cable channels and a $2 million charge related to additional accretion on facility termination obligations.

Equity earnings of affiliates—Equity earnings of affiliates increased $27 million for the three months ended September 30, 2011, as compared to the corresponding period of fiscal 2011. The increase is primarily due to improved results from Sky Deutschland and BSkyB, partially offset by the absence of a gain recognized by BSkyB in the corresponding period of fiscal 2011 related to a business disposal.


	For the three months ended September 30,
	2011			2010			% Change
	(in millions, except %)
DBS equity affiliates	$	123		$	103			19	%
Cable channel equity affiliates		—			(3	)		(100	)%
Other equity affiliates		(2	)		(6	)		(67	)%

Total equity earnings of affiliates	$	121		$	94			29	%

Interest expense, net—Interest expense, net increased $26 million for the three months ended September 30, 2011 as compared to the corresponding period of fiscal 2011, primarily due to interest related to the $2.5 billion in senior notes issued in February 2011, partially offset by the fiscal 2011 partial repayment of the $500 million senior debentures due February 2013.

Interest income—Interest income increased $10 million for the three months ended September 30, 2011, respectively, as compared to the corresponding period of fiscal 2011, primarily due to higher cash balances and higher interest rates.

Other, net—


	For the three months ended September 30,
	2011			2010
	(in millions)
Change in fair value of SkyD convertible securities^(a)	$	(82	)	$	—
BSkyB termination fee^(a)		(63	)		—
Other		15			(10	)

Total Other, net	$	(130	)	$	(10	)

^(a)	See Note 6—Investments to the accompanying unaudited consolidated financial statements.

Income tax expense—The effective income tax rate for the three months ended September 30, 2011 was 26% which was lower than the statutory rate of 35%, primarily due to the recognition of tax benefits from the disposition of certain businesses and permanent differences.

The effective income tax rate for the three months ended September 30, 2010 was 21% which was lower than the statutory rate of 35%, primarily due to the resolution of tax matters of approximately $90 million and permanent differences.

Net income—Net income decreased for the three months ended September 30, 2011 as compared to the corresponding period of fiscal 2011, primarily due to higher operating and selling, general and administrative expenses, the BSkyB termination fee and change in fair value of SkyD convertible securities noted above, partially offset by the revenue increase noted above.

Net income attributable to noncontrolling interests—Net income attributable to noncontrolling interests increased for the three months ended September 30, 2011 as compared to the corresponding period of fiscal 2011, primarily due to higher results at the Company’s majority owned businesses.

Segment Analysis:

The following table sets forth the Company’s revenues and segment operating income for the three months ended September 30, 2011 as compared to the three months ended September 30, 2010.


	For the three months ended September 30,
	2011			2010			% Change
	(in millions, except %)
Revenues:
Cable Network Programming	$	2,120		$	1,872			13	%
Filmed Entertainment		1,778			1,503			18	%
Television		923			851			8	%
Direct Broadcast Satellite Television		922			856			8	%
Publishing		2,069			2,046			1	%
Other		147			298			(51	)%

Total revenues	$	7,959		$	7,426			7	%


Segment operating income:
Cable Network Programming	$	775		$	659			18	%
Filmed Entertainment		347			280			24	%
Television		133			105			27	%
Direct Broadcast Satellite Television		119			82			45	%
Publishing		110			178			(38	)%
Other		(99	)		(156	)		(37	)%

Total segment operating income	$	1,385		$	1,148			21	%

Management believes that total segment operating income is an appropriate measure for evaluating the operating performance of the Company’s business segments because it is the primary measure used by the Company’s chief operating decision maker to evaluate the performance and allocate resources within the Company’s businesses. Total segment operating income provides management, investors and equity analysts a measure to analyze 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). The following table reconciles total segment operating income to income before income tax expense.


	For the three months ended September 30,
	2011			2010
	(in millions)
Total segment operating income	$	1,385		$	1,148
Impairment and restructuring charges		(91	)		(7	)
Equity earnings of affiliates		121			94
Interest expense, net		(258	)		(232	)
Interest income		36			26
Other, net		(130	)		(10	)

Income before income tax expense	$	1,063		$	1,019

Cable Network Programming (27% and 25% of the Company’s consolidated revenues in the first three months of fiscal 2012 and 2011, respectively)

For the three months ended September 30, 2011, revenues at the Cable Network Programming segment increased $248 million, or 13%, as compared to the corresponding period of fiscal 2011 primarily due to higher net affiliate and advertising revenues. For the three months ended September 30, 2011, domestic net affiliate and advertising revenues increased 9% and 13%, respectively, primarily due to increases at FX and FOX News, as well as higher net affiliate revenue at the RSNs. For the three months ended September 30, 2011, international net affiliate and advertising revenues increased 24% and 23%, respectively, primarily due to increases at FIC and STAR.

For the three months ended September 30, 2011, domestic net affiliate revenues increased primarily due to higher average rates per subscriber and a higher number of subscribers. Domestic advertising revenues increased due to higher pricing and ratings at FX and higher pricing at Fox News.

The Company’s international cable operations’ revenues increased for the three months ended September 30, 2011 as compared to the corresponding period of fiscal 2011, primarily due to higher net affiliate and advertising revenues at FIC and STAR. The higher net affiliate revenues resulted primarily from increases in the number of subscribers at FIC and STAR in India. The higher advertising revenues at STAR in India were primarily due to higher pricing across channels due to increased market share and improved ratings, while the strengthening of the advertising markets led to improvements at existing FIC channels in Latin America.

For the three months ended September 30, 2011, operating income at the Cable Network Programming segment increased $116 million, or 18%, as compared to the corresponding period of fiscal 2011, primarily due to the revenue increases noted above. These revenue increases were partially offset by a $132 million increase in expenses for the three months ended September 30, 2011, primarily due to higher sports rights amortization and higher entertainment programming costs.

Filmed Entertainment (22% and 20% of the Company’s consolidated revenues in the first three months of fiscal 2012 and 2011, respectively)

For the three months ended September 30, 2011, revenues at the Filmed Entertainment segment increased $275 million, or 18%, as compared to the corresponding period of fiscal 2011. The revenue increase was primarily due to the inclusion of revenues from Shine which was acquired in fiscal 2011. Also contributing to the increase was the worldwide theatrical success of Rise of the Planet of the Apes, the worldwide home entertainment performances of Rio and X-Men: First Class, the domestic pay television availability of Black Swan and higher licensing revenues from Avatar. The corresponding period in fiscal 2011 included the international pay television availability of Ice Age: Dawn of the Dinosaurs and the worldwide home entertainment success of Percy Jackson and the Olympians: The Lightning Thief.

For the three months ended September 30, 2011, the Filmed Entertainment segment’s operating income increased $67 million, or 24% as compared to the corresponding period of fiscal 2011. The increase in operating income was primarily due to the revenue increases noted above and lower releasing costs, partially offset by the inclusion of amortization expense from Shine which was acquired in fiscal 2011, higher amortization of production costs and higher participation costs.

Television (12% and 11% of the Company’s consolidated revenues in the first three months of fiscal 2012 and 2011, respectively)

For the three months ended September 30, 2011, revenues at the Television segment increased $72 million, or 8%, as compared to the corresponding period of fiscal 2011, primarily due to increased advertising revenues at FOX, higher NFL revenues as well as higher retransmission consent revenues. The increase at FOX was due to the broadcast of the Emmy^® Awards during fiscal 2012 and the NFL increase was due to an additional broadcast week and higher pricing. These revenue increases were partially offset by lower political advertising revenues at the television stations owned by the Company due to the 2010 mid-term elections in fiscal 2011.

The Television segment reported an increase in operating income for the three months ended September 30, 2011 of $28 million, or 27%, as compared to the corresponding period of fiscal 2011. The increase was primarily due to the revenue increases noted above and lower entertainment programming costs, partially offset by increased NFL programming and production costs resulting from one additional broadcast week as compared to the corresponding period of fiscal 2011 and increased marketing costs at FOX, in support of the launch of the new series Terra Nova, The New Girl and X-Factor, which premiered during the first quarter of fiscal 2012.

Direct Broadcast Satellite Television (11% and 12% of the Company’s consolidated revenues in the first three months of fiscal 2012 and 2011, respectively)

For the three months ended September 30, 2011, SKY Italia’s revenues increased $66 million, or 8%, as compared to the corresponding period of fiscal 2011, primarily due to favorable foreign exchange fluctuations. Revenue, on a local currency basis, was lower by 2%, as compared to the corresponding period of fiscal 2011 primarily due to the absence of FIFA World Cup revenues in the current quarter. SKY Italia had a net increase of approximately 34,000 subscribers during the first quarter of fiscal year 2012, which increased SKY Italia’s total subscriber base to 5 million at September 30, 2011. The total churn for the three months ended September 30, 2011 was approximately 157,000 subscribers on an average subscriber base of 5 million, as compared to churn of approximately 135,000 subscribers on an average subscriber base of 4.8 million in the corresponding period of fiscal 2011. Subscriber churn for the period represents the number of SKY Italia subscribers whose service was disconnected during the period.

Average revenue per subscriber (“ARPU”) of approximately €40 in the three months ended September 30, 2011 decreased from approximately €43 reported in the corresponding period of fiscal 2011. The decrease in ARPU for the three months ended September 30, 2011 was primarily due to lower average tier mix and the timing of various pricing promotions. SKY Italia calculates ARPU by dividing total subscriber-related revenues for the period by the average subscribers for the period and dividing that amount by the number of months in the period. Subscriber-related revenues are comprised of total subscription revenue, pay-per-view revenue and equipment rental revenue for the period. Average subscribers are calculated for the respective periods by adding the beginning and ending subscribers for the period and dividing by two.

Subscriber acquisition costs per subscriber (“SAC”) of approximately €315 in the first quarter of fiscal 2012 decreased from the first quarter of fiscal 2011, primarily due to lower marketing costs. SAC is calculated by dividing total subscriber acquisition costs for a period by the number of gross SKY Italia subscribers added during the period. Subscriber acquisition costs include the cost of the commissions paid to retailers and other distributors, the cost of equipment sold directly by SKY Italia to subscribers and the costs related to installation and acquisition advertising net of any upfront activation fee. SKY Italia excludes the value of equipment capitalized under SKY Italia’s equipment lease program, as well as payments and the value of returned equipment related to disconnected lease program subscribers from subscriber acquisition costs.

For the three months ended September 30, 2011, SKY Italia’s operating income increased $37 million, or 45%, primarily due to favorable foreign exchange fluctuations, lower programming acquisition costs due to the absence of the FIFA World Cup, lower aggregate subscriber acquisition costs noted above and the absence of prior year’s rebranding campaign. During the three months ended September 30, 2011, the weakening of the U.S. dollar against the Euro resulted in an increase in operating income of approximately 13%, as compared to the corresponding period of fiscal 2011.

Publishing (26% and 28% of the Company’s consolidated revenues in the first three months of fiscal 2012 and 2011, respectively)

For the three months ended September 30, 2011, revenues at the Publishing segment increased $23 million, or 1%, as compared to the corresponding period of fiscal 2011, primarily due to increased revenues at the Australian newspapers due to favorable foreign exchange fluctuations and higher advertising and circulation revenues at The Wall Street Journal. Newspaper revenue on a local currency basis in Australia was lower by 7% as compared to the corresponding period of fiscal 2011, primarily due to lower advertising and circulation revenues. In addition, revenues were lower at the U.K. newspapers, principally due to the shutdown of The News of the World in July 2011, and at the integrated marketing services business resulting from lower volume of in-store marketing products. The weakening of the U.S. dollar against local currencies, primarily the Australian dollar, resulted in a revenue increase of approximately $118 million, or 6%, for the three months ended September 30, 2011, as compared to the corresponding period of fiscal 2011.

For the three months ended September 30, 2011, operating income at the Publishing segment decreased $68 million, or 38%, as compared to the corresponding period of fiscal 2011. The decrease in operating income for the three months ended September 30, 2011 was primarily due to the shutdown of The News of the World and lower revenues at the integrated marketing services business and at the Australian newspapers as noted above. The operating income decreases were partially offset by increased operating income at Dow Jones. The weakening of the U.S. dollar against local currencies, primarily the Australian Dollar, resulted in an operating income increase of approximately $11 million, or 6%, for the three months ended September 30, 2011, as compared to the corresponding period of fiscal 2011.

Other (2% and 4% of the Company’s consolidated revenues in the first three months of fiscal 2012 and 2011, respectively)

For the three months ended September 30, 2011, revenues at the Other segment decreased approximately $151 million, or 51%, as compared to the corresponding period of fiscal 2011 primarily due to decreased revenues resulting from the disposals of Myspace and Fox Mobile in fiscal 2011 and News Outdoor Russia in July 2011. The revenue decreases were partially offset by the inclusion of revenues from Wireless Generation which was acquired in fiscal 2011.

Operating results for the three months ended September 30, 2011 improved $57 million, or 37%, as compared to the corresponding period of fiscal 2011, primarily due to the absence of operating losses from Myspace.

Liquidity and Capital Resources

Current Financial Condition

The Company’s principal source of liquidity is internally generated funds. The Company also has a $2.25 billion revolving credit facility, which expires in May 2012, and has access to various film co-production alternatives to supplement its cash flows. In addition, the Company has access to the worldwide capital markets, subject to market conditions. As of September 30, 2011, the availability under the revolving credit facility was reduced by stand-by letters of credit issued which totaled approximately $74 million. As of September 30, 2011, the Company was in compliance with all of the covenants under the revolving credit facility, and it does not anticipate any violation of such covenants. The Company’s internally generated funds are highly dependent upon the state of the advertising markets and public acceptance of its film and television products.

The principal uses of cash that affect the Company’s liquidity position include the following: investments in the production and distribution of new feature films and television programs; the acquisition of and payments under programming rights for entertainment and sports programming; paper purchases; operational expenditures including employee costs; capital expenditures; interest expenses; income tax payments; investments in associated entities; dividends; acquisitions; debt repayments; and stock repurchases.

The Company has evaluated, and expects to continue to evaluate, possible acquisitions and dispositions of certain businesses. Such transactions may be material and may involve cash, the Company’s securities or the assumption of additional indebtedness.

Sources and uses of cash

Net cash provided by operating activities for the three months ended September 30, 2011 and 2010 was as follows (in millions):


For the three months ended September 30,	2011		2010
Net cash provided by operating activities	$	424	$	499

The decrease in net cash provided by operating activities during the three months ended September 30, 2011 as compared to the corresponding period of fiscal 2011 primarily reflects higher sports rights and programming payments and higher interest payments. These decreases were partially offset by higher affiliate receipts at the Cable Network Programming segment and lower tax payments.

Net cash used in investing activities for the three months ended September 30, 2011 and 2010 was as follows (in millions):


For the three months ended September 30,	2011			2010
Net cash used in investing activities	$	(93	)	$	(411	)

The decrease in net cash used in investing activities during the three months ended September 30, 2011 as compared to the corresponding period of fiscal 2011 was primarily due to higher cash proceeds from disposals as a result of the disposition of News Outdoor Russia during the three months ended September 30, 2011.

Net cash used in financing activities for the three months ended September 30, 2011 and 2010 was as follows (in millions):


For the three months ended September 30,	2011			2010
Net cash used in financing activities	$	(1,315	)	$	(133	)

The increase in net cash used in financing activities for the three months ended September 30, 2011 as compared to the three months ended September 30, 2010 was primarily due to share repurchases of approximately $1,272 million during the first quarter of fiscal 2012. The Company repurchased 77.2 million shares during the first quarter of fiscal 2012 with no comparable share repurchases in the first quarter of fiscal 2011.

Debt Instruments


	For the three months ended September 30,
	2011			2010
	(in millions)
Borrowings
All other		—			1

Total borrowings	$	—		$	1

Repayments of borrowings
Bank loans		(32	)		(14	)
All other		—			(2	)

Total repayment of borrowings	$	(32	)	$	(16	)

Ratings of the Public Debt

The table below summarizes the Company’s credit ratings as of September 30, 2011.


Rating Agency	Senior Debt	Outlook
Moody’s	Baa 1	Stable
S&P	BBB+	CreditWatch/Negative

Revolving Credit Agreement

In May 2007, NAI entered into a credit agreement (the “Credit Agreement”), among NAI as Borrower, the Company as Parent Guarantor, the lenders named therein (the “Lenders”), Citibank, N.A. as Administrative Agent and JPMorgan Chase Bank, N.A. as Syndication Agent. The Credit Agreement provides a $2.25 billion unsecured revolving credit facility with a sub-limit of $600 million available for the issuance of letters of credit and has a maturity date of May 2012. Borrowings are in U.S. dollars only, while letters of credit are issuable in U.S. dollars or Euros. The significant terms of the agreement include the requirement that the Company maintain specific leverage ratios and limitations on secured indebtedness. NAI pays a facility fee of 0.08% regardless of facility usage. NAI pays interest for borrowings at LIBOR plus 0.27% and pays commission fees on letters of credit at 0.27%. NAI pays an additional fee of 0.05% if borrowings under the facility exceed 50% of the committed facility. The interest and fees are based on the Company’s current debt rating. As of September 30, 2011, approximately $74 million in standby letters of credit, for the benefit of third parties, were outstanding.

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. Other than as previously disclosed in the accompanying notes to the Company’s unaudited consolidated financial statements, the Company’s commitments have not changed significantly from the disclosures included in the Company’s Form 10-K filed with the SEC on August 15, 2011.

Guarantees

The Company’s guarantees have not changed significantly from disclosures included in the Company’s Form 10-K filed with the SEC on August 15, 2011.

Contingencies

Other than as disclosed in the notes to the accompanying unaudited Consolidated Financial Statements of News Corporation, the Company is party to several purchase and sale arrangements which become exercisable over the next ten years by the Company or the counter-party to the agreement. In the next twelve months, none of these arrangements that become exercisable are material. Purchase arrangements that are exercisable by the counter-party to the agreement, and that are outside the sole control of the Company, are accounted for in accordance with ASC 480-10-S99-3A “Distinguishing Liabilities from Equity.” Accordingly, the fair values of such purchase arrangements are classified in redeemable noncontrolling interests.

As disclosed in the notes to the accompanying unaudited Consolidated Financial Statements of News Corporation, U.K. and U.S. regulators and governmental authorities are conducting investigations after allegations of phone hacking and inappropriate payments to police at our former publication, The News of the World, and other related matters, including investigations into whether similar conduct may have occurred at the Company’s subsidiaries outside of the U.K. The Company is cooperating fully with these investigations. It is possible that these proceedings could damage our reputation and might impair our ability to conduct our business.

The Company is not able to predict the ultimate outcome or cost associated with these investigations. Violations of law may result in civil, administrative or criminal fines or penalties. The Company has admitted liability in a number of civil cases related to the phone hacking allegations and has settled a number of cases. At September 30, 2011, the Company has provided for its best estimate of the liability for the claims that have been filed. The Company has announced a process under which parties can pursue claims against the Company, and management believes that it is probable that additional claims will be filed. It is not possible to estimate the liability for such additional claims given the early stage of this matter and 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 for such matters. Any fees, expenses, fines, penalties, judgments or settlements which might be incurred by the Company in connection with the various proceedings could affect the Company’s results of operations and financial condition.

Intangible Assets

The Company has a significant amount of intangible assets, including goodwill, FCC licenses, and other copyright products and trademarks. Intangible 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. The judgments made in determining the estimated fair value assigned to each class of intangible assets acquired, their reporting unit, as well as their useful lives can significantly impact net income.

The Company accounts for its business acquisitions under the purchase method of accounting. The total cost of acquisitions is allocated to the underlying net assets, based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the tangible net assets acquired is recorded as intangibles. Amounts recorded as goodwill are assigned to one or more reporting units. 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 economic characteristics and the identification of existing business units that benefit from the acquired goodwill. The Company allocates goodwill to disposed businesses using the relative fair value method.

Carrying values of goodwill and intangible assets with indefinite lives are reviewed at least annually for possible impairment in accordance with ASC 350. The Company’s impairment review is based on, among other methods, a discounted cash flow approach that requires significant management judgments. The Company uses its judgment in assessing whether assets may have become impaired between annual valuations. 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.

The Company uses the direct valuation method to value identifiable intangibles for purchase accounting and impairment testing. The direct valuation method used for FCC licenses requires, among other inputs, the use of published industry data that are based on subjective judgments about future advertising revenues in the markets where the Company owns television stations. This method also involves the use of management’s judgment in estimating an appropriate discount rate reflecting the risk of a market participant in the U.S. broadcast industry. The resulting fair values for FCC licenses are sensitive to these long-term assumptions and any variations to such assumptions could result in an impairment to existing carrying values in future periods and such impairment could be material.

The Company’s goodwill impairment reviews are determined using a two-step process. The first step of the process is to compare the fair value of a reporting unit with its carrying amount, including goodwill. In performing the first step, the Company determines the fair value of a reporting unit by primarily 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, perpetual 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 have been 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. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment review is not necessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment review is required to be performed to estimate the implied fair value of the reporting unit’s goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the estimated fair value of the reporting unit was the purchase price paid. The implied fair value of the reporting unit’s goodwill is compared with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

During fiscal 2011, the Company recorded an impairment charge for its Digital Media Group which is considered a reporting unit under ASC 350. The Company continues to monitor this reporting unit due to impairment charges recorded in fiscal 2011. Goodwill at risk for future impairment related to this reporting unit totaled $242 million as of September 30, 2011. The Company will continue to monitor its goodwill and intangible assets for possible future impairment.

Recent Accounting Pronouncements

See Note 1—Basis of Presentation to the accompanying unaudited consolidated financial statements for discussion of recent accounting pronouncements.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has exposure to several types of market risk: changes in foreign currency exchange rates, interest 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 exchange rate risk, interest 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 Exchange Rates

The Company conducts operations in four principal currencies: the U.S. dollar; the British pound sterling; the Euro; and the Australian dollar. These currencies operate as the functional currency for the Company’s U.S., United Kingdom, Italian and Australian operations, respectively. Cash is managed centrally within each of the four 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, draw downs in the appropriate local currency are available from intercompany borrowings. Since earnings of the Company’s Australian, United Kingdom and Italian operations are expected to be reinvested in those businesses indefinitely, the Company does not hedge its investment in the net assets of those foreign operations.

At September 30, 2011, the Company’s outstanding financial instruments with foreign currency exchange rate risk exposure had an aggregate fair value of $129 million (including the Company’s non-U.S. dollar-denominated fixed rate debt). The potential increase in the fair values of these instruments resulting from a 10% adverse change in quoted foreign currency exchange rates would be approximately $69 million at September 30, 2011.

Interest Rates

The Company’s current financing arrangements and facilities include approximately $15,446 million of outstanding fixed-rate debt and the Credit Agreement, which carries variable interest. Fixed and variable rate debts are impacted differently by changes in interest rates. A change in the interest rate or yield of fixed rate debt will only impact the fair market value of such debt, while a change in the interest rate of variable debt will impact interest expense, as well as the amount of cash required to service such debt. As of September 30, 2011, substantially all of the Company’s financial instruments with exposure to interest rate risk were denominated in U.S. dollars and had an aggregate fair value of approximately $17,309 million. The potential change in fair market value for these financial instruments from an adverse 10% change in quoted interest rates across all maturities, often referred to as a parallel shift in the yield curve, would be approximately $966 million at September 30, 2011.

Stock Prices

The Company has common stock investments in several publicly traded companies that are subject to market price volatility. These investments principally represent the Company’s equity affiliates and had an aggregate fair value of approximately $8,935 million as of September 30, 2011. A hypothetical decrease in the market price of these investments of 10% would result in a fair value of approximately $8,042 million. Such a hypothetical decrease would result in a before tax decrease in comprehensive income of approximately $17 million, as any changes in fair value of the Company’s equity affiliates are not recognized unless deemed other-than-temporary, as these investments are accounted for under the equity method.

Credit Risk

Cash and cash equivalents are maintained with several 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.

ITEM 4.

CONTROLS AND PROCEDURES

(a)

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chairman and 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 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report. Based on such evaluation, the Company’s Chairman and 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 it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chairman and Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b)

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 15(d)-15(f) under the Exchange Act) during the Company’s first quarter of fiscal 2012 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. Other Information

ITEM 1.

LEGAL PROCEEDINGS

Intermix

On August 26, 2005 and August 30, 2005, two purported class action lawsuits captioned, respectively, Ron Sheppard v. Richard Rosenblatt et. al., and John Friedmann v. Intermix Media, Inc. et al., were filed in the California Superior Court, County of Los Angeles. Both lawsuits named as defendants all of the then incumbent members of the board of directors of Intermix Media, Inc. (“Intermix”), including Mr. Rosenblatt, Intermix’s former Chief Executive Officer, and certain entities affiliated with VantagePoint Venture Partners (“VantagePoint”), a former major Intermix stockholder. The complaints alleged that, in pursuing the transaction whereby Intermix was to be acquired by Fox Interactive Media, a subsidiary of the Company (the “FIM Transaction”), and approving the related merger agreement, the director defendants breached their fiduciary duties to Intermix stockholders by, among other things, engaging in self-dealing and failing to obtain the highest price reasonably available for Intermix and its stockholders. The complaints further alleged that the merger agreement resulted from a flawed process and that the defendants tailored the terms of the merger to advance their own interests. The FIM Transaction was consummated on September 30, 2005. The Friedmann and Sheppard lawsuits were subsequently consolidated and, on January 17, 2006, a consolidated amended complaint was filed (the “Intermix Media Shareholder Litigation”). The plaintiffs in the consolidated action sought various forms of declaratory relief, damages, disgorgement and fees and costs. On March 20, 2006, the court ordered that substantially identical claims asserted in a separate state action filed by Brad Greenspan, captioned Greenspan v. Intermix Media, Inc., et al., be severed and related to the Intermix Media Shareholder Litigation. The defendants filed demurrers seeking dismissal of all claims in the Intermix Media Shareholder Litigation and the severed Greenspan claims. On October 6, 2006, the court sustained the demurrers without leave to amend. On December 13, 2006, the court dismissed the complaints and entered judgment for the defendants. Greenspan and plaintiffs in the Intermix Media Shareholder Litigation filed notices of appeal. The Court of Appeal heard arguments on the fully briefed appeal on October 23, 2008. On November 11, 2008, the Court of Appeal issued an unpublished opinion affirming the lower court’s dismissal on all counts. On December 19, 2008, stockholder appellants filed a Petition for Review with the California Supreme Court. The California Supreme Court denied review on February 18, 2009 and the judgment is now final.

and the claims against the Investment Banks were dismissed with prejudice. The Section 14(a), Section 20(a) and the breach of fiduciary duty claims related to the FIM Transaction remain against the officer and director defendants and the VantagePoint defendants. On November 14, 2008, plaintiff filed a motion for class certification to which defendants filed their opposition on January 14, 2009. On June 22, 2009, the court granted plaintiff’s motion for class certification, certifying a class of all holders of Intermix common stock from July 18, 2005 through consummation of the FIM Transaction, who were allegedly harmed by defendants’ improper conduct as set forth in the complaint. The parties have completed fact and expert discovery. On June 17, 2010, the court granted in part and denied in part defendants’ summary judgment motion filed on October 19, 2009. Specifically, the court denied plaintiff’s motion for summary adjudication of a factual issue and denied defendants’ motion to exclude plaintiff’s damages expert, which was filed on November 30, 2009. In the court’s June 17 order, the court found that plaintiff could not proceed on any fiduciary duty claim based upon alleged violations of the duty of care, but found material issues of fact prohibiting summary judgment on alleged violations of fiduciary duty of loyalty. On plaintiff’s Section 14(a) claim, the court found material issues of fact that prohibited summary judgment on the entire claim, but granted defendants’ motion as to certain purported omissions, finding the allegedly omitted information immaterial. Further, the court granted defendants’ motion as to two damage theories for the Section 14(a) claim, finding benefit of the bargain damages not viable and lost opportunity damages too speculative, and permitting plaintiff to proceed only based upon a theory of out-of-pocket damages. No trial date was set. On October 21, 2010, the parties agreed to a settlement of the action, which is subject to approval by the court. A formal stipulation of settlement was submitted to the court for its approval on December 28, 2010. Accordingly, the Company has recognized the terms of this settlement, which was not material to the Company, in its results of operations. On February 18, 2011, the court granted preliminary approval of the settlement. Plaintiff’s counsel supervised notice of the settlement to the class. The notice provided class members with an opportunity to object. Two shareholders filed objections to the settlement with the court in April 2011. Both objectors had counsel appear on their behalf at a hearing on May 16, 2011 where the court considered plaintiff’s motion for final approval of the settlement and plaintiff’s counsel’s motion for attorneys’ fees, which will come out of the settlement funds. At the hearing, the court did not rule on the motions and instead ordered that plaintiff, objector Trafelet & Co., and defendants submit joint briefing with respect to certain of Trafelet’s objections. The joint brief was filed on June 10, 2011. The joint brief narrowed the objections to allocation of the settlement amount and sufficiency of the notice as it pertains to how the settlement funds will be allocated. The joint brief contained no objection to the settlement itself. On September 29, 2011, the court entered an order rejecting the settlement in so far as the court found that the proposed plan of allocation was not fair, adequate and reasonable because certain members of the certified class are releasing their claims under the settlement, but under the proposed plan, they will not be receiving any of the settlement proceeds. The court ordered the parties to submit a new plan of allocation within 30 days and stated that it will issue appropriate orders after reviewing the new plan. The court order has no effect on the settlement amount.

Shareholder Litigation

Chancery by a purported shareholder of the Company, New Orleans Employees’ Retirement System, on March 25, 2011 (the “New Orleans Employees’ Retirement Litigation”). Both the Amalgamated Bank Litigation and the New Orleans Employees’ Retirement Litigation were consolidated on April 6, 2011 (the “Consolidated Action”), with The Amalgamated Bank’s complaint serving as the operative complaint. The Consolidated Action was captioned In re News Corp. Shareholder Derivative Litigation. On April 9, 2011, the court entered a scheduling order governing the filing of an amended complaint and briefing on potential motions to dismiss.

of Incorporation and (ii) taking such other action as may be necessary to place before shareholders for a vote on corporate governance policies that: (a) appoint a non-executive Chair of the Board who is not related to the Murdoch family or extended family; (b) appoint an independent Chair of the Board’s Audit Committee; (c) appoint at least three independent directors to the Governance and Nominating Committees; (d) strengthen the Board’s supervision of financial reporting processes and implement procedures for greater shareholder input into the policies and guidelines of the Board; and (e) appropriately test and strengthen the internal and audit control functions.

The Wilder Litigation, the Stricklin Litigation and the Iron Workers Litigation are all now before the judge in the Shields Litigation.

The Company and its Board of Directors believe these shareholder claims are entirely without merit, and intend to vigorously defend these actions.

The News of the World Investigations and Litigation

HarperCollins

Other

ITEM 1A.

RISK FACTORS

Prospective investors should consider carefully the risk factors set forth below before making an investment in the Company’s securities.

A Decline in Advertising Expenditures Could Cause the Company’s 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 on or in its television stations, broadcast and cable networks, newspapers, integrated marketing services, digital media properties and direct broadcast satellite services. Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions, as well as budgeting and buying patterns. A decline in the economic prospects of advertisers or the economy in general could alter current or prospective advertisers’ spending priorities. Demand for the Company’s products is also a factor in determining advertising rates. For example, ratings points for the Company’s television stations, broadcast and cable networks and circulation levels for the Company’s newspapers are factors that are weighed when determining advertising rates, and with respect to the Company’s television stations and broadcast and television networks, when determining the affiliate rates received by the Company. In addition, newer technologies, including new video formats, streaming and downloading capabilities via the Internet, video-on-demand, personal video recorders, digital distribution models for books and other devices and technologies are increasing the number of media and entertainment choices available to audiences. Some of these devices and technologies allow users to view television or motion pictures from a remote location or on a time-delayed basis and provide users the ability to fast-forward, rewind, pause and skip programming and advertisements. These technological developments are increasing the number of media and entertainment choices available to audiences and may cause changes in consumer behavior that could affect the attractiveness of the Company’s offerings to viewers, advertisers and/or distributors. A decrease in advertising expenditures or reduced demand for the Company’s offerings can lead to a reduction in pricing and advertising spending, which could have an adverse effect on the Company’s businesses.

Global Economic Conditions May Have a Continuing Adverse Effect on the Company’s Business.

The United States and global economies have undergone a period of economic uncertainty, which caused, 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 and lower consumer net worth. 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 has had and may continue to have an adverse effect on the Company’s business, results of operations, financial condition and liquidity. A continued decline in these economic conditions could further impact the Company’s business, reduce the Company’s advertising and other revenues and negatively impact the performance of its motion pictures and home entertainment releases, television operations, newspapers, books and other consumer products. In addition, these conditions could also impair the ability of those with whom the Company does business to satisfy their obligations to the Company. As a result, the Company’s results of operations may be adversely affected. Although the Company believes that its operating cash flow and current access to capital and credit markets, including the Company’s existing credit facility, will give it the ability to meet its financial needs for the foreseeable future, there can be no assurance that continued or increased volatility and disruption in the global capital and credit markets will not impair the Company’s liquidity or increase its cost of borrowing.

Acceptance of the Company’s Film and Television Programming by the Public is Difficult to Predict, Which Could Lead to Fluctuations in Revenues.

Feature film and television production and distribution are speculative businesses since the revenues derived from the production and distribution of a feature film or television series depend primarily upon its acceptance by the public, which is difficult to predict. The commercial success of a feature film or television series also depends upon the quality and acceptance of other competing films and television series released into the marketplace at or

near the same time, the availability of a growing number of alternative forms of entertainment and leisure time activities, general economic conditions and their effects on consumer spending and other tangible and intangible factors, all of which can change and cannot be predicted with certainty. Further, the theatrical success of a feature film and the audience ratings for a television series are generally key factors in generating revenues from other distribution channels, such as home entertainment and premium pay television, with respect to feature films, and syndication, with respect to television series.

The Company Could Suffer Losses Due to Asset Impairment Charges for Goodwill, Intangible Assets (including FCC Licenses) and Programming.

In accordance with applicable generally accepted accounting principles, the Company performs an annual impairment assessment of its recorded goodwill and indefinite-lived intangible assets, including FCC licenses, during the fourth quarter of each fiscal year. The Company also continually evaluates whether current factors or indicators, such as the prevailing conditions in the capital markets, require the performance of an interim impairment assessment of those assets, as well as other investments and other long-lived assets. 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, particularly those in the Publishing, Television and Cable Network Programming segments. A downward revision in the fair value of a reporting unit, indefinite-lived intangible assets, investments or long-lived assets could result in an impairment and a non-cash charge would be required. Any such charge could be material to the Company’s reported net earnings.

Fluctuations in Foreign 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 the Company operations are conducted in foreign currencies. The value of these currencies fluctuates relative to the U.S. dollar. As a result, the Company is exposed to exchange rate fluctuations, which could have an adverse effect on its results of operations in a given period or in specific markets.

The Loss of Carriage Agreements Could Cause the Company’s Revenue and Operating Results to Decline Significantly in any Given Period or in Specific Markets.

The Company is dependent upon the maintenance of affiliation agreements with third party owned television stations and there can be no assurance that these affiliation agreements will be renewed in the future on terms acceptable to the Company. The loss of a significant number of these affiliation arrangements could reduce the distribution of FOX and MyNetworkTV and adversely affect the Company’s ability to sell national and local advertising time. Similarly, the Company’s cable networks maintain affiliation and carriage arrangements that enable them to reach a large percentage of cable and direct broadcast satellite households across the United States. The loss of a significant number of these arrangements or the loss of carriage on basic programming tiers could reduce the distribution of the Company’s cable networks, which may adversely affect those networks’ revenues from subscriber fees and their ability to sell national and local advertising time.

The Inability to Renew Sports Programming Rights Could Cause the Company’s Advertising Revenue to Decline Significantly in any Given Period or in Specific Markets.

The sports rights contracts between the Company, 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 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, as it relates to FOX, and could adversely affect the Company’s advertising and affiliate revenues. Upon renewal, the Company’s results could be adversely affected if escalations in sports programming rights costs are unmatched by increases in advertising rates and, in the case of cable networks, subscriber fees.

The Company relies on network and information systems and other technology that may be subject to disruption or misuse, which could result in improper disclosure of personal data or confidential information as well as increased costs or loss of revenue.

Network and information systems and other technologies, including those related to our network management, are important to our business activities. Network and information systems-related events, such as computer hackings, 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, could result in a disruption of our services or improper disclosure of personal data or confidential information. Improper disclosure of such information could harm our reputation, require us to expend resources to remedy such a security breach or subject us to liability under laws that protect personal data, resulting in increased costs or loss of revenue.

Technological Developments May Increase the Threat of Content Piracy and Signal Theft and Limit the Company’s Ability to Protect Its Intellectual Property Rights.

The Company seeks to limit the threat of content piracy and direct broadcast satellite programming signal theft; however, policing unauthorized use of the Company’s products and services and related intellectual property is often difficult and the steps taken by the Company may not in every case prevent the infringement by unauthorized third parties. Developments in technology, including digital copying, file compressing and the growing penetration of high-bandwidth Internet connections, increase the threat of content piracy by making it easier to duplicate and widely distribute pirated material. In addition, developments in software or devices that circumvent encryption technology increase the threat of unauthorized use and distribution of direct broadcast satellite programming signals. The Company has taken, and will continue to take, a variety of actions to combat piracy and signal theft, both individually and, in some instances, together with industry associations. 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 or signal theft. Content piracy and signal theft present a threat to the Company’s revenues from products and services, including, but not limited to, films, television shows, books and direct broadcast satellite programming.

The Company Must Respond to Changes in Consumer Behavior as a Result of New Technologies in Order to Remain Competitive.

Technology, particularly digital technology used in the entertainment industry, continues to evolve rapidly, leading to alternative methods for the delivery and storage of digital content. These technological advancements have driven changes in consumer behavior and have empowered consumers to seek more control over when, where and how they consume digital content. Content owners are increasingly delivering their content directly to consumers over the Internet, often without charge, and innovations in distribution platforms have enabled consumers to view such Internet-delivered content on televisions and portable devices. There is a risk that the Company’s responses to these changes and strategies to remain competitive, including distribution of its content on a “pay” basis, may not be adopted by consumers. In addition, enhanced Internet capabilities and other new media may reduce television viewership, the demand for DVDs and Blu-rays, the desire to see motion pictures in theaters and the demand for newspapers, which could negatively affect the Company’s revenues. In publishing, the trending toward digital media may drive down the price consumers are willing to spend on our products disproportionately to the costs associated with generating literary content. The Company’s failure to protect and exploit the value of its content, while responding to and developing new technology and business models to take advantage of advancements in technology and the latest consumer preferences, could have a significant adverse effect on the Company’s businesses and results of operations.

Labor Disputes May Have an Adverse Effect on the Company’s Business.

In a variety of the Company’s businesses, the Company and its partners engage the services of writers, directors, actors and other talent, trade employees and others who are subject to collective bargaining agreements, including employees of the Company’s film and television studio operations and newspapers. If the

Company or its partners are 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.

Changes in U.S. or Foreign Regulations May Have an Adverse Effect on the Company’s Business.

The Company is subject to a variety of U.S. and foreign regulations in the jurisdictions in which its businesses operate. In general, the television broadcasting and multichannel video programming and distribution industries in the United States are highly regulated by federal laws and regulations issued and administered by various federal agencies, including the FCC. The FCC generally regulates, among other things, the ownership of media, broadcast and multichannel video programming and technical operations of broadcast licensees. Our program services and online properties are subject to a variety of laws and regulations, including those relating to issues such as content regulation, user privacy and data protection, and consumer protection, among others. Further, the United States Congress, the FCC and state legislatures currently have under consideration, and may in the future adopt, new laws, regulations and policies regarding a wide variety of matters, including technological changes and measures relating to privacy and data security, which could, directly or indirectly, affect the operations and ownership of the Company’s U.S. media properties. Similarly, changes in regulations imposed by governments in other jurisdictions in which the Company, or entities in which the Company has an interest, operate could adversely affect its business and results of operations.

In addition, changes in tax laws, regulations or the interpretations thereof in the U.S. and other jurisdictions in which the Company has operations could affect the Company’s results of operations.

We face criminal investigations regarding allegations of phone hacking and inappropriate payments to police and other related matters and related civil lawsuits.

The Company has admitted liability in a number of civil cases related to the phone hacking allegations and has settled a number of cases. The Company has announced a process under which parties can pursue claims against the Company, and management believes that it is probable that additional claims will be filed.

We are not able to predict the ultimate outcome or cost of the investigations. Violations of law may result in civil, administrative or criminal fines or penalties. It is also possible that these proceedings could damage our reputation and might impair our ability to conduct our business. Any fees, expenses, fines, penalties, judgments or settlements which might be incurred by the Company in connection with the various proceedings could affect the Company’s results of operations and financial condition.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In June 2005, the Company announced a stock repurchase program under which the Company is authorized to acquire from time to time up to an aggregate of $3 billion in Class A Common Stock and Class B Common Stock. In May 2006, the Company announced that the Board increased the total amount of the stock repurchase program to $6 billion. In July 2011, the Company announced that the Board had authorized increasing the total amount of the stock repurchase program remaining by approximately $3.2 billion to $5 billion. The remaining authorized amount under the Company’s stock repurchase program at September 30, 2011, excluding commissions, was approximately $3.7 billion.

Below is a summary of the Company’s purchases of its Class A Common Stock during the three months ended September 30, 2011:


	Total Number of Shares Purchased		Average Price per Share		Total Cost of Purchase
					(in millions)
Common Stock—July Class A		—	$	—	$	—
Common Stock—August Class A		35,210,000		16.53		582
Common Stock—September Class A		42,000,000		16.43		690

Total		77,210,000			$	1,272

The Company did not purchase any of its Class B Common Stock during the three months ended September 30, 2011.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.

(REMOVED AND RESERVED)

ITEM 5.

OTHER INFORMATION

Not applicable.

ITEM 6.

EXHIBITS

(a)

Exhibits.


10.1		Form of Performance Stock Unit Agreement Settled in Stock-Settled Performance Stock Units.*

12.1		Ratio of Earnings to Fixed Charges.*

18.1		Preferability Letter Issued by Ernst & Young LLP regarding a change in accounting principle.*

31.1		Chairman and Chief Executive Officer Certification required by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.*

31.2		Chief Financial Officer Certification required by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.*

32.1		Certification of Chairman and Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes Oxley Act of 2002.**

101		The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 formatted in eXtensible Business Reporting Language: (i) Unaudited Consolidated Statements of Operations for the three months ended September 30, 2011 and 2010; (ii) Consolidated Balance Sheets at September 30, 2011 (unaudited) and June 30, 2011 (audited); (iii) Unaudited Consolidated Statements of Cash Flows for the three months ended September 30, 2011 and 2010; and (iv) Notes to the Unaudited Consolidated Financial Statements.**

*	Filed herewith.

**	Furnished herewith.

SIGNATURE

Pursuant to the requirements 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.


NEWS CORPORATION (Registrant)

By:		/s/ David F. DeVoe
		David F. DeVoe Senior Executive Vice President and Chief Financial Officer

Date: November 3, 2011