DBRS Confirms News Corporation Finance Subsidiary Ratings at BBB, Changes Trend to Positive

DBRS has today confirmed the ratings of News Corporation’s finance subsidiaries (collectively, News Corp. or the Company) at BBB and changed the trends to Positive. The Positive trend reflects the increasing global diversity of News Corp’s business portfolio combined with the consistent integration successes that DBRS believes are driving growth in free cash flow and will lead to an improvement in the Company’s overall credit profile. This could, in the near- to medium-term, separate News Corp from its media peers within the BBB rating. The confirmation reflects the Company’s well-diversified mix of media businesses that generate strong cash flow from operations and a reasonable financial risk profile.

News Corp is successfully executing a strategy to become more of a content aggregator and is somewhat agnostic to the channel of delivery of its content, which DBRS views as positive in the highly competitive media industry. This results in the Company being nimble and more capable of exploiting opportunities as the media market continues to evolve. News Corp. continues to incrementally add new businesses such as its acquisition of Dow Jones & Company (Dow Jones) in December 2007. While the Dow Jones acquisition has given the Company more exposure to a slow growth, lower margin area of the media industry, DBRS believes News Corp can be successful in monetizing this franchise in both the developed world and in developing markets by expanding the print and newswire service.

The combination of News Corp.’s diversity in products, geographic reach and mix of stable and growth businesses within the media industry further supports the Positive trend. Furthermore, DBRS notes there is a clear growth trajectory being built around extending and integrating acquired companies which augment a diverse portfolio of stable businesses. The benefits of this can be observed in increased profitability as EBITDA margins for the overall portfolio have improved to approximately 20%, an increase of 170 basis points, over the last 24 months.

The Company has maintained a stable business risk profile through its diversified portfolio of businesses. This diversification is evidenced in the current period where its Television and Book Publishing units have experienced pressure; however the Company’s Filmed Entertainment and Satellite operations have experienced good growth. Rounding out the strategy, the Company is adding franchises such as MySpace with social networking and Dow Jones with additional newspapers and newswire services which provide alternative distribution opportunities for existing content as well as a source of content which can be repackaged and redistributed through additional channels. DBRS notes that as the Company has evolved with this strategy the percentage of revenue derived from advertising has declined from more than 40% a few years ago to less than 25% today, further strengthening the stability of the Company’s business risk profile.

News Corp. has moderately improved its financial risk profile despite carrying higher debt levels over the past few years. This was largely accomplished by growth in EBITDA and cash flow from operations. The Company, with robust levels of free cash flow, continues to have the flexibility to invest in new businesses and DBRS expects that this acquisitions strategy will continue to be executed.

Notes:
All figures are in U.S. dollars unless otherwise noted.
This rating is based on public information.