Reed Nolte – Senior Vice President of Investor Relations Chase Carey – President and Chief Operating Officer James Murdoch – Co-Chief Operating Officer John Nallen – Chief Financial Officer.

Jessica Reif Cohen – Bank of America, Merrill Lynch Michael Nathanson – MoffettNathanson Benjamin Swinburne – Morgan Stanley Alexia Quadrani – JP Morgan David Bank – RBC Capital Markets Anthony DiClemente – Nomura Securities Todd Juenger – Sanford C. Bernstein John Janedis – Jefferies & Co.

Daniel Salmon – BMO Capital Markets Jason Bazinet – Citigroup Michael Morris – Guggenheim Securities.

Ladies and gentlemen, thank you for standing by. Welcome to Twenty-First Century Fox First Quarter 2015 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time.

(Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mr. Reed Nolte, Senior Vice President, Investor Relations. Please go ahead, sir..

Thank you very much, operator. Hello everyone, and welcome to our first quarter fiscal 2015 earnings conference call. On the call today are Chase Carey, President and Chief Operating Officer; James Murdoch, Deputy Chief Operating Officer; and John Nallen, our Chief Financial Officer.

First, we will give some prepared remarks on the most recent quarter, then we'll be happy to take questions from the investment community. This call may include certain forward-looking information with respect to Twenty-First Century Fox's business and strategy. Actual results could differ materially from what is said.

The company's Form 10-Q for the three months ended September 30, 2014, identifies risks and uncertainties that could cause actual results to differ, and these statements are qualified by the cautionary statements contained in such filings. Additionally, the call will include certain non-GAAP financial measurements.

The definition of and a reconciliation of such measures can be found in our earnings release and our 10-Q filings.

Finally, please note that certain financial measures used in this call, such as segment operating income before depreciation and amortization, often referred to as EBITDA, and adjusted earnings per share, are expressed on a non-GAAP basis. The GAAP to non-GAAP reconciliation of these non-GAAP measures is included in our earnings release.

And with that, I'm pleased to turn it over to John..

Thank you, Reed. As you will have seen in today's earnings release, our fiscal 2015 year is off to a good start overall, with our first quarter results reflecting double-digit percentage increases in total company revenues, segment EBITDA and adjusted earnings per share.

I'll expand on this later, but note that the consolidated results from our DBS businesses are included in our reported results and will continue to be until the closing of the sale of these businesses to BSkyB.

The first quarter's financial results were driven by strong top line revenue growth, with total company revenues of $7.89 billion, up 12% compared to the first quarter a year ago, reflecting double-digit increases in our Cable Network and Film segments.

Total segment EBITDA for the first quarter was $1.78 billion, up 10% over the $1.62 billion reported a year ago. This increase was principally led by our Film and Cable Network segments, partially offset by lower contributions from the Television segment.

Additionally, unfavorable foreign currency movement reduced our total EBITDA growth rate by 3 percentage points. From a bottom-line perspective, we reported income from continuing operations attributable to stockholders of $1.04 billion as compared to the $768 million we reported in the first quarter a year ago.

Included in this year's result is a net after-tax gain reported in equity earnings of affiliates of $172 million, principally related to BSkyB's gain on the sale of shares in ITV.

Excluding the net income effect of this gain and last year's gain from participating in BSkyB's share repurchase program as well as the amounts reflected in other net, first quarter adjusted earnings per share were $0.39 this year versus $0.33 in the prior year, an 18% improvement.

Now let me provide some additional context on the performance at a few of our businesses. Let's start with the Cable Network segment, where overall, total segment revenues increased 15% from last year, highlighted by a 15% increase in affiliate revenues and 11% advertising revenue growth.

With respect to affiliate revenues, domestic affiliate fees increased 18%, primarily from higher average rates, led by the RSNs, FX and FOX News as well as increases from the conversions of our new channels FS1 and FXX. The inclusion of the YES Network this year also contributed to the growth.

Our reported international affiliate fees were up 8%, reflecting strong underlying local currency growth of about 16%, partially offset by unfavorable foreign currency movements, primarily in Latin America.

The first quarter advertising revenue growth of 11% reflects domestic advertising increases of 10%, led by the RSNs, FX Networks and FOX News, and reported growth at the international channels up 13%, driven by strong year-over-year increases at STAR.

Total Cable segment EBITDA in the first quarter of $1.04 billion was up 5% over the prior year, reflecting the strong revenue growth, which was partially offset by a planned 21% increase in expenses, primarily related to higher sports rights and entertainment programming costs.

EBITDA at our domestic channels increased 15% from increased contributions at FOX News, continued strong underlying growth at the RSNs as well as the impact of consolidating the YES Network this year.

Contributions from the FX networks were below last year, but this was expected, due to increased costs for additional hours of original programming, including The Strain, Tyrant and Sons of Anarchy at FX and the launch of The Simpsons at FXX.

International channel EBITDA contributions were below a year ago, as strong double-digit local currency EBITDA growth at FIC was more than offset by both the continued investment we're making in STAR Sports, including this quarter's costs for the India-England cricket series and a negative impact from foreign exchange rates.

At our Television segment, first quarter EBITDA was $174 million as compared to the $231 million in the prior year.

This decline largely reflects higher programming costs at the FOX broadcast network, primarily from the combination of additional hours of scripted summer series, higher program cancellation costs and higher rights fees from the new NFL contract.

Total segment revenues were unchanged from the year ago quarter as strong retransmission consent revenue growth was offset by a 5% decline in advertising revenues, primarily due to lower general entertainment ratings at the broadcast network. Now turning to our Film segment.

We reported record first quarter EBITDA of $458 million, a 40% increase over the year-ago results driven by a 17% increase in revenues. This quarter's results include several successful theatrical releases, including Dawn of the Planet of the Apes, Maze Runner and The Fault in Our Stars, as well as strong home entertainment contributions from Rio 2.

Quarterly results also include increased earnings contributions from our television production businesses led by increased syndication and SVOD revenues. Our DBS segment reported EBITDA of $207 million in the quarter, a $17 million increase over the prior year.

This improvement reflects higher subscriber revenues at Sky Deutschland, partially offset by higher programming costs at SKY Italia from their broadcast of the FIFA World Cup. Now before I turn to guidance, let me make a couple of capital-related comments. We ended the quarter with $4.7 billion in cash and $20.2 billion in gross debt.

This debt position reflects the $1.2 billion of new long-term debt we issued in September, recognizing that we have approximately $1 billion of scheduled debt maturities over the next 12 months.

With regard to the stock buyback, we repurchased approximately $1.9 billion of FOXA shares from July 1 through today, and we are on pace to complete the $6 billion buyback within the 12-month timeframe we previously announced. So now let me address our guidance update for fiscal 2015.

And as a reminder and, as I indicated on our last earnings call, with the Sky transaction expected to close shortly, for guidance purposes we are excluding the DBS businesses for the entirety of all periods, resulting in a base EBITDA for fiscal 2014 of $6.29 billion.

Chase will provide more commentary in a moment around our businesses, and while we have one quarter under our belt, we've seen some puts and takes in the last few months as against our original expectations for fiscal 2015. Clearly, the initial ratings at the FOX broadcast network for the new broadcast season are below our original expectations.

Additionally, the continued strengthening of the dollar results in lower reported U.S. dollar EBITDA from our international businesses, particularly the FOX International Channels.

On the plus side, our Filmed Entertainment businesses are performing above initial expectations and, as importantly, our domestic cable network businesses continue to perform in line with our expectations.

So considering these balancing factors and based on all of the assumptions inherent in our current projections, we continue to expect that our total segment EBITDA percentage growth rate for fiscal 2015 will be in the high single-digit range, above the $6.29 billion total segment EBITDA base level for fiscal 2014.

Now finally, since the Sky transaction is expected to close within the next couple of weeks, I thought we would provide a few comments related to how it will affect our reported financial results once completed.

The DBS segment results will no longer be included in our consolidated revenues, EBITDA or depreciation and amortization after the closing date. We will also no longer report any minority interest related to Sky Deutschland's results.

For reference, the consolidated DBS segment results will have contributed only around 1% of our annual total adjusted earnings per share in both fiscal 2014 and 2015.

For the periods after the closing, and excluding the impact of BSkyB's purchase price amortization, we do not anticipate the transaction to have a material impact on our fiscal '15 equity earnings from affiliates. And finally, we do not anticipate the transaction to have a significant impact on our anticipated effective tax rate going forward.

And with that, I'll turn it over to Chase..

The state of the TV ad market, trends in network ratings and the impact of digital platforms on viewership in traditional business models.

A number of people claim that these three issues portend new challenges for our business – that television advertising is shifting to new digital platforms; that ratings reflect a decline in the viewership of our product and that new over-the-top digital platforms will undermine traditional business models.

My first observation is that these concerns are overblown, particularly in the short term. The television ad market is a mixed story, but the issue is primarily the economy.

Pricing has actually held up pretty well, but volume is a bit softer than expected due to a lack of confidence, leading businesses to buy short term or keep the money in their pocket. Actually, our core cable networks each saw solid growth in advertising this last quarter.

On the ratings front, network ratings are down, but the issue generally is not popularity of content, particularly hit content. The issue is that an increasing amount of viewership is occurring in ways and places not reflected in traditional network ratings.

And as it relates to new digital platforms, the traditional bundle, while mature, continues to have real legs. But while all the concerns may be overblown today, these are real issues that while challenging also present real opportunities for us.

On the advertising issue, the priority for our industry is to develop the capability to offer a more effective and efficient message, combined with a more engaging consumer experience that increases the value of our messages to both advertisers and consumers.

To address the decline in traditional network ratings, we need to more effectively measure and monetize the viewership on these new digital platforms and devices. We need to achieve this goal while recognizing that the consumer is going to demand more choice and control in tomorrow's digital world.

For example, if we want the consumer to use a robust VOD service instead of a DVR, we have to make it a better experience. When it comes to the emergence of new digital platforms, we actually view this as the most exciting and important opportunity for our future growth. To start, it means there will be increased competition for our content.

It also means we'll be able to engage the consumer more directly to create a more exciting and valuable experience. The emergence of the new digital offerings also doesn't spell the end of the traditional bundle. In fact, we believe the traditional bundle offers great value to consumers and will be the primary consumer package for years to come.

However, we also recognize that traditional bundle is fraying at the edge due to both millennials with different lifestyles and economic pressures in tough times. There will be a gradually increasing number of consumers that want more choice in programming options.

We believe that most of these customers will still want a bundle of programming as a foundation. It just may be a somewhat different bundle and proposition. The key challenge for us is to build these choices in ways that fairly compensate us for our content and brands and do not undermine more established business models.

Overall, we recognize that we're in a period of change, but we truly look at this as a glass half-full opportunity.

There's a real chance for us to build exciting new areas of growth if we can create more exciting choices for customers, a more valuable proposition for advertisers, while maintaining a discipline that enables us to manage the trade-off required to ensure fair value for our product. There'll be winners and losers as this process evolves.

We believe exploding digital demand and platforms puts content in the sweet spot. And within the content world, we believe those with hit content and brands at scale are best positioned to come out on top. We look forward to tackling these opportunities. With that, I'll turn it back to Reed..

Thank you, Chase. Now, Chase, James and John will be happy to take your questions.

Operator?.

(Operator Instructions) And our first question in queue will come from Jessica Reif Cohen with Bank of America..

Thanks. So my one big double question is, could you, Chase or James, John, whoever, talk about the use of BSkyB proceeds? You said you're closing in the quarter. You have a lot of money coming in and you haven't changed your target capital returns. And then the second thing is, just a follow-up on Chase's comment on demand for content.

There's a view in the market that demand for television content is exceptionally strong on a global basis. Now I'm just wondering if you could change that focus a little bit to film. Your film numbers have been great and you seem pretty bullish on the outlook for your titles.

What do you see in terms of changes in trends, on whether it's on a global basis or even domestically?.

I guess on the BSkyB proceeds, yes, I mean we do expect those proceeds in, I guess, the next week or two weeks. But it isn't going to dramatically – drastically change our plans. I mean we are, as John said, we've got the buyback in place, we're on course for it. We recognize we'll have excess liquidity that will result from this.

And it hasn't changed our longer-term goals that we think is the right place to get to. We recognize we won't be there at the end of this buyback, but we will continue to work to get to the place we think we should be.

And that's going to be through the combination of initiatives that we've talked in the past, investing in our core businesses, returning capital to shareholders. And we will do that – continue to do that over time. In terms of demand for product, I think the film demand, we feel really good about it.

I mean, certainly internationally, you continue to see growth, and even domestically. I think the place – I mean, there's been a lot written about box office this year. But I think if you look at sort of the demand in digital, I mean, probably one of the more exciting arenas for us in the film business in the U.S.

has been the really pretty dynamic growth in the digital and home entertainment space. And I think that will continue to build and we've been excited about the digital HD initiative we had to put our films out in a new window a bit ahead of DVDs. And we think that's a business we feel very good about.

It's obviously, beyond just the year we've had, we think film business continues to have real demand around the world..

Thank you. That will come from Michael Nathanson with MoffettNathanson..

Thanks. I have one for Chase and one for John. So Chase, you talked about the new digital models that are emerging for distribution. When we hear that, it's often mini-bundles and virtual MSOs, like the Sony project we're hearing about.

So how can you make sure that, if that's the digital bundles we're seeing going forward, that your RSNs are part of that package? Or how do you navigate what people want to do is perhaps make slimmer bundles without RSNs..

I mean, I guess actually realistically, the RSNs are not different than any other channel we have, and we are engaged with – there are a lot of players who seem to be wanting to enter this space. We touched on a few of them.

We are doing our own continued work and analysis on how best do we develop these opportunities and we're looking at it from all directions.

And as we do, I guess, as I said in the opening comments, we're going to ensure that both individually and in aggregate, we develop these opportunities in ways that don't simply undermine our existing core businesses. And we think we have the breadth and strength of product to be able to do that.

I think in many ways, as you look at some of these offerings, I think they'll, in many ways, likely reinforce the attractiveness of a bundle of content. And I think as it comes to sports, I think what you'll find is there's a reason sports has the highest cost.

It's because it's the most important product, and it's the product people, first and foremost, want to access on these platforms. So I think we're going to – use the phrases disciplined and manage the trade-offs to make sure.

We want to be proactive, we want to be – I think we want to be a step ahead, not a step behind of leading into developing these business models.

But we think we have an array of content that are really fundamental to anybody's content experience and look to work with third parties as well as do our own work to figure out how do we develop these opportunities..

And then for John, you know your cable expenses grew 21% in this quarter.

Can you give us a reminder of what the cadence will be for the rest of the year on cable network expenses?.

Yes I think what we've indicated for the year, we expect high-teens growth, I mentioned that on our last call. I think you'll find the biggest step-up will happen in the third fiscal quarter, and that's most notably because of the sports cost at STAR for the Cricket World Cup..

Thank you. That will come from Ben Swinburne with Morgan Stanley..

Thank you. I have two. James, can you talk about the Shine-Endemol deal? TV production is an area where I think everyone is quite bullish. And in many ways you guys are sort of selling your asset, one of your assets in that space. It's going to move below the line, which is a different trend than FOX has been following which is to consolidate more.

So why is this the right strategy in TV production for the Shine asset? And then I just had a follow-up for Chase. It sounds like you're exploring at FOX your own over-the-top potential product to address the broadband-only sub-base. I just want to see if you would flush that out.

Your comments earlier sounded like you're heading at least exploratory at looking at that type of offering..

Ben, on the Shine-Endemol transaction, I mean – look, I think, first of all, the television production business that remains wholly consolidated or the businesses that remain wholly consolidated within Twenty-First Century Fox i.e.

TCFTV and our production capability in places like India and around the place, remain very important to us and are much, much larger than the Shine business for example. Really with Shine and Endemol, we saw an opportunity to create something as a joint venture that was really an order of magnitude greater than what the individual parts were.

And we thought that with Shine and Endemol coming together we could create something that was, on an independent production basis, really a world leader.

So it was really opportunistic, to be able to create something that we feel – we hope it's going to be awaiting some regulatory clearances, but we would hope that we're closing that transaction before the end of the year. And we think it's a very, very attractive business.

Now generally speaking, we've been seeking over the last number of years, as you mentioned, to kind of simplify our operating model to have probably fewer joint ventures and fewer minorities and things like that, but I don't think we want to foreclose opportunities to ourselves that are really unique in being too orthodox about that.

This was one of those unique opportunities where the Endemol asset and the core assets and Shine really fit together very well, and we thought that – and we do believe that it can be something that's a very special new company formed. And we decided to take that opportunity as opposed to leave it out there..

And I guess I'll just add, one reality at Shine, because it is not consolidated, the profits of Shine won't be going forward. It won't be in the place. But again, as James said, I don't think we want to be locked in to any particular.

We want to be opportunistic, and this is a way for us to really be part of a very unique globally leading production company. In terms of digital, look, we're looking at everything. When I said looking at it ourselves, I think what I mean is we're not just responding to third parties that want to put together bundles of products and offerings.

We're making our own analysis what do we think consumers want. So I don't – it was not implying that there's anything imminent we're doing on our own. We're not going to be just simply reactive to what we think can – what should be the models out there for consumers in the marketplace.

And I think we want to make sure we are proactive in forming our own judgments about what types of bundles and what types of offerings and what are the other ways in which we can create attractive offerings that are additive to our business as it exists today..

Thank you. That will come from Alexia Quadrani with JPMorgan..

Thank you. My question’s on your earlier commentary about measurement being a bit of an issue in terms of there's a fair amount of viewership that's not captured in ratings.

I guess I'd be interested in your commentary on how you think that might, I guess, change going forward and could it – can it change going forward and can you capture some of that viewership? And then just a follow-up, sorry if I missed it, but did you give a organic advertising gross number for cable?.

So if I look organically, I'll give it both on domestic affiliate and domestic ad, which is really excluding the YES Network. So on affiliate, it would be low double digits. And on domestic ad, it would be mid-single digits organically which excludes the YES Network..

Yes. And in terms of monetizing viewership across all these platforms, it's really, I guess, there are multitude of ways we need to pursue that. Some of its measurement, I mean, I don't, I think we all recognize that there are issues in terms of the quality and accuracy of the measuring devices today.

I think it's an issue, I wouldn't say it's the issue, but I think it's a issue we need to deal with. We're still not measuring some of the mobile, the most obvious one, still not measuring viewership in that. We still only move from measuring three days to seven days. There's obviously a lot of viewership that happens beyond seven days.

There are ways we need to make – create consumer experiences. I talked about VOD versus DVRs. One of the things we'd like to do is create a better experience for consumers that may have the opportunity to have messages in that, that they find more attractive and more rewarding than a DVR that we can shift viewership from a DVR to a VOD experience.

That's a positive for us. We need to make these messages more interesting to consumers, more engaging to consumers. I think you find just simply giving them a choice between two ads makes it – makes them more engaged because they feel like they have some control over it.

So it is really doing an array of things that we need to take advantage of, that enable us to monetize our viewership much beyond the traditional L plus 3 or L plus 7 business we have today. We are selling into some of these digital platforms, but clearly, we don't have them. But targeting another dynamic tools anywhere close to where we want to be.

We’re really in the first inning of trying to develop that. Fortunately, I think there is a focus on it. We are starting to make some headway, but we have a long way to go..

Thank you. That will come from David Bank with RBC Capital Markets..

Chase, in your sort of concluding comments there, you seem to have a real conviction that some of the softer dynamics in the ad market had more to do with macro weakness in secular share shift to the ad pie from TV to digital.

What gives you that conviction? Are the advertisers definitively telling you that? Are you seeing any differences across categories? Also, are you seeing anything in terms of cancellations in calendar 1Q that would tell you something? And I guess lastly, you've unified ad sales across cable and broadcast under Toby Byrne now.

Will you be doing anything differently now that you sort of have a unified platform for TV ad sales?.

Yes. I mean, it's a little bit of all of those. I mean, certainly, a big part of it is talking to those in the ad – in the agencies and the advertisers.

And really what you mostly get back from them is a comment that there is a marginal shift to digital and that marginal shift is probably going to – is certainly a direction, I don't think it's a – it's not a one-year phenomena, there's no question, there are values being offered in these digital platforms that people want, need to be – that advertisers want and are better for consumers.

That's why we need to offer them. So it will keep going that way. But at this point, it is by – from all the people we talk to, whether it's advertisers, clients and the like, it's a pretty modest shift. And what you get back is – much more of the issue is confidence in the short-term economy and how they feel about it.

We do hope the holidays, new budgets in January will put some money back in the advertising system. But it is basically sort of our analysis and our interacting with the wider array of players that we deal with in the marketplace.

And what was the other? Oh, and Toby Byrne, I mean, I guess, in many ways, the restructuring we did there is sort of recognizing the changing business we're in. I think aligning – we had cable and broadcast separate. I think we felt to be opportunistic, it made more sense, we’d already taken that step in sports.

So we're clearly taking that step now across the board. And increasingly, it's not just cable and broadcast, it's these digital platforms and developing new capabilities that need to go across all these platforms.

And I think we recognize that we need to look at it much more holistically and figure out how do we monetize this viewership with – from a top-down philosophy that takes advantage of all the trends that we see emerging.

And we thought this structure really is a structure that's built for the world we're going to compete in going forward as opposed to the world that we've competed in looking back..

And cancellations, I'm sorry, I might have missed the answer there in calendar 1Q?.

I don't think there's anything – there's nothing out of the ordinary in that regard..

Thank you. That will come from Anthony DiClemente with Nomura..

First for John and then for Chase. John, I think the 13% international ad revenue was what you reported. Can you please give us that on a constant currency basis? And then John one other one also on your guidance.

I'm wondering on those puts and takes, does your guidance imply a recovery in FOX TV ratings from here? Or do they – does it imply similar ratings performance that we've seen going forward? And then I guess bigger picture for Chase.

As we talk about these digital platforms and Internet delivered video taking share of the market, the buyers of ad seem to be getting a lot more sophisticated, whether it's ROI analysis, programmatic buying and the like.

So I guess the question is as a seller of new digital ads, be it dynamic ad insertion and so forth, over the next several years, are you investing in the data technology on the sell side of your ad business? I'm talking about things like digital inventory yield systems, custodial systems and the like, so that they could better interface with those digital ad exchanges or programmatic ad buyers in the marketplace..

Let me cover your first two financial questions. On the international ad growth reported at 13%, it's about the same on a constant currency basis, and that's principally because the real big growth in the quarter on advertising was at STAR where the rupee really is unchanged year-on-year.

And then for the puts and takes on the network, it's our best estimate, really, where we think the ratings will be, particularly on upcoming programming. We've got pretty well locked in, obviously, what we know at this point, so we've taken our best estimate right now as to what we think the upcoming shows will rate..

Yes. I guess I'd say on the broadcasting side, I mean we don't really – relative for this year and next, I mean I guess you can go back to 16, the assumption we had a year ago. We don't assume we're getting back to that.

So whether it's other business that's covering it or using up a degree of what probably, I guess, I'd call it cushion that was in those numbers is probably the reality and, I guess, likewise for this year.

I think we've made realistic assumptions for it, but they probably, given where we are today, assume a shortfall in the broadcast business against our expectations – it's covered by upside in other businesses for this year..

Notably in the film business..

In terms of data – developing the tools we need and the capabilities we need to really take advantage of the digital world, I mean the simple answer is, yes, we're doing a lot of it and we're doing it, I'd say we're still midstream – not even midstream, we are probably in the early stages of it, but certainly not just starting.

And whether that's creating databases or technical capabilities, whether it's for ad sales or whether it's how we more effectively use our own time to promote, to market our own products, we're engaged with third parties that obviously bring us an array of expertise, both on how do we analyze data, how to manage data and third parties that bring capabilities in terms of a much more dynamic ad experience and messaging experience than we have in-house working with all of them that really figure out how do we develop these, certainly take time.

But it's a priority for us to develop the capabilities to really take advantage. And look, we think our product is the product first and foremost that people want in all these platforms.

And so it is, I use the phrase glass half-full, I think it really is a glass half-full, that there's a lot of upside for us if we can tap into and build those capabilities to better monetize our viewership while creating a better consumer experience. And so certainly that's a big priority for us going forward..

Thank you. That will come from Todd Juenger with Sanford Bernstein..

So Chase or James or whoever, you mentioned several times the changing consumer behaviors in these new platforms. You specifically called out VOD and DVR and some of the over-the-top stuff, all that is conceivably ad-supported.

So I'd love to get your specific current thinking on the SVOD window, in particular, and the value you're getting from your content there versus the fact that it does take viewers out of the ad-supported world and how you think about the role of the SVOD window going forward and also relative to Hulu and what that plays in that.

And then the quick follow-up, if you don't mind, would just be we'd love to hear any comments on any differences between the national ad market and the local broadcast ad demand environment, if there's any differences there.

And if there are any differences, maybe why difference in confidence between local and national or maybe the fact there's more digital substitutes for national advertisers?.

I think in the issue of how do we think about the platforms that are ad-free, I think in many ways, you go back in what I was – we talked about earlier is – we need to make sure however we distribute our product, we're getting fair value for it. And I think as we look at – and obviously, we can get value in two ways.

We can get it in advertising or we can get it through subscription fees or license fees. And through those combination of factors, we need to make sure we get fair value that realistically get ad-free platform, it has more value than an ad-supported platform certainly at this point in time.

And that value, whether it's subscription fees or license fees, should be reflected in it. I think it’s important for us to continue to figure out how do we evaluate and engage with all these plays, I mean Netflix and Amazon are ad-free platforms. We license our product to it – to them. We think we get compensated.

And I think it's important for us to be disciplined in our license fees to get compensated for an amount that recognizes that product is going to be displayed ad-free. I think in a larger context, we – I talked about the fact that consumers are clearly going to have more control over the experience and more choice over the experience going forward.

We want to give those consumers – we want to find ways to give those consumers choices. Those choices just should be fairly valued. So if that means accessing content on platforms that don't have advertising then we need to get compensated through the payments that exist. If it's a dual revenue platform, we get compensated in a different way.

So I don't think we want to – I don't think it – we'll look at it and say we're going to try and discipline the world to say every platform has to be an ad-supported platform. I think there are ways we can get properly compensated in value if it is a platform that doesn't have advertising..

National versus local..

National versus local, I mean there are always differences. Some of it, I wouldn't say they're dramatic differences, I mean certainly right now, you have different political swings locally where in some places you had politics playing up a large role and in other places, a very limited role, national side of that clearly being different.

I think different advertising sectors probably buying a bit, given I think there's some advertising sectors, electronics and the like that are more geared to national buying than local buying. And I wouldn't say they are dramatically different – dramatic differences today between sort of the national side and the local side..

Thank you. That will come from John Janedis with Jefferies LLC..

Chase, this seems like an ad market where more than usual there may be some haves and have-nots.

And I just wanted to ask, given your rights, is there any evidence sports programming is taking more share maybe at the expense of general entertainment networks or your mouse [ph] skewing cable networks? And then more broadly, what are you seeing from the auto category?.

I mean, I think it's certainly true that strong programming is doing better. As I said, I think whether it's – clearly, we see it in the strength in the NFL, which has done well. You look at our cable networks, which have competed well.

I think, whether it's FOX News, or FX or the RSNs, all had strong – and that's a mix of entertainment and sports product, all competitively did well. We had in each of our core cable networks, we saw advertising growth. So I do think clearly strong unique programming in sports is the most obvious example.

I mean some of it's just got the ratings hold up better, you have less fragmentation, the live nature of sports does enable to stand up – to stand up on its ratings. I think the NFL, we're pretty close to flat year-on-year at this point with the NFL season.

So the strength of sports programming, I think, in many ways certainly positions it well for these marketplaces. But I think it is generally true that sort of successful programming will do better, and I think that's going to be in many ways an increasing part of the story..

Anything on auto?.

On the auto category? The auto category, probably today is one of those that has probably been a bit of a disappointment. Auto sales have been great and yet it seems to be a place where the auto advertisers are – certainly, year-on-year, the category is down and they're keeping – it seems like they're keeping more of the money in their pocket.

Hopefully, some of it comes back into the market, maybe with fresh budgets or the fall, but – or the holiday season, but the auto category for the strength of the auto market, maybe there's – it's not been a strong category year-on-year..

Thank you. That will come from Dan Salmon with BMO Capital..

Chase, just to go back a little bit to the ratings question.

As some of those improvements start to roll out, particularly around mobile measurement, which Nielsen has been very visible on lately, we've been hearing a little bit about network ad sales folks trying to figure out whether they want those rolled into the regular TV ratings, and I think a lot of this has to do with rates of monetization on digital and mobile versus traditional linear.

Could you give us a little bit of color around how you guys are viewing that as these improvements come along, how you expect to roll them into how you're selling? And then just a quick one for John, you mentioned programming cancellation costs at FOX this quarter.

Should we expect – FOX broadcast rather, should we expect a little bit of that to continue with some other recent news around cancellations there in this coming quarter?.

I think that's an issue that realistically we are very much in the midst of evaluating and analyzing and I think there's a real question as you get these digital platforms where, again, consumers have more control, what's the right way to approach it and are you better off with sort of premium advertising with more capabilities that may have less volume than – linear I think there's a honest argument to sort of say you look at the ad load that exists in our traditional business and it's pretty heavy.

And clearly, I think one of the things that makes the DVR appealing is the ability to not just control what you want, find what you want, but to manage your time in terms of the advertising that's there.

And so I think there is a question of do we – are we better off getting premium dollars by creating different opportunities for advertisers and different experiences for consumers? And people have these studies sort of saying you can watch a large ad break or you can watch a short ad break and at the end of it, interact with – answer a bunch of questions about product.

That's a way to create a different – and then just one example, but there are array of examples that we can use to try to create different experiences for consumers that would monetize this in new and different ways..

And Dan, to follow up on your question, yes, clearly, we made announcements in the last few days around programming that we're shortening or cancelling. So we'll absorb the cost of that in the quarter, but that's reflected in the guidance that we put together..

Thank you. That will come from Jason Bazinet with Citi..

Question for Mr. Carey. In your prepared remarks, you suggested there may be opportunities to engage the consumer more directly via OTT offers.

Assuming that Hulu is part of that mix, can you elaborate on what changes you'd like to see occur at Hulu to make it more relevant relative to some of its competitors?.

I guess what I really mean is – I mean, the more you understand what the consumer wants to watch and what they like and obviously, gives us a lot of insight into creating a better experience.

And whether that's programming or trying to suggest choices or even down to what sort of advertising and promotional messages are relevant to them, is all part of it.

Certainly, one of the attractions with Hulu is it is the leading digital platform we have today that through which we're only obviously a part owner, but we have an opportunity to directly engage with the consumer, and there's no question the more we are able to directly engage with the consumer, understand the consumer, develop data and information about what that consumer likes and is interested and wants to do, the more we think we can make that a rewarding experience for the consumer and one in which we can create value out of it with our array of partners.

So I do think we think the ability to participate more directly with the consumer, whether it's Hulu or others, and develop a much better understanding of our consumers and the type of databases we were talking about a few minutes ago and information and capabilities.

Certainly with Hulu, we have a vehicle that's able to do ad targeting that doesn't require third parties. We're not sort of a step removed from the process of creating targeted ads. We can directly create a platform that enables us to target ads to the consumers in Hulu and that opportunity certainly exists in other over-the-top platforms..

Thank you, Jason. Operator, at this time we have time for one more question..

Thank you sir and that will come from Michael Morris with Guggenheim Partners..

A couple of questions on regional sports networks. Earlier today, DISH spoke about RSNs as being somewhat more at risk in an environment where consumers have more selection over the types of packages that they buy. At the same time, they were positive on Disney, which, of course, is very exposed to national sports network in their business model.

So I guess I have two questions.

First, when you look at your existing agreements or you look over the next couple of years, how much risk is there at your regional sports networks of your distribution partners, moving your networks to different tiers perhaps that aren't as broadly distributed? Are you able to protect yourself from that type of shift in offering? And second of all, just given that you do have exposure to both regional sports networks and a national sports networks, can you talk about the affinity for the regional sports networks versus the national sports networks and whether it makes sense that a national sports network would be more valuable to the consumer, to a distributor than the regional networks?.

I mean, first let me be clear our regional sports business – regional sports network business for us is a great business. It has been one of the most successful and probably as important as any business we've had in many ways, has and continues to be, a real area of growth.

And I think the reason is clear, at the end of the day, David Hill used to say that "sports are tribal", which ultimately means local. Local sports are the heart, in many ways, of what makes a community tick. We think these regional sports networks are great businesses. I think we've proven the ability to manage it.

I think the fact that we have a breadth and depth of not just regional sports networks helps distinguish us from others in the business, but the fact that the regional sports networks are part of a broader portfolio of sports that cut across national networks and the broadcast network, truly enables us to create really clearly distinctive and unique opportunities for consumers to engage with sports across the board.

We think this sports programming is going to get nothing but more important and more valuable in a digital world and we realistically feel great about it. I mean, I guess, I didn't see the DISH comment.

I guess, it shouldn't be lost that they have a deal with Disney so I guess sort of saying – defending the reasons for doing a deal after you've already done a deal is probably a bit sort of self-justification as opposed to rationalizing something upfront. But we feel great about the regional sports networks in terms of value.

Obviously I don't think you can generalize. Not every regional is the same and, obviously, not every national sports network is the same. Our national sports network continues to increase in value as we've added key rights to it.

We think it is uniquely attractive to a large segment of consumers out there in many ways, must-have programming, when you look at the breadth of content that's going to exist from sort of baseball to NASCAR to soccer, to the UFC to golf to college sports, basketball, football. Uniquely important, we will value it fairly and accordingly.

The regionals have played a different role in each of their local communities.

And we feel very good about the future of each and we feel – while there's some linkage, clearly, I think as a whole, it makes us stronger, I think it is a one plus one is three to have the breadth of sports we have across the Fox Network, the FOX national sports networks and the regional sports networks.

Each at the end of the day, while they are part of a larger whole, each appropriately stands on its own two feet. And we continue to be excited about it. And again, I think our track record in continuing to build them speaks for itself..

And on the question of if there's risk of perhaps more tiering of the regional sports networks relative to where they are right now, is that a legitimate concern within the agreements or are you somewhat protected from --.

It's not how we built these businesses. I mean, it's not how we built the businesses. We've done deals as recently as the last month and certainly that's not where we're going. If you’ve tiered these, they'd have a completely different cost and you'd have completely different proposition.

It would be a very different consumer proposition and you'd be disenfranchising and in many ways obviously, it would cost a lot more if you tiered it and you'd be disenfranchising in many ways consumers who would say that's the most important programming in the bundle I've been buying.

And that has not been again how we built it, and it's not the base around the business – the model around which we've continued to build it, and we continue to engage with our distributors and continue to build – we think this bundle as a whole, again, has real great value for the consumer to the degree you have noise around it.

I think sports is a critical part of that bundle. I think if you started to unbundle things, you may well find the consumers wish for the days of the bundle that the real – the best value proposition for them is the ability to buy a breadth and choice of programming that includes sports.

And that is certainly the path along which we continue to build our businesses..

Thank you, everybody, for joining today's call. If you have any further questions, please feel free to call me or Joe Dorrego here in New York. Thanks..

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