Twenty-First Century Fox Inc (FOXA): Gaining Australian Exposure Through News Corp (NWSA)

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With a more business-friendly government just elected in Australia, the country suddenly seems like the place to be. We here in the States, however, can sometimes be a bit America-centric with our investments. And that is only natural. It is far easier for us to understand and invest in American companies rather than to go searching for opportunities half a world away. Realizing that, the next order of business is to then be able to identify great American companies that can give us the international exposure we need.

News Corp (NASDAQ:NWS)

News Corp should break itself up
Now I know what you are thinking: “Break itself up? News Corp? Didn’t they just do that only two months ago?” Yes, you would be correct. The ‘old’ News Corp – now named Twenty-First Century Fox Inc (NASDAQ:FOXA) – spun-off its publishing division into the ‘new’ News Corp (NASDAQ:NWSA) earlier this year. In the divorce, Twenty-First Century Fox Inc (NASDAQ:FOXA) took with it all of the couple’s TV assets. Well, all except those from Australia, which together with other Australian assets form to create the country’s largest media company. At 36% of the ‘new’ News Corp (NASDAQ:NWSA)’s 2012 revenues, the Australian operations are so large, diverse and dominant that they could be a completely separate company in their own right.

No. 1 in Subscription TV
A 50-50 joint venture between the Australian telecom Telstra and News Corp (NASDAQ:NWSA), Foxtel is Australia’s largest subscription TV provider and one of the world’s most profitable. With 2.5 million subscribing households (up from 2.3 million a year ago), Foxtel is the provider of choice for more than 30% of the entire population of Australia.

Although a traditional cable and satellite TV company, Foxtel has recently begun to implement more innovative and forward thinking offerings. Launched on July 30 of this year, Foxtel Play is a Netflix-like Internet subscription service. Unlike Netflix though, which offers a limited selection of shows after they are broadcast on TV, Foxtel Play is actual live TV without the need for a traditional cable/satellite subscription. Subscribers of Foxtel Play can receive more than 40 full (same as cable) live channels and on-demand options though a user’s PC, Mac, tablet, smartphone, video game console or Internet connected TV. If only we had something like this in the States…

No. 1 in Sports
100% owned by News Corp (NASDAQ:NWSA), Fox Sports Australia is the country’s most watched sports programming provider with more than 9,000 hours of live sports annually. Fox Sports Australia has the largest portfolio of exclusive content popular with Australian sports fans, such as Australian Rules Football, the Rugby World Cup, the Asian Championship League (soccer), and the ICC Cricket World Cup, to name a small few.

Fox Sports Australia has experienced good revenue growth in recent years (from $373 million USD in 2010 to $484 million USD in 2012). Much like America however, the rising costs of sports content around the world will tend to slowly eat away at margins. Though still impressively high at 30.2% in 2012, those margins are down from 35.7% in 2010. That’s just the cost of doing business; obtaining great exclusive content that is in high demand.

No. 1 in News
With its corporate origins based in Australia, it should come as small surprise that News Corp (NASDAQ:NWSA) is Australia’s largest newspaper publisher with 63% of all newspaper circulation and 7 of the top 10 newspapers. Selling over 10.4 million newspapers each week, more than half of Australia’s adult population reads a News Corp publication.

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