SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended DecemberMarch 31, 20042005

or

For the transition period fromto            

Commission file number 001-32352

NEWS CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Registrant’s telephone number, including area code (212) 852-7000

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    Yes  x    No  ¨    No  x⁽¹⁾

As of February 2,May 4, 2005, 1,893,190,6702,251,413,258 shares of Class A Common Stock, par value $0.01 per share, and 1,044,776,1571,044,776,158 shares of Class B Common Stock, par value $0.01 per share, were outstanding.

NEWS CORPORATION

FORM 10-Q

TABLE OF CONTENTS

NEWS CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

NEWS CORPORATION

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share amounts)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

NEWS CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Basis of Presentation

On November 12, 2004, a new Delaware corporation named News Corporation became, through a wholly-owned subsidiary named News Australia Holdings Pty Ltd (“News Australia Holdings”), the parent of News Holdings Limited (formerly known as The News Corporation Limited), an Australian corporation (“TNCL” or for periods prior to November 12, 2004, the “Company”). We refer to these transactions collectively as the “Reorganization.”

In the Reorganization, all outstanding TNCL ordinary shares and preferred limited voting ordinary shares were cancelled and shares of Class B Common Stock and Class A Common Stock, respectively, were issued in exchange on a one for two share basis. The financial statements have been presented as if the one for two share exchange took place on July 1, 2003.

News Corporation (the “Company”) is a diversified entertainment and media company. The Company manages and reports its businesses in eight segments, which are: Filmed Entertainment, Television, Cable Network Programming, Direct Broadcast Satellite Television, Magazines and Inserts, Newspapers, Book Publishing and Other.

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generalgenerally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary for a fair presentation have been reflected in these unaudited consolidated financial statements. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2005.

These interim unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2004 included in the Company’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on November 24, 2004.

The preparation of financial statements in conformity with GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates.

Certain fiscal 2004 amounts have been reclassified to conform to the fiscal 2005 presentation.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1- Basis of Presentation (continued)

The Company follows the disclosure-only provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” and in accordance with its provisions, applies the intrinsic value method set forth in Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees.”

The following table reflects the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions for stock-based employee compensation. These pro forma effects mayare not be representative of future amounts since the estimated fair value of stock options on the date of grant is amortized to expense over the vesting period, and additional options may be granted in future years.years and the vesting of certain options was accelerated on May 3, 2005 (See Note 14).

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1- Basis of Presentation (continued)

In accordance with SFAS No. 130, “Reporting Comprehensive Income,” total comprehensive income for the Company consists of the following:

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123 (R)123(R), “Share-Based Payment.” This standard will require the cost of employee compensation paid with equity instruments to be measured based on grant-date fair values. That cost will be recognized over the vesting period. SFAS No. 123(R) will become effective for the Company in the first quarter of fiscal 2006. An illustration of the impact on the Company using a Black-Scholes option valuation methodology is presented above.

In accordance with SFAS No. 130, “Reporting Comprehensive Income,” total comprehensive income for the Company consists of the following:

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation (continued)

Recent Accounting Pronouncements

In October, 2004, the American Jobs Creation Act (the “Act”) was signed into law. The Jobs Creation Act providesincludes a temporary incentive for a special one-time tax deduction of 85% for certainU.S. multinationals to repatriate foreign earnings at an effective 5.25 percent tax rate. Such repatriations must occur in either an enterprise’s last tax year that are repatriated, as defined inbegan before the Act.enactment date, or the first tax year that begins during the one-year period beginning on the date of enactment. In December 2004, the FASB issued a FASB Staff Position;Position, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (“FSP FAS 109-2”). FSP FAS 109-2 allows companies additional time to evaluate the effect of the Act as to whether unrepatriated foreign earnings continue to qualify for the SFAS No. 109 exception regarding non-recognition of deferred tax liabilities and would require explanatory disclosures from those who need the additional time. The Company is currently considering the effects of the repatriation provisions of the Act. Through DecemberMarch 31, 2004,2005, the Company has not provided deferred taxes on substantially all of the undistributed earnings of foreign subsidiaries since substantially all such earnings were expected to be permanently invested in foreign operations but has started an evaluation of the effects of the repatriation provision. Whether the Company will ultimately take advantage of this provision depends on a number of factors, including reviewing future Congressional or Treasury Department guidance, before a determination can be made. The range of possible amounts that the Company is considering for repatriation under this provision is up to approximately $300$500 million. The related potential range of income tax is up to approximately $20$30 million.

In September 2004, the Emerging Issues Task Force issued Topic No. D-108, “Use of the Residual Method to Value Acquired Assets Other Than Goodwill” (“Topic D-108”). Topic D-108 requires a direct value method, rather than the residual value method, be used to value intangible assets other than goodwill for such assets acquired in business combinations completed after September 29, 2004. Topic D-108 also requires that registrants who have applied the residual method to the valuation of intangible assets for purposes of impairment testing should perform an impairment test using a direct value method for such intangibles no later than the beginning of their first fiscal year beginning after December 15, 2004. The Company has used the residual value method to value its broadcast licenses. Pursuant to the provisions of Topic D-108, the Company plans to utilize a direct method of valuation for an impairment test to be performed as of July 1, 2005. The Company has not yet evaluated the impact of adopting Topic D-108 on its financial position, results of operations or cash flows.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 2-2 – Incorporation in the United States

On November 12, 2004, the Reorganization was accomplished under Australian law whereby the holders of TNCL’s ordinary and preferred limited voting ordinary shares, including those ordinary shares and preferred limited voting ordinary shares represented by American Depositary Shares, had their shares cancelled and received in exchange shares of Class B Common Stock and Class A Common Stock of News Corporation, respectively, on a one for two share basis. Reorganization costs expensed during the three and sixnine month periodsperiod ended DecemberMarch 31, 20042005 amounted to $36 million and $49 million respectively, and are included in Other operating charge in the unaudited consolidated statements of operations.

As a result of the Reorganization, News Corporation became the new parent company of TNCL. News Corporation has a primary listing on the New York Stock Exchange and secondary listings on the Australian Stock Exchange and in due course, expects to obtain a secondary listing on the London Stock Exchange.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 2- Incorporation in the United States (continued)

In connection with the Reorganization, the Company acquired from the Murdoch Interests the approximate 58% interest in Queensland Press Pty limitedLimited (“QPL”) not already owned by the Company through the acquisition of the Cruden Group of companies. The Murdoch Interests are certain trusts, the beneficiaries of which include Mr. K.R. Murdoch, members of his family and certain charities. The principal assets of the Cruden Group were shares of the Company and a 58% interest in QPL. QPL owns a publishing business which includes two metropolitan and eight regional newspapers in Queensland, Australia, as well as shares of News Corporation. This transaction has been accounted for as a purchase in accordance with SFAS No. 141, “Business Combinations” (“SFAS No. 141”). The consideration for the acquisition of the net assets of the Cruden Group, excluding shares of the Company owned directly through the Cruden Group and indirectly (through QPL), was the issuance of approximately 60 million shares of Class B Common Stock valued at approximately $1 billion and the assumption of approximately $400 million of debt. All of the debt assumed was retired during the three months ended December 31,in November 2004. The excess purchase price over the fair value of the net assets acquired of approximately $1.2 billion has been preliminarily allocated to certain indefinite-lived intangibles and goodwill, which in accordance with SFAS No. 142 “Goodwill and Other Intangible Assets” (“SFAS No. 142”) are not being amortized. The allocation of the excess is not final and is subject to changes upon completion of final valuations of certain assets and liabilities. A future reduction in goodwill for additional value to be assigned to identifiable finite-lived intangible assets or tangible assets could reduce future earnings as a result of additional amortization. For every $100 million reduction in goodwill for additional value to be assigned to identifiable finite-lived intangible assets or tangible assets, Depreciation and amortization expense would increase by approximately $10 million per year representing amortization expense assuming an average useful life of 10 years. The results of QPL have been included in the Company’s consolidated statements of operations from November 12, 2004, the date of acquisition. As a result of the purchase of this interest in QPL, the Company’s ownership interest in QPL increased from 42% to 100% and accordingly on November 12, 2004, the Company ceased to equity account for QPL.

In exchange for the approximately 78 million shares of Class A Common Stock and approximately 247 million shares of Class B Common Stock which were owned directly through the Cruden Group and indirectly (through QPL) by the Cruden Group, the Murdoch Interests received shares of News Corporation in the same exchange ratio as all other holders of Company shares in the Reorganization. The number of shares of Class A Common Stock that the Murdoch Interests received was reduced by the number of shares equal in value to the net debt and certain other net liabilities of the Cruden Group which were assumed by the Company in the transaction. The shares issued toIn the Reorganization, the Murdoch Interests waswere issued approximately 60 million shares of Class A Common Stock and approximately 247 million shares of Class B Common Stock with an approximate value of $7 billion and the Company assumed approximately $250 million of net debt and certain other net liabilities of the Cruden Group. All of the debt assumed was retired during the three months ended December 31,in November 2004.

The Company shares acquired through the acquisition of the Cruden Group as well as the shares which were indirectly owned by the Company through its 42% ownership interest in QPL prior to the acquisition are considered treasury shares. The treasury shares are accounted for using the par value method. Shares of Class A Common Stock and shares of Class B Common Stock held in treasury as a result of the acquisition of the Cruden Group at DecemberMarch 31, 20042005 were approximately 109 million and 314 million, respectively. The Company has not retired any shares held in treasury during the six months ended December 31, 2004.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 3-3 – Investments

The Company’s investments were comprised of the following at:

DIRECTV

Investments in equity affiliates primarily reflect the Company’s investment in DIRECTV and includes the excess of fair value over the Company’s proportionate share of DIRECTV’s underlying net assets at December 22, 2003, as adjusted to record such net assets at fair value, most notably the adjustment to the carrying value of DIRECTV’s SPACEWAY and PanAmSat businesses and assets and its deferred subscriber acquisition costs. This excess, approximately $3.6 billion, has been allocated to finite-lived intangibles, which are being amortized over lives ranging from 6-20 years, and to certain indefinite-lived intangibles and goodwill, which are not subject to amortization in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.”

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 3- Investments (continued)142.

Summarized financial information for DIRECTV, accounted for under the equity method, is as follows:

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 3 – Investments (continued)

The Company’s share of DIRECTV’s losses for the sixnine months ended DecemberMarch 31, 20042005 was $177$217 million and includes the Company’s share of DIRECTV’s increased loss from its sale of PanAmSat resulting from a reduction in the sales proceeds, the Company’s portion of the SPACEWAY program impairment and the amortization of certain finite-lived intangibles.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 4 -Inventories,– Inventories, net

Inventories, net consisted of the following at:

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 5—5 – Borrowings

Eurobonds

During the six months ended December 31,In July 2004, the Company retired the remaining Eurobonds that were outstanding for $302 million.as of June 30, 2004.

New Millennium II

In May 2004, the Company ended the transfer term under the New Millennium II Agreement, the Company’s film financing vehicle, and will no longer drawceased drawing any borrowings under the facility. In accordance withDuring the terms of the termination,nine months ended March 31, 2005, the Company will repay $636fully repaid the remaining outstanding principal of $659 million ofunder the facility in fiscal 2005 and $23 million in fiscal 2006. During the six months ended December 31, 2004, the Company repaid $507 millionthat was outstanding as of the facility. At December 31, and June 30, 2004, $153 million and $659 million, respectively, remained outstanding and were included in Borrowings on the consolidated balance sheets and the corresponding interest expense was included in Interest expense, net in the unaudited consolidated statements of operations. Subsequent to December 31, 2004, the Company repaid principal of $83 million of the facility.2004.

Notes due 2014 &and Notes due 2034

On December 3, 2004, the Company issued approximately $750 million inof 5.30% Senior Notes due 2014 at 5.30% and $1,000 million inof 6.20% Senior Notes due 2034 at 6.20%.2034. The Company received proceeds of $1,743 million on the issuance of this debt, net of expenses.

Notes due 2005

On February 15, 2005, the Company repaid approximately $132 million in principal and $6 million in interest on the 8.5% Notes due February 2005.

LYONS

In February 2001, the Company issued Liquid Yield Option Notes (“LYONS^™”) which pay no interest and have an aggregate principal amount at maturity of $1,515 million representing a yield of 3.5% per annum on the issue price. The holders may exchange the notes at any time into Class A shares of News Corporation or, at the option of the Company, the cash equivalent thereof at a fixed exchange rate of 24.2966 Class A shares per $1,000 note. The notes are redeemable at the option of the holders on February 28, 2006, February 28, 2011 and February 28, 2016 at a price of $594.25, $706.82 and $840.73, respectively. The Company, at its election, may satisfy the redemption amounts in cash, Class A shares or any combination thereof. The Company can redeem the notes in cash at any time on or after February 28, 2006 at specified redemption amounts. The notes, which have been recorded at a discount, are being accreted using the effective interest rate method and had a carrying value of $873 million at March 31, 2005 and are included in current liabilities.

Note 6—6 – Acquisitions and Disposals

Fiscal 2005 Transactions

In September 2004, the Company purchased Telecom Italia’s 20% interest in SKY Italia, increasing the Company’s ownership interest in SKY Italia to 100%, for aggregate cash consideration of $108 million (€88 million) before fees.

In October 2004, the Company and its 34% investee, DIRECTV, announced a series of transactions with Grupo Televisa, Globopar and Liberty Media International, Inc. that will result in the reorganization of the companies’ direct-to-home (“DTH”) satellite TV platforms in Latin America. The transactions will result in DIRECTV Latin America and Sky Latin America consolidating their two DTH platforms into a single platform in each of the major territories served in the region. As part of these transactions, DIRECTV will acquireagreed to aquire News Corporation’s interests in Sky Brasil, Innova and Innova. As theSky Multi-Country Partners. The Sky Multi-Country Partners transaction has closed and the Company has recorded a pre-tax loss during the second quarter of fiscal 2005 of $55 million. Upon the completion of the reorganization of the other platforms, which is subject to the necessary governmental approvals, the Company will record a gain. As a result of these transactions, the Company’s transponder lease guarantee increased by $175 million. UponHowever, upon the closing of the Latin American DTH reorganization transactions, the Company will be released from the transponder lease guarantees. (See Note 10 -– Commitments and Guarantees)

In December 2004, the Company sold its 20% investment in Rogers Sportsnet to Rogers Broadcasting Limited for $41 million. Rogers Sportsnet operates regional sports networks in Canada covering local sports events plus national programming. For the six months ended December 31, 2004, the Companymillion and recognized a gain of $39 million on this sale in Other, net in the unaudited consolidated statements of operations.

In January 2005, STAR completed the acquisition of approximately 26% in Balaji Telefilms Limited, a television content production company in India for $34 million. Balaji’s shares are listed for trading on The Stock Exchange, Mumbai and the National Stock Exchange of India.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 6 – Acquisitions and Disposals (continued)

In February 2005, the Company and Rainbow Media Holdings (“Rainbow”) announced the exchange of their investments in Regional Programming Partners (“RPP”). Under the terms of the agreement, the Company will exchange its 40% interest in RPP for Rainbow’s 60% interests in Fox Sports Net Ohio (“FSN Ohio”) and Fox Sports Net Florida (“FSN Florida”) (formerly included in the RPP business) and Rainbow’s 50% interests in National Sports Partners (“NSP”) and National Advertising Partners (“NAP”). In addition, the Company will retain its 40% interest in Fox Sports Net Bay Area (“FSN Bay Area”) (also formerly included in the RPP business) and will remit to RPP the $150 million in promissory notes it received from RPP as a result of RPP’s 2003 acquisition of the Company’s direct ownership interests in Fox Sports Net Chicago and FSN Bay Area. The Company is accounting for this exchange in accordance with Accounting Principles Board Opinion No. 29, “Accounting for Nonmonetary Transactions” and accordingly the Company will record the assets received at fair value upon closing. Accordingly, during the third quarter, the Company recognized a loss of approximately $77 million on this exchange in Other, net on the accompanying unaudited consolidated statement of operations for the nine months ended March 31, 2005, as the fair value of the assets received is less than the book value of the assets exchanged. This transaction closed in April 2005.

In March 2005, Fox Acquisition Corp, a direct wholly-owned subsidiary of the Company, completed its offer to the holders of Class A common stock of Fox Entertainment Group, Inc. (“FEG”) to exchange 2.04 shares of the Company’s Class A common stock for each outstanding share of FEG’s Class A common stock validly tendered and not withdrawn in the exchange offer (the “Offer”). Shortly thereafter, the Company effected a “short form” merger of FEG with and into Fox Acquisition Corp. Each share of FEG Class A common stock not acquired in the Offer, other than the shares owned by the Company, was converted in the “short form” merger into 2.04 shares of the Company’s Class A common stock. The Company issued approximately 357 million shares of News Corporation’s Class A Common Stock valued at approximately $6.3 billion in exchange for the outstanding FEG Class A common shares. After the consummation of the offer and the subsequent merger, Fox Acquisition Corp changed its name to “Fox Entertainment Group, Inc.” As a result of the Offer, the Company’s ownership interest increased from approximately 82% to 100%.

In connection with the Offer and subsequent merger, a wholly owned subsidiary of the Company tendered the shares of Fox Class A common stock and Fox Class B common stock that it owned prior to the acquisition to Fox Acquisition Corp in exchange for News Corporation Class A Common Stock at the same exchange ratio as is provided in the Offer for shares of Fox Class A common stock. As a result of the exchange, the wholly owned subsidiary owns shares of News Corporation, which are considered treasury shares. The treasury shares are accounted for using the par value method. Of the Class A Common Stock held in treasury at March 31, 2005, approximately 1,631 million shares were received in exchange for shares of FEG’s common stock.

This transaction has been accounted for as a purchase in accordance with SFAS No. 141. The Company has not yet completed the evaluation and allocation of the purchase price as the appraisals associated with the valuation of tangible and intangible assets are not yet complete. Until the final allocation is complete, the Company has preliminarily allocated the purchase price to goodwill in the Other segment. In accordance with SFAS No. 142, goodwill is not being amortized, however a future reduction in goodwill for additional value to be assigned to identifiable finite-lived intangible assets or tangible assets could reduce future earnings as a result of additional amortization. For every $100 million reduction in goodwill for additional value to be assigned to identifiable finite-lived intangible assets or tangible assets, Depreciation and amortization expense would increase by approximately $10 million per year representing amortization expense assuming an average useful life of 10 years.

Fiscal 2004 Transactions

On December 22, 2003, the Company acquired a 34% interest in Hughes Electronics Corporation (“Hughes”) for total consideration of approximately $6.8 billion. General Motors Corporation (“GM”) sold its 20% interest in Hughes to the Company in exchange for approximately $3.1 billion, in cash, and 57.2 million shares of News Corporation Class A shares,Common Stock, valued at approximately $800 million. The Company acquired 14% of Hughes from the former GM Class H common stockholders in exchange for approximately 204.2 million shares of News Corporation Class A shares,Common Stock, valued at $2.9 billion. Immediately following the acquisition, the Company transferred its entire 34% interest in Hughes to FEG in exchange for two promissory notes totaling $4.5 billion and approximately 74.5 million shares of FEG’s Class A common stock valued at $2.3 billion. The issuance of approximately 74.5 million shares of FEG’s Class A Common Stockcommon stock to the Company increased its equity interest in FEG from approximately 81% to approximately 82% while its voting power remained at approximately 97%. Subsequent to the above transaction, Hughes changed its corporate name to The DIRECTV Group, Inc.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 6—6 – Acquisitions and Disposals (continued)

In December 2003, NDS Group plc (“NDS”), a subsidiary of the Company, acquired 100% of the MediaHighway middleware business from a subsidiary of Thomson SA and licensed certain related patents from Thomson SA for a total consideration of $73 million (€60 million) in cash. Subsequent to this acquisition, the Company concluded that certain intangible assets recognized on acquisition were not supported by projections of the incremental future cash flows attributable to the acquired business. Accordingly,during the second quarter of fiscal 2004, the Company recorded an impairment charge against these intangibles of $11.3 million reflected in Operating expenses within Operating income.in the unaudited consolidated statements of operations for the nine months ended March 31, 2004.

In December 2003, the Company sold its 50% direct ownership interests in SportsChannel Chicago Associates (“SportsChannel Chicago”) and SportsChannel Pacific Associates (“SportsChannel Bay Area”) (collectively the “SportsChannels”) to subsidiaries of RegionalofRegional Programming Partners (“RPP”) for consideration of $150 million. This consideration was paid wholly in the form of two three-year promissory notes issued by the subsidiaries of RPP, which own only the acquired interests in the SportsChannels, in an aggregate amount of $150 million and bearing interest at prime plus 1% per annum. The $150 million notes are secured by a pledge of 100% ofwere remitted to RPP as partial consideration for the intereststransaction with Rainbow that closed in SportsChannel Bay Area.April 2005, as described above. Upon the close of this sale, the SportsChannels arewere held 100% by RPP and indirectly 60% by Rainbow Media Sports Holdings, Inc. and 40% by the Company. The Company recognized a net gain on the sale of the SportsChannels of $9 million, which was reflected in Other, net in the unaudited consolidated statements of operations for the threenine months ended DecemberMarch 31, 2003.2004.

In February 2004, the Company sold the Los Angeles Dodgers (“Dodgers”), together with Dodger Stadium and the team’s training facilities in Vero Beach, Florida and the Dominican Republic, to entities owned by Frank McCourt (the “McCourt Entities”). The gross consideration for the sale of the Dodgers franchise and real estate assets was $421 million, subject to further adjustment. The consideration at closing was comprised of (i) $225 million in cash, (ii) a $125 million two-year note secured by non-team real estate, (iii) a $40 million four-year note secured by bank letters of credit and (iv) a $31 million three-year note that is convertible, at the Company’s option, into preferred equity in the McCourt Entities if unpaid at maturity. The Company has agreed to remit $50 million during the first two years following the closing of the transaction to reimburse the McCourt Entities for certain pre-existing commitments.commitments of which approximately $39 million has been remitted as of March 31, 2005. Pending the final determination of contractual adjustments, the sale has resulted in an estimated pre-tax loss of $19 million, which was recorded in Other, net in the Company’s statements of operations for the year ended June 30, 2004.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 7-7 – Pension Plans and Other Postretirement Benefits

The Company sponsors non-contributory pension plans and retiree health and life insurance benefit plans covering specific groups of employees. The benefits payable for the non-contributory pension plans are based primarily on a formula factoring both an employee’s years of service and pay near retirement. Participant employees are vested in the plans after five years of service. The Company’s policy for all pension plans is to fund amounts, at a minimum, in accordance with statutory requirements. During the sixnine months ended DecemberMarch 31, 20042005 and 2003,2004, the Company made discretionary contributions of $85$127 million and $55$90 million, respectively, to its pension plans. Plan assets consist principally of common stocks, marketable bonds and government securities. The retiree health and life insurance benefit plans offer medical and/or life insurance to certain full-time employees and eligible dependents that retire after fulfilling age and service requirements.

The components of net periodic benefit costs were as follows:

Other Postretirement Benefits Amendments

The fiscal 2005 postretirement net periodic costs reflect plan amendments implemented during the second quarter of fiscal 2004.

In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (“the Medicare Act”) was signed into law. The Medicare Act introduced a prescription drug benefit under Medicare (Medicare Part D) and a federal subsidy to sponsors of retirement health care plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In accordance with FASB Staff Position 106-1, the Company elected to defer recognizing the effects of the Medicare Act on the accounting for its retirement health care plans in fiscal 2004. In May 2004, the FASB issued FASB Staff Position 106-2, providing final guidance on accounting for the Medicare Act. FASB Staff Position 106-2 was implemented by the Company in the first quarter of fiscal 2005. The adoption of FASB Staff Position 106-2 did not have a material impact on the financial condition and results of operations of the Company in fiscal 2005, but reduced the Company’s Accumulated Postretirement Benefit Obligation (“APBO”) by approximately $5 million. The amortization of the $5 million reduction in APBO will reduce our future net postretirement benefit cost.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 8 – Segment Information

The Company is a diversified entertainment company, which manages and reports its businesses in eight segments:

The Company’s operating segments have been determined in accordance with the Company’s internal management structure, which is organized based on operating activities. The Company evaluates performance based upon several factors, of which the primary financial measure ismeasures are segment operating income (loss) and Operating income (loss) before depreciation and amortization.

Operating income (loss) before depreciation and amortization, defined as operating income (loss) plus depreciation and amortization and the amortization of cable distribution investments, eliminates the variable effect across all business segments of non-cash depreciation and amortization. Depreciation and amortization expense includes the depreciation of property and equipment, as well as amortization of finite-lived intangible assets. Amortization of cable distribution investments represents a reduction against revenues over the term of a carriage arrangement and as such it is excluded from Operating income (loss) before depreciation and amortization. Operating income (loss) before depreciation and amortization is a non-GAAP measure and it should be considered in addition to, not as a substitute for, operating income (loss), net income (loss), cash flow and other measures of financial performance reported in accordance with GAAP. Operating income (loss) before depreciation and amortization does not reflect cash available to fund requirements, and the items excluded from Operating income (loss) before depreciation and amortization, such as depreciation and amortization, are significant components in assessing the Company’s financial performance.

Management believes that Operating income (loss) before depreciation and amortization is an appropriate measure for evaluating the operating performance of the Company’s business segments. Operating income (loss) before depreciation and amortization provides management, investors and equity analysts a measure to analyze operating performance of each business segment and enterprise value against historical and competitors’ data, although historical results, including Operating income (loss) before depreciation and amortization, may not be indicative of future results (as operating performance is highly contingent on many factors including customer tastes and preferences).

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 8–8 – Segment Information (continued)