News Corp. Bull's Rebuttal
by Yi-Hsin Chang ([email protected])

Back in Mulder and Scully's cramped office in the basement of FBI headquarters in downtown Washington, Scully is engrossed with the screen of her laptop when Mulder saunters in munching on a handful of sunflower seeds.

"Mulder, I've been reading up on News Corp. I didn't realize it was such a dynamic and innovative company. Time and time again it has broken the rules of the establishment and written its own rules. It's clearly a trendsetter that's setting the pace for the whole entertainment industry."

"Yeah, it's really ahead in the game when it comes to capitalizing on the entertainment value of sports. News Corp. won NFL broadcast rights from CBS, outbid Disney for a stake in Cablevision's regional sports channels, and now owns the L.A. Dodgers. The company even has broadcast rights to the Anaheim Angels, a team owned by Disney."

"Then there's the $1 billion offer to buy the incredibly popular Manchester United soccer team. Mulder, I just read a defense of News Corp.'s seemingly high bid by Harvey Schiller, of all people. He's president of Time Warner's Turner Sports division. He says that if you assume that 50 million households in Europe would be willing to pay $1 a month to watch Manchester United games, that would come to $600 million per year not counting revenue from actual ticket sales."

"Well, speaking of rivals, Disney Chairman Michael Eisner has said he can't compete with Rupert Murdoch on costs because Murdoch's a much bigger gambler than he is, and he says it's certainly paid off for News Corp. You know, Scully, the head of Fox Film, who used to work at Disney, has said if you're afraid to take chances, you should be in another business."

"Spending $200 million to make Titanic certainly was a big gamble that paid off in a big way. BSkyB in Britain and Star TV in Asia were also big bets in satellite technology that have given News Corp. the dominant position in Britain and the lead in Asia. Plus, the opportunities for growth in the entertainment industry lie in the emerging markets, and News Corp. is by far the most global among its competitors. Take China, the world's most populous country. News Corp. has a joint venture with the People's Daily that has built a Chinese-language website called ChinaByte, which saw traffic increase an astonishing 1,100% last year to reach 800,000 page views a day, making it one of the top three sites in the country. ChinaByte also launched a Titanic website in Chinese timed with the release of the movie in China. Closer to home, Fox Sports Online just launched the first Web sports-radio show."

"Scully, did you know three-quarters of the world's population is covered by satellite and TV platforms controlled by News Corp.? What many people don't realize is that in Murdoch's game, return on investment has to be measured in years, not months. We're talking about a ton of infrastructure that needs to be put in place, not to mention tailoring entertainment offerings to different cultures and sensibilities."

"You know, Mulder, some people complain that it's hard to get investor information on News Corp. because it's a foreign company. But I found quite a bit on the Internet, including news stories and what's on the company's website, plus the company is required to file a 20-F with the SEC once a year detailing its operations. With the spin-off of Fox Entertainment as an American company, News Corp.'s U.S. operations will become much more transparent. Though, really, one trade-off for less disclosure in a foreign company is the huge tax savings that can be had through smart tax planning."

"In his comments to shareholders at the company's annual meeting on Oct. 13, Murdoch stressed that the very purpose of the initial public offering is to help analysts, investors, and shareholders see the true value of News Corp. Murdoch's actually taking a cautious approach in these uncertain economic times. He has moved the company's short-term debt into long-term debt, leaving no significant repayments for at least five years. He's also keeping large sums of cash on hand and in the bank instead of making acquisitions and continuing to buy back shares, which boosts per-share earnings."

"Murdoch actually closed his comments to shareholders with something rather Foolish. He said, 'I remain uncertain of the immediate future and extremely confident of the long-term.' News Corp. is definitely a long-term play, Mulder."

"Sounds like you might become a shareholder, Scully."

"Let's just say I might try to get in on that Fox IPO..."

"The truth is out there, Scully..."

Next: The Bear Responds