Chase Carey

March 31, 2010 World Screen

News Corporation, arguably the most international of the media conglomerates, has businesses spanning the globe, with pay-TV platforms in Europe, Latin America and Asia; a bouquet of 183 international channels broadcasting in 166 television markets; broadcast and cable TV networks in the U.S.; a major Hollywood studio; Internet sites; newspapers in the U.S., the U.K. and Australia; and one of the world’s leading English-language book publishers.

This content-production-and-distribution prowess helped News Corp. buck the economic downturn and post impressive financial results during the last three months of 2009, a year hammered by the worst global recession in decades. In the second quarter, in fact, the company’s total revenue increased by 10 percent to reach $8.7 billion. For the fiscal year ended June 30, 2009, revenues amounted to some $30 billion.

The underpinnings of this strong financial performance are a group of businesses that are diversified both in revenue and geographically, so that when one region, say, Europe, is experiencing a downturn, another, say, Asia, is already recovering. In fact, News Corp.’s healthy mix of advertiser-supported and subscription-based businesses have helped offset the global advertising slump.

Running the empire Rupert Murdoch built requires an executive who has had experience managing international businesses, and Chase Carey, the deputy chairman, president and COO of News Corp., has that experience. He took over from Peter Chernin in July of last year, and prior to that he had been at the helm of The DIRECTV Group. Before joining DIRECTV, Carey had done his first stint at News Corp., where he had had a particular focus on the worldwide television business, including the FOX network, FOX Television Stations, the cable programming group, and News Corp.’s international satellite operations.

Today, Carey oversees a major media company that has had numerous successes across its various divisions. Twentieth Century Fox now boasts the two highest-grossing movies in the history of film, both from director James Cameron: first Titanic and more recently Avatar, which to date has garnered more than $2 billion worldwide and whose 3-D technology may well have opened a new era in filmmaking.

While Twentieth Century Fox pursues blockbuster status with Percy Jackson & the Olympians: The Lightning Thief—to the delight of young viewers who have become addicted to the book series that spawned the film—and Wall Street: Money Never Sleeps, which brings back to the screen the greedy Gordon Gekko made popular in the 1987 movie by Michael Douglas, Fox Searchlight Pictures caters to niche audiences with (500) Days of Summer and Crazy Heart.

Twentieth Century Fox Television continues to churn out hit series, from the extremely successful The Simpsons and 24 to the new series Glee and Modern Family. Fox Television Studios has found innovative financing formulas that have yielded hits including Burn Notice.
In the cable business, FOX News Channel achieved its highest-ever quarterly profit and increased its operating income by 51 percent, while attracting more viewers in the U.S. than all the other news channels combined.

Among News Corp.’s satellite businesses, BSkyB in the U.K. remains the leading pay-TV platform in Europe with nearly 10 million subscribers, while SKY Italia has surpassed 4 million and Sky Deutschland is being revamped to better address the needs of German viewers.

And News Corp. has been fully invested in new-media platforms, with MySpace and a stake in Hulu, the online video site, which is a joint venture with NBC Universal, The Walt Disney Company and Providence Equity Partners. Carey talks to World Screen about adapting traditional media assets in order to remain at the forefront of the digital world.

WS: News Corporation recently reported very favorable financial results. What drove those revenues and profits?
CAREY: If there is one overall theme it would be strength in content—film, TV, sports, news—and the cable-channels group was a driving force in both the U.S. and internationally. And in key businesses we continue to take market share: the FOX television stations had record shares in several markets, and FOX News is clearly taking share. And we certainly also made some headway on the cost side: the stations have really taken some real costs out of their business; so have the newspapers. So it starts with great strength in content across the board, driving that content through channels and making sure we focus on operating our businesses efficiently and taking advantage of our opportunities around the world to maximize profits.

 
WS: News Corp. is known for being the most entrepreneurial of the major media companies. How do you create this kind of mind-set?
CAREY: News Corp. is a company that is driven by operating executives and pushes them to manage with a sense of responsibility and ownership for their businesses. It is not a company that relies on corporate infrastructures or bureaucracies, but one that is streamlined, encourages intelligent risk-taking, is not afraid to break the mold, will not continue to fall back on old habits, but is willing to take advantage of opportunities as they emerge. But I think part of it is having great operating managers and encouraging them to run their businesses aggressively and opportunistically. Fortunately, we have a great set of managers to do that.
 
WS: Is the cable model of a dual-revenue stream better suited than broadcasting in today’s media environment of fragmenting audiences and declining advertising?
CAREY: Without question. In many ways broadcasting competes more and more head-to-head with cable channels for content and for audiences. We’ve seen some content like major sporting events already move to cable channels. Certainly, cable channels are more aggressive in original programming. Broadcast channels are competing with them and competing with a single-revenue business against a dual-revenue business. It’s like competing with one hand tied behind your back. Clearly the dual-revenue stream provides a much stronger revenue base and a much more stable one. The subscription side of the business has much more long-term predictability to it as opposed to the volatility, as the last year proved, that can exist in the ad markets, not to mention the challenges of audience fragmentation we will continue to see going forward.
 
WS: What was News Corp.’s goal in the retransmission deal with Time Warner, and why was it important that you close that deal?
CAREY: As our broadcast business competes with cable for content and for viewers, we need a revenue stream that enables us to continue to invest in the type of content that makes FOX what it is—the best event television out there, with American Idol, 24, the NFL, the World Series and other great events. But we’ve got to be able to build a revenue model that lets us continue to invest in those types of programming. It was critically important for us to move to a place where we have a business model that competes effectively with the cable universe.
 
WS: Peter Rice is now in charge of both FOX Broadcasting and the FX networks. What can the broadcast network learn from cable about how shows are promoted and developed? And Fox Television Studios has some very interesting formulas for keeping costs down and getting a lot of quality on the screen.
CAREY: That’s right. I would actually say we hope that both of those businesses learn from each other, not just the network from cable, but cable can learn certain things from the network. Clearly those businesses have grown with different practices. Whether it’s the network with its historical practices of pilots and sweeps and launching all shows at certain points in the year and having certain patterns in terms of when originals or reruns air. And cable has operated in a different way and has promoted shows and launched them in different ways. I think they can learn from each other. Equally importantly, both those businesses are going to go through changes that are driven as much as anything by the digital revolution, such as changes in windows and in how consumers access shows. We have to be opportunistic and smart about picking the best of both, developing those businesses and maximizing the value of our content across multiple platforms in ways that benefit both us and our viewers.
 
WS: FOX News has certainly been a success story and is getting more viewers than the other news channels combined. How do you account for this growth?
CAREY: You have to give Roger Ailes great credit. He has created a channel that has great energy and great quality. He identified a major segment of the marketplace that was underserved and has built a channel that serves that segment. He continues to find ways to energize the channel, refresh it, keep it lively, interesting and exciting, and the ratings success is a testament to that.
 
WS: Does Avatar show the way to a new model in which studios might not have to pay huge sums of money for actors?
CAREY: No, I don’t think so. Talent is always the heart of our business. Avatar really is a testament to great filmmaking, great storytelling, and to the great talent of James Cameron. It’s a wonderful film and we are incredibly proud of it.
 
WS: Do you think 3-D will work on TV?
CAREY: Yes. I think initially it will be more of an event-focused type of experience. I suppose in day-in-and-day-out regular television habits, 3-D’s initial focus will be sporting events, movies and a certain type of product to which it adds a particularly exciting dimension. Technology probably has to get to a place where you don’t have to put on glasses so that it becomes a more everyday experience. But I think 3-D will clearly be a major force in television as we go forward.
 
WS: Fox Searchlight does some amazing gems of films.
CAREY: That they do.
 
WS: What’s the role of the art-house label within the studio system?

CAREY: It’s a very important part of our business. At Fox, and this is true of television as well as film, we think it’s important to have multiple production operations that approach their businesses with different perspectives, different objectives and different viewpoints. Content creation is not an assembly-line business, it’s really a business based on talented management making intelligent judgments and taking intelligent risks. Having Fox Searchlight brings a unique perspective that is clearly different from Fox mainstream, just as you mentioned before [that] Fox TV Studios brings a different perspective to the television creative process than Twentieth Century Fox Television does. I think it’s a great strength of ours to have these different operations approaching those businesses with different perspectives, and we are fortunate to have great management running each of them.

 
WS: And it certainly shows that a company as large as Twentieth Century Fox can accommodate large franchises but also those small films based on original stories. There is room for both.
CAREY: There is a real audience there, and it is important to recognize that we are not in a business where one size fits all. Certainly movies like Slumdog Millionaire or Crazy Heart speak to the opportunities in the market. It’s one of the great things about content, it’s not a formula business; you can’t run it by formulas. You’ve got to run it by making judgments and having quality people who can make those judgments and have the vision to see those opportunities.
 
WS: Twentieth Century Fox has had considerable success with a number of TV shows recently. Even though much of what determines the success of a network series is more akin to alchemy than to cut-and-dried formulas, what do these successes say of Fox and its relationships with talent and the production community?
CAREY: I agree with your statement wholeheartedly. Success is about having great management that understands the creative process, understands talent and is able to put together projects like Modern Family. The continued success of our management, Dana Walden and Gary Newman, has proven a unique capability to really understand that process. You are right it’s not formulas, it’s people making intelligent judgments and relating to people, understanding product, understanding the dy­namics that go into putting together the right elements to create a show like Modern Family. And hand in hand with that is also a willingness to take an intelligent risk and not being afraid to break traditional models. And Glee is a testament to that, of a willingness to try to do a show that isn’t just a recut version of something else that is on the air and is successful.
 
WS: Despite the bad economy, Fox’s international channels grew substantially in 2009—what has driven that growth?
CAREY: They have been a great success and they have more growth ahead of them than behind them. We are tremendously excited and there are two driving forces. One is we are a global company and have been at the forefront of creating a real leadership position in building these channels around the world and maximizing the value of our brands like Fox and National Geographic, as well as the content we own. The second factor that has benefitted, and will continue to benefit us, is that we are still in early stages of the growth of subscription television around the world. In developed markets, such as Italy, pay TV is at only 30-percent penetration, and in more emerging markets like Asia or Latin America there is enormous growth left. The management of that group has done a great job at building channels that are leaders in their markets.
 
WS: And that statement is valid for your platforms in Europe and Asia and Latin America—you see growth opportunities there as well?
CAREY: For sure. Take Italy as an example, it’s a market that has enormous growth left in it. The platform in Germany is in its infancy in terms of us building it to what it can be. And India, even more so, has probably a longer-term growth curve, but enormous potential as we grow the satellite platform there.
 
WS: Do you still see lot of growth potential internationally? Is that a driving force for the company?
CAREY: Oh, for sure, we truly believe we are the most global amongst the major companies we compete with. In many ways I think the growth opportunities outside the U.S. will exceed those inside the U.S. The obvious reasons simply being that there is so much growth yet to happen overseas, whereas the U.S. is more mature in areas like subscription television. We think there are great opportunities and we will continue to be aggressive and opportunistic around the world in places where we can build businesses.
 
WS: About 10, 15 years ago everybody was saying it’s not only important to own and control your content, but you have to have the distribution pipes as well. Let’s fast-forward to the digital world of today, how important is it to own platforms if content is king, and, as Mr. Murdoch recently said, content is “emperor”!
CAREY: [Laughs] That is right! I think our general view on this is that we are first and foremost a content company, and that is the heart of what we do and where News Corp.’s strengths originate. We equally recognize that where we are able to add any distribution component to that content, there are real synergies between distribution and content. I certainly agree that content is king or emperor, but equally, it has been tremendously important and advantageous for us to align content and distribution where we can. It does become a win-win situation and makes both of them stronger, more attractive and interesting content experiences for our customers.

WS: As people nowadays watch cable on demand, online on demand or download to own, is there any one model that is more important than another?

CAREY: No, they are all important. Electronic distribution is both a tremendously important arena for our future and a great opportunity for us. As you say, people are going to want to access product when they want, where they want, how they want, and certainly today you hear a lot of buzz about mobile being a new dimension to that experience when you see devices like the iPad coming out. It is tremendously important to make sure we are maximizing the opportunities in all of those areas. They are growing very strongly, but as businesses they are all in their infancy. We have to learn and develop and then take advantage as those businesses evolve in coming years.

 
WS: Looking at content online, what business models are emerging right now?
CAREY: I think “business models” is too strong a term. We are learning that there will continue to be free content, i.e., ad-supported content, but there is an increasing recognition that the dual-revenue stream or multiple-revenue stream is the right way to try to build that business. It’s not a consensus, but we certainly understand more today than we did six months or 12 months ago regarding the importance of ease of use for customers, in what forms do customers want to access content, watch content, and what the role of advertising is in that. We are learning a lot as we go, and business models are evolving and we’ll see a lot of changes over the next few years.
 
WS: How can media companies get young adults to pay for content?
CAREY: Hopefully people recognize that great content is uniquely valuable, and I think people will pay a fair price. It’s important that we deliver it in attractive ways, in ways that people value, and that we respect the customer in doing so. I actually am probably more optimistic that people will pay a fair price for content. And if it’s delivered as a quality experience and a reliable experience—we can’t take viewers for granted—I think people will pay.
 
WS: Are you finding social networks a valuable tool in promoting content and creating that “virtual watercooler”?
CAREY: There is no question that social networks have become a mainstay of society today. They have really become the way people share and form opinions and they will continue to be an increasingly fundamental part of how you promote product and share information on product. Social networks are becoming part of the fabric of life today, and it is critically important to develop them to their fullest potential.
 
WS: What have been the major challenges of owning and operating MySpace, and what have you learned from the experience?
CAREY: In hindsight, the issues we’ve dealt with at MySpace are the challenges of managing explosive growth. MySpace probably grew too far too wide and lost a bit of focus on its core. During the last nine months or so we have made changes and brought focus back and went through a painful rightsizing. We are still a work in progress, but we are stabilizing it and actually feel quite good about the track we are on. We are focused on making MySpace a place where consumers can share thoughts and ideas around music, entertainment and content, and we’re getting some traction doing that.
 

We’ve got some real assets that we can build on and it’s important for us to focus on: what are our strengths, what is it that distinguishes MySpace, and how do we make sure that it is a great experience for our customers? During the past nine months we have also been improving the customer experience, which, in some places, we probably did not do a good enough job. Again, we first must have a focus on what we mean to customers, and that is building a social network around those core content areas, making sure it’s a good experience for customers as they access it. It’s a work in progress, but I think we’ve made some real headway in the last couple quarters.


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