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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 10-Q



(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended September 30, 2003



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from
 to



Commission file number 1-14595



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FOX ENTERTAINMENT GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)



|Delaware                                                       |  | 95-4066193                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|1211 Avenue of the Americas, New York, New York                |  | 10036                               
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          



Registrants
telephone number, including area code (212) 852-7111



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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 ̈



As of November 5, 2003,
352,436,375 shares of Class A Common Stock, par value $.01 per share, and 547,500,000 shares of Class B Common Stock, par value $.01 per share, were outstanding.



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##### Table of Contents

FOX ENTERTAINMENT GROUP, INC.



FORM 10-Q



TABLE OF CONTENTS



|                              |  |           |  |                                                                                                                  |  | Page
|----------------------------- |  | --------- |  | ---------------------------------------------------------------------------------------------------------------- |  | ----
|Part I. Financial Information |  |          
|                              |  |           | 
|                              |  | Item 1.   |  | Financial Statements                                                                                             |  |     
|                              |  |           | 
|                              |  |           |  | Unaudited Consolidated Condensed Statements of Operations for the three months ended September 30, 2003 and 2002 |  | 3   
|                              |  |           | 
|                              |  |           |  | Consolidated Condensed Balance Sheets as of September 30, 2003 (unaudited) and June 30, 2003 (audited)           |  | 4   
|                              |  |           | 
|                              |  |           |  | Unaudited Consolidated Condensed Statements of Cash Flows for the three months ended September 30, 2003 and 2002 |  | 5   
|                              |  |           | 
|                              |  |           |  | Notes to the Unaudited Consolidated Condensed Financial Statements                                               |  | 6   
|                              |  |           | 
|                              |  | Item 2.   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                            |  | 14  
|                              |  |           | 
|                              |  | Item 3.   |  | Quantitative and Qualitative Disclosures About Market Risk                                                       |  | 24  
|                              |  |           | 
|                              |  | Item 4.   |  | Controls and Procedures                                                                                          |  | 24  
|                              | 
|Part II. Other Information    |  |          
|                              |  |           | 
|                              |  | Item 1.   |  | Legal Proceedings                                                                                                |  | 24  
|                              |  |           | 
|                              |  | Item 6.   |  | Exhibits and Reports on Form 8-K                                                                                 |  | 25  
|                              |  |          
|                              |  | Signature |  | 25                                                                                                              



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FOX ENTERTAINMENT GROUP, INC.



UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(in millions except per share amounts)



|                                                                                  |  | For the three monthsended September 30, |      
|--------------------------------------------------------------------------------- |  | --------------------------------------- | -----
|                                                                                  |  | 2003                                    |      
|Revenues                                                                          |  | $                                       | 2,758
|Expenses:                                                                         |  |                                         |      
|Operating                                                                         |  |                                         | 1,786
|Selling, general and administrative                                               |  |                                         | 319  
|Depreciation and amortization                                                     |  |                                         | 42   
|                                                                                  |  |                                         |      
|Operating income                                                                  |  |                                         | 611  
|                                                                                  |  |                                        
|Other income (expense):                                                           |  |                                         |      
|Interest expense, net                                                             |  |                                         | (8   
|Equity earnings (losses) of affiliates                                            |  |                                         | 7    
|Minority interest in subsidiaries                                                 |  |                                         | (2   
|Other, net                                                                        |  |                                         | 26   
|                                                                                  |  |                                         |      
|Income before provision for income taxes                                          |  |                                         | 634  
|Provision for income tax expense on a stand-alone basis                           |  |                                         | (233 
|                                                                                  |  |                                         |      
|Net income                                                                        |  | $                                       | 401  
|                                                                                  |  |                                         |      
|Basic and diluted earnings per share                                              |  | $                                       | 0.45 
|                                                                                  |  |                                         |      
|Basic and diluted weighted average number of common equivalent shares outstanding |  |                                         | 900  
|                                                                                  |  |                                         |      



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



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FOX ENTERTAINMENT GROUP, INC.



UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

(in millions except share and per share amounts)



|                                                                                                                                                  |  | As ofSeptember 30,2003 |        | As ofJune 30,2003
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------ | -----------------
|                                                                                                                                                  |  | (unaudited)            |        | (audited)        
|Assets:                                                                                                                                           |  |                        |        |                  
|Cash and cash equivalents                                                                                                                         |  | $                      | 36     |                  
|Accounts receivable, net                                                                                                                          |  |                        | 2,835  |                  
|Filmed entertainment and television programming costs, net                                                                                        |  |                        | 3,360  |                  
|Investments in equity affiliates                                                                                                                  |  |                        | 1,581  |                  
|Property and equipment, net                                                                                                                       |  |                        | 1,443  |                  
|Intangible assets, net                                                                                                                            |  |                        | 8,662  |                  
|Goodwill, net                                                                                                                                     |  |                        | 4,816  |                  
|Other assets and investments                                                                                                                      |  |                        | 916    |                  
|                                                                                                                                                  |  |                        |        |                  
|Total assets                                                                                                                                      |  | $                      | 23,649 |                  
|                                                                                                                                                  |  |                        |        |                  
|Liabilities and Shareholders Equity:                                                                                                             |  |                        |        |                  
|                                                                                                                                                  |  |                       
|Liabilities:                                                                                                                                      |  |                        |        |                  
|Accounts payable and accrued liabilities                                                                                                          |  | $                      | 1,472  |                  
|Participations, residuals and royalties payable                                                                                                   |  |                        | 1,271  |                  
|Television programming rights payable                                                                                                             |  |                        | 1,473  |                  
|Deferred revenue                                                                                                                                  |  |                        | 455    |                  
|Borrowings                                                                                                                                        |  |                        | 717    |                  
|Deferred income taxes                                                                                                                             |  |                        | 2,152  |                  
|Other liabilities                                                                                                                                 |  |                        | 815    |                  
|                                                                                                                                                  |  |                        |        |                  
|                                                                                                                                                  |  |                        | 8,355  |                  
|Due to affiliates of News Corporation                                                                                                             |  |                        | 562    |                  
|                                                                                                                                                  |  |                        |        |                  
|Total liabilities                                                                                                                                 |  |                        | 8,917  |                  
|                                                                                                                                                  |  |                        |        |                  
|Minority interest in subsidiaries                                                                                                                 |  |                        | 28     |                  
|                                                                                                                                                  |  |                        |        |                  
|                                                                                                                                                  |  |                       
|Commitments and contingencies                                                                                                                     |  |                        |        |                  
|                                                                                                                                                  |  |                       
|Shareholders Equity:                                                                                                                             |  |                        |        |                  
|Preferred stock, $.01 par value per share; 100,000,000 shares authorized; 0 shares issued and outstanding as of September 30 and
June 30, 2003    |  |                        |       |                  
|Class A Common stock, $.01 par value per share; 1,000,000,000 authorized; 352,436,375 issued and outstanding as of September 30
and June 30, 2003 |  |                        | 4      |                  
|Class B Common stock, $.01 par value per share; 650,000,000 authorized; 547,500,000 issued and outstanding as of September 30 and
June 30, 2003   |  |                        | 6      |                  
|Additional paid-in capital                                                                                                                        |  |                        | 12,780 |                  
|Retained earnings and accumulated other comprehensive income                                                                                      |  |                        | 1,914  |                  
|                                                                                                                                                  |  |                        |        |                  
|Total shareholders equity                                                                                                                        |  |                        | 14,704 |                  
|                                                                                                                                                  |  |                        |        |                  
|Total liabilities and shareholders equity                                                                                                        |  | $                      | 23,649 |                  
|                                                                                                                                                  |  |                        |        |                  



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



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FOX ENTERTAINMENT GROUP, INC.



UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in millions)



|                                                                                  |  | For the three months ended September 30, |     
|--------------------------------------------------------------------------------- |  | ---------------------------------------- | ----
|                                                                                  |  | 2003                                     |     
|Operating activities:                                                             |  |                                          |     
|Net income                                                                        |  | $                                        | 401 
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                          |     
|Depreciation and amortization                                                     |  |                                          | 42  
|Amortization of cable distribution investments                                    |  |                                          | 31  
|Equity (earnings) losses of affiliates and distributions                          |  |                                          | (7  
|Minority interest in subsidiaries                                                 |  |                                          | 2   
|Deferred taxes                                                                    |  |                                          | 58  
|Change in operating assets and liabilities, net of acquisitions:                  |  |                                          |     
|Accounts receivable and other assets                                              |  |                                          | (199
|Filmed entertainment and television programming costs, net                        |  |                                          | (169
|Accounts payable and accrued liabilities                                          |  |                                          | (50 
|Participations, residuals and royalties payable and other liabilities             |  |                                          | 117 
|                                                                                  |  |                                          |     
|Net cash provided by operating activities                                         |  |                                          | 226 
|                                                                                  |  |                                          |     
|Investing activities:                                                             |  |                                          |     
|Acquisitions, net of cash acquired                                                |  |                                          | (5  
|Investments in equity affiliates                                                  |  |                                          | (19 
|Other investments                                                                 |  |                                          | (26 
|Purchases of property and equipment, net of acquisitions                          |  |                                          | (22 
|Disposals of property and equipment                                               |  |                                          |    
|                                                                                  |  |                                          |     
|Net cash used in investing activities                                             |  |                                          | (72 
|                                                                                  |  |                                          |     
|Financing activities:                                                             |  |                                          |     
|Borrowings                                                                        |  |                                          | 118 
|Repayment of borrowings                                                           |  |                                          | (138
|Decrease in minority interest in subsidiaries                                     |  |                                          | (2  
|Decrease in Preferred Interests                                                   |  |                                          | (26 
|(Repayments to) advances from affiliates of News Corporation, net                 |  |                                          | (142
|                                                                                  |  |                                          |     
|Net cash (used in) provided by financing activities                               |  |                                          | (190
|                                                                                  |  |                                          |     
|Net (decrease) increase in cash and cash equivalents                              |  |                                          | (36 
|Cash and cash equivalents, beginning of year                                      |  |                                          | 72  
|                                                                                  |  |                                          |     
|Cash and cash equivalents, end of period                                          |  | $                                        | 36  
|                                                                                  |  |                                          |     



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



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FOX ENTERTAINMENT GROUP, INC.



NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



Note 1  Basis of Presentation



Fox Entertainment Group,
Inc. (the Company) is principally engaged in the development, production and worldwide distribution of feature films and television programs, television broadcasting and cable network programming. The Company is a majority-owned
subsidiary of The News Corporation Limited (News Corporation), which, as of September 30, 2003, held equity and voting interests in the Company of 80.6% and 97.0%, respectively.



The accompanying unaudited consolidated condensed financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in the United States (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) considered necessary for a fair presentation have been reflected in these unaudited consolidated condensed 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, 2004.



These interim unaudited consolidated condensed financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and
notes thereto included in the Companys Form 10-K for the fiscal year ended June 30, 2003 as filed with the Securities and Exchange Commission.



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 condensed 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 prior year amounts have been
reclassified to conform to the fiscal 2004 presentation.



Effective for the
third quarter of fiscal 2003, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of FASB Statement No. 123, which
requires quarterly disclosure about the method of accounting for stock-based employee compensation and the effect on reported results. The Company follows the disclosure-only provisions of SFAS No. 123 Accounting for Stock-Based
Compensation, and in accordance with its provisions, applies Accounting Principles Board Opinion No. 25 Accounting for Stock Issued to Employees.



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FOX ENTERTAINMENT GROUP, INC.



NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



Note 1  Basis of Presentation - continued



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 may 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.



|                                                                                                                                                |  | For the three months ended September 30, |     
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ----
|                                                                                                                                                |  | 2003                                     |     
|                                                                                                                                                |  | (in millions except per share data)      |     
|Net income, as reported                                                                                                                         |  | $                                        | 401 
|Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of
related tax effects |  |                                          | (13 
|                                                                                                                                                |  |                                          |     
|Pro forma net income                                                                                                                            |  | $                                        | 388 
|                                                                                                                                                |  |                                          |     
|Basic and diluted earnings per share:                                                                                                           |  |                                          |     
|As reported                                                                                                                                     |  | $                                        | 0.45
|Pro forma                                                                                                                                       |  | $                                        | 0.43



Note 2  Comprehensive Income



Comprehensive income is as follows:



|                                         |  | For the three months ended September 30, |    
|---------------------------------------- |  | ---------------------------------------- | ---
|                                         |  | 2003                                     |    
|                                         |  | (in millions)                            |    
|Net income, as reported                  |  | $                                        | 401
|Other comprehensive income:              |  |                                          |    
|Foreign currency translation adjustments |  |                                          |   
|                                         |  |                                          |    
|Total comprehensive income               |  | $                                        | 401
|                                         |  |                                          |    



Note 3  Goodwill and Other
Intangible Assets



The initial adoption of SFAS No. 142, Goodwill
and Other Intangible Assets, effective July 1, 2002, required the Company to perform an impairment assessment of its goodwill and indefinite-lived intangible assets as of the date of adoption. This impairment assessment compared the fair value
of these intangible assets to their carrying value. As a result of the tests performed, the Company determined that none of its goodwill and indefinite-lived intangible assets were impaired.



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FOX ENTERTAINMENT GROUP, INC.



NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



Note 4  Filmed Entertainment and Television Programming Costs, net



Filmed entertainment and television programming costs, net consisted of the following as
of:



|                                                                 |  | September 30, 2003 |       | June 30, 2003
|---------------------------------------------------------------- |  | ------------------ | ----- | -------------
|                                                                 |  | (in millions)     
|Filmed entertainment costs:                                      |  |                    |       |              
|Films:                                                           |  |                    |       |              
|Released                                                         |  | $                  | 725   |              
|Completed, not released                                          |  |                    | 33    |              
|In production                                                    |  |                    | 626   |              
|In development or preproduction                                  |  |                    | 50    |              
|                                                                 |  |                    |       |              
|                                                                 |  |                    | 1,434 |              
|                                                                 |  |                    |       |              
|Television productions:                                          |  |                    |       |              
|Released                                                         |  |                    | 397   |              
|In production                                                    |  |                    | 201   |              
|In development or preproduction                                  |  |                    | 2     |              
|                                                                 |  |                    |       |              
|                                                                 |  |                    | 600   |              
|                                                                 |  |                    |       |              
|Total filmed entertainment costs, less accumulated amortization  |  |                    | 2,034 |              
|Television programming costs, less accumulated amortization      |  |                    | 1,326 |              
|                                                                 |  |                    |       |              
|Total filmed entertainment and television programming costs, net |  | $                  | 3,360 |              
|                                                                 |  |                    |       |              



Note 5  New Millennium II



In September 2003, the Company purchased substantially all of the
outstanding equity of Tintagel Investors L.L.C. (Tintagel), the entity that held the Preferred Interest in New Millennium II (NM2), for $25.5 million plus accrued and unpaid Preferred Payments in the amount of approximately
$106,000. As a result of the acquisition of this equity interest, the Company has consolidated the assets and liabilities of Tintagel for accounting purposes and all Preferred Interests and Preferred Payments in NM2 have been eliminated. The June
30, 2003 outstanding NM2 Preferred Interest of $762 million was included in Minority interest in subsidiaries on the consolidated balance sheet and Preferred Payments were included in Minority interest in subsidiaries in the statement of operations.
Tintagels September 30, 2003 outstanding indebtedness of $717 million is included in Borrowings on the unaudited consolidated condensed balance sheet and the corresponding interest is included in Interest expense, net. Tintagel continues to be
a separate legal entity from the Company with separate assets and liabilities.



Note 6  Acquisitions



In August 2002, the Company
acquired WPWR-TV in the Chicago designated market area (DMA) from Newsweb Corporation for $425 million. This transaction has been treated as a purchase in accordance with SFAS Nos. 141, Business Combinations, and 142, Goodwill and
Other Intangible Assets.



In April 2003, News Corporation, General Motors
Corporation (GM) and Hughes Electronics Corporation (Hughes) reached an agreement in which News Corporation would acquire 34% of Hughes (the Hughes Transaction). News Corporation will acquire GMs approximate
19.9% interest in Hughes for approximately $3.8 billion (subject to upward adjustment), of which approximately $768 million (subject to upward adjustment) may be paid in News Corporation American Depositary Receipts representing preferred limited
voting ordinary shares (ADRs). News Corporation will acquire through a merger an additional 14.1% of Hughes for approximately $2.7 billion that is payable, at News Corporations option, in cash, News Corporation ADRs, or a
combination thereof. Simultaneously with the closing of this transaction, News Corporation will transfer its 34% ownership interest in Hughes to the Company in exchange for promissory notes representing $4.5 billion and approximately 74.2 million
shares of the Companys Class A Common Stock, thereby increasing News Corporations ownership interest in the Company from 80.6% to approximately 82%. News Corporations voting percentage will remain at 97%. The closing of the
transaction is subject to a number of conditions, including regulatory approvals.



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FOX ENTERTAINMENT GROUP, INC.



NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



Note 7  Segment Information



The Company manages and reports its activities in four business segments:



| |  | Filmed Entertainment, which principally consists of the production and acquisition of live-action and animated motion pictures for distribution and licensing in all formats in all
entertainment media primarily in the United States, Canada and Europe, and the production of original television programming in the United States and Canada;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Television Stations, which principally consists of the operation of broadcast television stations in the United States;
| | - | -----------------------------------------------------------------------------------------------------------------------



| |  | Television Broadcast Network, which principally consists of the broadcasting of network programming in the United States; and
| | - | -----------------------------------------------------------------------------------------------------------------------------



| |  | Cable Network Programming, which principally consists of the production and licensing of programming distributed through cable television systems and direct broadcast satellite
operators in the United States and professional sports team ownership in the United States.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Companys reportable 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 measures are segment operating income and Operating Income Before Depreciation and Amortization.



|                             |  | For the three months ended September 30,
|---------------------------- |  | ----------------------------------------
|                             |  | 2003                                    
|                             |  | (in millions)                           
|Revenues:                    |  |                                         
|Filmed Entertainment         |  | $                                       
|Television Stations          |  |                                         
|Television Broadcast Network |  |                                         
|Cable Network Programming    |  |                                         
|                             |  |                                         
|Total revenues               |  | $                                       
|                             |  |                                         



Operating Income 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 Before Depreciation and Amortization. Since Operating Income Before Depreciation and Amortization is a non-GAAP measure, 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 Before Depreciation and Amortization does not reflect cash available to fund
requirements and the items excluded from Operating Income Before Depreciation and Amortization, such as depreciation and amortization, are significant components in assessing the Companys financial performance.



Management believes that Operating Income Before Depreciation and Amortization is an
appropriate measure for evaluating the operating performance of the Companys business segments. Operating Income Before Depreciation and Amortization, which is the information reported to and used by the Companys chief decision maker for
the purpose of making decisions about the allocation of resources to segments and assessing their performance, 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 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).



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FOX ENTERTAINMENT GROUP, INC.



NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



Note 7  Segment Information - continued



|                                                            |  | For the three months ended September 30, |     
|----------------------------------------------------------- |  | ---------------------------------------- | ----
|                                                            |  | 2003                                     |     
|                                                            |  | (in millions)                            |     
|Operating Income Before Depreciation and Amortization:      |  |                                          |     
|Filmed Entertainment                                        |  | $                                        | 345 
|Television Stations                                         |  |                                          | 237 
|Television Broadcast Network                                |  |                                          | (41 
|Cable Network Programming                                   |  |                                          | 143 
|                                                            |  |                                          |     
|Total Operating Income Before Depreciation and Amortization |  |                                          | 684 
|Amortization of cable distribution investments              |  |                                          | (31 
|Depreciation and Amortization                               |  |                                          | (42 
|                                                            |  |                                          |     
|Total operating income                                      |  |                                          | 611 
|                                                            |  |                                          |     
|Interest expense, net                                       |  |                                          | (8  
|Equity earnings (losses) of affiliates                      |  |                                          | 7   
|Minority interest in subsidiaries                           |  |                                          | (2  
|Other, net                                                  |  |                                          | 26  
|                                                            |  |                                          |     
|Income before provision for income taxes                    |  | $                                        | 634 
|Provision for income tax expense on a stand-alone basis     |  |                                          | (233
|                                                            |  |                                          |     
|Net income                                                  |  | $                                        | 401 
|                                                            |  |                                          |     



|                             |  | For the three months ended September 30, 2003         |    
|---------------------------- |  | ----------------------------------------------------- | ---
|                             |  | Operating Income Before Depreciation and Amortization |    
|                             |  | (in millions)                                         |    
|Filmed Entertainment         |  | $                                                     | 345
|Television Stations          |  |                                                       | 237
|Television Broadcast Network |  |                                                       | (41
|Cable Network Programming    |  |                                                       | 143
|                             |  |                                                       |    
|Total                        |  | $                                                     | 684
|                             |  |                                                       |    



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FOX ENTERTAINMENT GROUP, INC.



NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



Note 7 Segment Information - continued



|                             |  | For the three months ended September 30, 2002        |    
|---------------------------- |  | ---------------------------------------------------- | ---
|                             |  | Operating Income Before Depreciation andAmortization |    
|                             |  | (in millions)                                        |    
|Filmed Entertainment         |  | $                                                    | 118
|Television Stations          |  |                                                      | 224
|Television Broadcast Network |  |                                                      | (3 
|Cable Network Programming    |  |                                                      | 128
|                             |  |                                                      |    
|Total                        |  | $                                                    | 467
|                             |  |                                                      |    



Intersegment revenues generated
primarily by the Filmed Entertainment segment of approximately $152 million and $160 million for the three months ended September 30, 2003 and 2002, respectively, have been eliminated within the Filmed Entertainment segment. Intersegment operating
profits generated primarily by the Filmed Entertainment segment of approximately $20 million and $16 million for the three months ended September 30, 2003 and 2002, respectively, have been eliminated on consolidation within the Filmed Entertainment
segment.



Interest expense, net, Equity earnings (losses) of affiliates,
Minority interest in subsidiaries, Other, net and Provision for income tax expense on a stand-alone basis are not allocated to segments, as they are not under the control of segment management.



|                                          |  | As of September 30, 2003 |        | As of June 30, 2003
|----------------------------------------- |  | ------------------------ | ------ | -------------------
|                                          |  | (in millions)           
|Total assets:                             |  |                          |        |                    
|Filmed Entertainment                      |  | $                        | 4,710  |                    
|Television Stations                       |  |                          | 11,440 |                    
|Television Broadcast Network              |  |                          | 1,028  |                    
|Cable Network Programming                 |  |                          | 4,890  |                    
|Investments in equity affiliates          |  |                          | 1,581  |                    
|                                          |  |                          |        |                    
|Total assets                              |  | $                        | 23,649 |                    
|                                          |  |                          |        |                    
|Goodwill and Intangible assets, net:      |  |                          |        |                    
|Filmed Entertainment                      |  | $                        | 445    |                    
|Television Stations                       |  |                          | 10,049 |                    
|Television Broadcast Network              |  |                          |       |                    
|Cable Network Programming                 |  |                          | 2,984  |                    
|                                          |  |                          |        |                    
|Total goodwill and intangible assets, net |  | $                        | 13,478 |                    
|                                          |  |                          |        |                    



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FOX ENTERTAINMENT GROUP, INC.



NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



Note 8  Guarantees



The Company, News Corporation and certain of News Corporations other subsidiaries are
guarantors of various debt obligations of News Corporation and certain of its subsidiaries. The principal amount of indebtedness outstanding under such debt instruments as of September 30 and June 30, 2003 was approximately $10 billion. The debt
instruments limit the ability of guarantors, including the Company, to subject their properties to liens, and certain of the debt instruments impose limitations on the ability of News Corporation and certain of its subsidiaries, including the
Company, to incur indebtedness in certain circumstances. Such debt instruments mature at various times between 2004 and 2096, with a weighted average maturity of over 20 years.



In the case of any event of default under such debt obligations, the Company will be directly liable to the creditors or debtholders. News
Corporation has agreed to indemnify the Company from and against any obligations it may incur by reason of its guarantees of such debt obligations. As of September 30, 2003, News Corporation was in compliance with all of its debt covenants and had
satisfied all financial ratios and tests and expects to remain in compliance and satisfy all such ratios and tests.



As of June 30, 2003, the Company guaranteed sports rights agreements for SportsChannel Chicago Associates (SportsChannel Chicago), which aggregated
approximately $1,007 million. On September 30, 2003, SportsChannel Chicago received notice that each of the Chicago Cubs, Bulls, Blackhawks and White Sox have exercised their right to terminate their rights agreement with SportsChannel Chicago
effective September 30, 2004. Upon termination of the rights agreements, the remaining guarantee would be approximately $43 million through fiscal 2005.



Note 9  Contingencies



Regional Sports Networks:



In January 2003, Fox Sports Net, Inc. (Fox Sports Net) exercised its right to put its 50% direct ownership interests in SportsChannel Chicago and
SportsChannel Pacific Associates (collectively the SportsChannels) to Regional Programming Partners (RPP). In March 2003, RPP and Fox Sports Net agreed on a $150 million purchase price for the interest in the SportsChannels,
payable in the form of three-year promissory notes of the subsidiaries of RPP, which own only the interests in the SportsChannels, the terms of which are under negotiation. The transaction is expected to close in the first half of fiscal 2004.
Following the closing of this sale, the SportsChannels will be held 100% by RPP and indirectly 40% by Fox Sports Net and 60% by Rainbow Media Sports Holdings, Inc., and each will remain a Fox Sports Net affiliate.



Hughes:



In April 2003, a putative derivative and shareholder class action (Norman Levin v. K. Rupert
Murdoch et al., 03 CV 2929) was filed in the United States District Court for the Southern District of New York against the Companys board members and the Company (as nominal defendant), alleging among other things that in approving the Hughes
Transaction (see Note 6), they breached their fiduciary duties to the Companys public shareholders. On September 15, 2003, the plaintiff agreed to dismiss the action with prejudice as to himself and without prejudice to putative class members
other than himself. On September 19, 2003, the Court entered the agreed upon order of dismissal.



In April 2003, six putative shareholder class actions were filed in state courts in Delaware (four actions) and California (two actions) against GM and certain of its board members, alleging that in approving the
Hughes Transaction (see Note 6), the defendants breached their fiduciary duties to public holders of GMs Class H shares. Hughes and its board members are defendants in certain of these actions and also are alleged to have breached fiduciary
duties to the same shareholders. News Corporation was a defendant in two of the Delaware actions and was alleged to have aided and abetted the other defendants purported breaches of fiduciary duties. The Delaware actions were consolidated on
May 6, 2003, and a consolidated complaint was filed on August 29, 2003. News Corporation was not named as a defendant in the consolidated complaint.



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FOX ENTERTAINMENT GROUP, INC.



NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



Note 10  Other, net



For the three months ended September 30, 2003, Other, net consisted of a gain related to the
settlement of the Companys insurance claim primarily for its broadcast tower at the World Trade Center in New York, New York.



Note 11  Recent Accounting Pronouncements



In January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. (FIN) 46, Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51. FIN 46 requires an enterprise to consolidate a variable interest entity if it is determined that the enterprise is a primary beneficiary of that entity, subject to the criteria set forth in FIN 46.
Assets, liabilities, and non controlling interests of newly consolidated variable interest entities will be initially measured at fair value. After initial measurement, the consolidated variable interest entity will be accounted for under the
guidance provided by Accounting Research Bulletin No. 51, Consolidated Financial Statements. FIN 46 is effective immediately for variable interest entities created or entered into after January 31, 2003. For variable interest entities
created or acquired before February 1, 2003, FIN 46 applies in the second quarter of fiscal 2004. The Company is currently in the process of evaluating the impact of adopting FIN 46 on its consolidated balance sheets and statements of operations.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 amends SFAS No. 6, Elements of Financial Statements, to improve accounting for certain financial instruments that, under previous guidance,
issuers could account for as equity. The new statement requires that those instruments be classified as liabilities in statements of financial position. SFAS No. 150 is effective for all financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 in July 2003 had no material impact on the consolidated condensed balance sheet and statement of operations of
the Company. The FASB is addressing certain implementation issues associated with the application of SFAS No. 150. On October 29, 2003, the FASB decided to defer certain provisions of SFAS No. 150 related to noncontrolling interests in subsidiaries
included in consolidated financial statements. The Company will monitor the actions of the FASB and assess the impact, if any, that these actions may have on its financial statements.



Note 12 Subsequent Events



On October 10, 2003, the Company announced that it had reached an agreement in principle to sell the Los Angeles Dodgers, together with Dodger Stadium and the teams
training facilities in Vero Beach, Florida and the Dominican Republic, to an investment group headed by Mr. Frank McCourt. This agreement is subject to Major League Baseball approval and customary closing conditions.



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##### Table of Contents

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



This document contains statements that constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended. The words expect, estimate, anticipate, predict, believe and similar expressions and variations thereof are intended to
identify forward-looking statements. These statements appear in a number of places in this document and include statements regarding the intent, belief or current expectations of the Fox Entertainment Group, Inc. (the Company), its
directors or its officers with respect to, among other things, trends affecting the Companys financial condition or results of operations. The readers of this document are cautioned that any such forward-looking statements are not guarantees
of future performance and involve risks and uncertainties. Those risks and uncertainties are discussed under the heading Risk Factors, in the Companys Registration Statement on Form S-3 (SEC file no. 333-85978) as declared
effective by the Securities and Exchange Commission on May 3, 2002, as well as the information set forth below. The Company does not ordinarily make projections of its future operating results and undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Readers should carefully review other documents filed by the Company with the Securities and Exchange Commission.
This section should be read in conjunction with the unaudited consolidated condensed financial statements of the Company and related notes set forth elsewhere herein.



The Company manages and reports its activities in four business segments:



| |  | Filmed Entertainment, which principally consists of the production and acquisition of live-action and animated motion pictures for distribution and licensing in all formats in all
entertainment media primarily in the United States, Canada and Europe, and the production of original television programming in the United States and Canada;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Television Stations, which principally consists of the operation of broadcast television stations in the United States;
| | - | -----------------------------------------------------------------------------------------------------------------------



| |  | Television Broadcast Network, which principally consists of the broadcasting of network programming in the United States; and
| | - | -----------------------------------------------------------------------------------------------------------------------------



| |  | Cable Network Programming, which principally consists of the production and licensing of programming distributed through cable television systems and direct broadcast satellite
operators in the United States and professional sports team ownership in the United States.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Sources of Revenue



Filmed
Entertainment. The Filmed Entertainment segment derives revenue from theatrical distribution, home video and DVD sales and distribution through pay-per-view, pay television services and broadcast television. The revenues and operating
results of the Filmed Entertainment segment are significantly affected by the timing of the Companys theatrical, home video and DVD releases, the number of its original and returning television series that are aired by television networks and
the number of its television series on off-network syndication. Theatrical release dates are determined by several factors, including timing of vacation and holiday periods and competition in the marketplace. Each motion picture is a separate and
distinct product, and its financial success depends upon many factors, including public acceptance.



Television Stations and Television Broadcast Network. The two reportable television segments derive their revenues principally from the sale of advertising time. Generally, advertising time is sold to
national advertisers by the Fox Broadcasting Company (FOX) and to national spot and local advertisers by the Companys group of 35 owned and operated full power television broadcast stations (O&Os) in
their respective markets. The sale of advertising time is affected by viewer demographics, program ratings and general market conditions. Adverse changes in the general market conditions for advertising may affect revenues.



Cable Network Programming. The Cable Network Programming segment derives
revenues from monthly affiliate fees received from cable television systems and direct broadcast satellite (DBS) operators based on the number of subscribers, net of the amortization of cable distribution investments, as well as from the
sale of advertising time. Monthly affiliate fees are dependent on maintenance of carriage arrangements with cable television systems and DBS operators. The sale of advertising time is affected by viewer demographics, program ratings and general
market conditions. Adverse changes in general market conditions for advertising may affect revenues.



14



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##### Table of Contents

Components of Expenses



Filmed Entertainment. Operating costs incurred by the Filmed Entertainment segment include exploitation costs, primarily prints and advertising; the
amortization of capitalized production, overhead and interest costs; and participations and talent residuals. Selling, general and administrative expenses include salaries, employee benefits, rent and other routine overhead.



Television Stations, Television Broadcast Network and Cable Network
Programming. Operating expenses of the two reportable television segments and the Cable Network Programming segment include expenses related to acquiring programming and rights to programming. Operating expenses also typically include
production and technical expenses related to operating the technical facilities of the broadcaster or cable network. Selling, general and administrative expenses include all promotional expenses related to improving the market visibility and
awareness of the broadcaster or cable network and sales commissions paid to the in-house sales force involved in the sale of advertising as well as salaries, employee benefits, rent and other routine overhead.



Depreciation and Amortization Expense. Depreciation and amortization expense
includes the depreciation of property and equipment, as well as amortization of finite-lived intangible assets.



Use of Operating Income Before Depreciation and Amortization.Operating Income 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 Before Depreciation and Amortization. Since Operating Income Before Depreciation and Amortization is a non-GAAP measure, 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 generally accepted accounting principles (GAAP). Operating Income Before Depreciation and Amortization does not reflect cash available to
fund requirements and the items excluded from Operating Income Before Depreciation and Amortization, such as depreciation and amortization, are significant components in assessing the Companys financial performance.



Management believes that Operating Income Before Depreciation and Amortization is an
appropriate measure for evaluating the operating performance of the Companys business segments. Operating Income Before Depreciation and Amortization, which is the information reported to and used by the Companys chief decision maker for
the purpose of making decisions about the allocation of resources to segments and assessing their performance, 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 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).



The following comparative
discussion of the results of operations of the Company includes, among other factors, an analysis of changes in business segment Operating Income Before Depreciation and Amortization.



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##### Table of Contents

Results of Operations  Three months ended September 30, 2003 versus Three months ended September 30, 2002.



The following table sets forth the Companys operating results, by
segment, for the three months ended September 30, 2003 as compared to the three months ended September 30, 2002.



|                                                            |  | For the three months ended September 30, |      
|----------------------------------------------------------- |  | ---------------------------------------- | -----
|                                                            |  | 2003                                     |      
|                                                            |  | (in millions)                            |      
|Revenues(1):                                                |  |                                          |      
|Filmed Entertainment                                        |  | $                                        | 1,250
|Television Stations                                         |  |                                          | 518  
|Television Broadcast Network                                |  |                                          | 394  
|Cable Network Programming                                   |  |                                          | 596  
|                                                            |  |                                          |      
|Total revenues                                              |  | $                                        | 2,758
|                                                            |  |                                          |      
|Operating income (loss):                                    |  |                                          |      
|Filmed Entertainment                                        |  | $                                        | 333  
|Television Stations                                         |  |                                          | 221  
|Television Broadcast Network                                |  |                                          | (45  
|Cable Network Programming                                   |  |                                          | 102  
|                                                            |  |                                          |      
|Total operating income (loss)                               |  |                                          | 611  
|                                                            |  |                                          |      
|Interest expense, net                                       |  |                                          | (8   
|Equity earnings (losses) of affiliates                      |  |                                          | 7    
|Minority interest in subsidiaries                           |  |                                          | (2   
|Other, net                                                  |  |                                          | 26   
|                                                            |  |                                          |      
|Income before provision for income taxes                    |  |                                          | 634  
|Provision for income tax expense on a stand-alone basis     |  |                                          | (233 
|                                                            |  |                                          |      
|Net income                                                  |  | $                                        | 401  
|                                                            |  |                                          |      
|Other data:                                                 |  |                                          |      
|                                                            |  |                                          |      
|Operating Income Before Depreciation and Amortization(2):   |  |                                          |      
|Filmed Entertainment                                        |  | $                                        | 345  
|Television Stations                                         |  |                                          | 237  
|Television Broadcast Network                                |  |                                          | (41  
|Cable Network Programming                                   |  |                                          | 143  
|                                                            |  |                                          |      
|Total Operating Income Before Depreciation and Amortization |  | $                                        | 684  
|                                                            |  |                                          |      

---

|** | not meaningful
|-- | --------------



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##### Table of Contents

FOOTNOTE:



| | (1) | The Company classifies the amortization of cable distribution investments against revenue in accordance with Emerging Issues Task Force No. 01-09, Accounting for the
Consideration Given by a Vendor to a Customer or a Reseller of the Vendors Products, as detailed in the following table:
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                               |  | For the three monthsended September 30, |      
|---------------------------------------------- |  | --------------------------------------- | -----
|                                               |  | 2003                                    |      
|                                               |  | (in millions)                           |      
|Gross Revenues                                 |  | $                                       | 2,789
|Amortization of cable distribution investments |  |                                         | (31  
|                                               |  |                                         |      
|Revenues                                       |  | $                                       | 2,758
|                                               |  |                                         |      



| | (2) | Operating Income 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 depreciation of property and equipment, as well as the 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 Before Depreciation and Amortization. Since Operating Income
Before Depreciation and Amortization is a non-GAAP measure, it should be considered in addition to, not as a substitute for, operating income (loss), net income (loss), cash flow and other measures of the financial performance prepared in accordance
with GAAP and presented in the consolidated condensed financial statements included elsewhere in this filing. The following is a reconciliation of Operating income (loss) to Operating Income Before Depreciation and Amortization by segment:
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                             |  | For the three months ended September 30, 2003      |    
|---------------------------- |  | -------------------------------------------------- | ---
|                             |  | OperatingIncome BeforeDepreciation andAmortization |    
|                             |  | (in millions)                                      |    
|Filmed Entertainment         |  | $                                                  | 345
|Television Stations          |  |                                                    | 237
|Television Broadcast Network |  |                                                    | (41
|Cable Network Programming    |  |                                                    | 143
|                             |  |                                                    |    
|Total                        |  | $                                                  | 684
|                             |  |                                                    |    



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##### Table of Contents

|                             |  | For the three months ended September 30, 2002       |    
|---------------------------- |  | --------------------------------------------------- | ---
|                             |  | Operating Income BeforeDepreciation andAmortization |    
|                             |  | (in millions)                                       |    
|Filmed Entertainment         |  | $                                                   | 118
|Television Stations          |  |                                                     | 224
|Television Broadcast Network |  |                                                     | (3 
|Cable Network Programming    |  |                                                     | 128
|                             |  |                                                     |    
|Total                        |  | $                                                   | 467
|                             |  |                                                     |    



Overview.For the
quarter ended September 30, 2003, the Companys revenues were $2,758 million, an increase of $414 million over the $2,344 million in revenue for the quarter ended September 30, 2002. This 18% increase was primarily due to revenue increases at
the Filmed Entertainment and Cable Network Programming segments. Operating expenses increased approximately 13% for the first quarter of fiscal 2004 primarily due to increased home entertainment marketing and maufacturing costs at the Filmed
Entertainment Segment. Selling, general and administrative expenses were consistent as compared to the quarter ended September 30, 2002. Depreciation and amortization expenses decreased $5 million from the first quarter of fiscal 2003. For the
quarter ended September 30, 2003, Operating income and Operating Income Before Depreciation and Amortization increased $222 million to $611 million and $217 million to $684 million, respectively, from the corresponding period of the prior year.
These increases were primarily due to the revenue increases noted above, partially offset by the increase in operating expenses for the first quarter of fiscal 2004.



Equity earnings of affiliates of $7 million increased $5 million from earnings of $2 million for the corresponding period of the prior year.
This increase is primarily related to improved results at National Geographic Channel  Domestic.



Net income for the three months ended September 30, 2003 was $401 million ($0.45 per share), an improvement of $187 million from $214 million ($0.25 per share) for the corresponding period of the prior year. This
improvement was primarily due to the operating improvements noted above, reduced interest expense and other, net of $26 million related to the settlement of the Companys insurance claim primarily for its broadcast tower at the World Trade
Center in New York, New York.



Filmed Entertainment.For the
first quarter of fiscal 2004, revenues at the Filmed Entertainment segment increased from $883 million for the first quarter of fiscal 2003 to $1,250 million, or 42%. This increase was primarily due to increased worldwide home entertainment
revenues, higher domestic syndication revenues, and higher worldwide pay television and international free television revenues, partially offset by decreases in worldwide theatrical revenues. Higher revenues for the worldwide home entertainment
market reflect the strong worldwide performances of Daredeviland Phone Booth,increased revenues for TheSimpsons and 24,and improved performance from various library titles on DVD, as compared to the
corresponding period of the prior year which included Shallow Hal, High Crimes,and Behind Enemy Lines. Domestic syndication revenues increased due to higher revenues for M*A*S*H and the initial domestic syndication of
Angel and Judging Amy, without comparative syndication releases in the corresponding period of the prior year. Worldwide pay television and international free television revenues increased due to a stronger film lineup and more feature
films available. Theatrical revenue decreased primarily due to fewer theatrical releases as compared to the same period last fiscal year. The current period included the worldwide theatrical performance of League of Extraordinary Gentlemenand 28 Days Later. The corresponding period of the prior years results included the theatrical performance of Road to Perdition, Like Mike, One Hour Photo, Swimfan, Banger Sisters,and Minority Report.For the three
months ending September 30, 2003, the Filmed Entertainment segment reported Operating income of $333 million as compared to $105 million in the corresponding period of the prior year. Operating Income Before Depreciation and Amortization increased
from $118 million to $345 million from the corresponding period of the prior year. These increases were due to the revenue increases noted above and reduced marketing costs associated with fewer first quarter theatrical releases, partially offset by
increased home entertainment marketing and manufacturing costs.



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##### Table of Contents

Television Stations. For the three months ended September 30, 2003, the Television Stations segments
revenues increased slightly to $518 million as compared to $514 million in the corresponding period of the prior year. Although advertising markets decreased primarily due to the absence of political spending as compared to the corresponding period
of the prior year, the Companys O&Os estimated market share increased 0.6 percentage points due to strong advertising sales for the Major League Baseball (MLB) regular season and the telecast of the MLB All-Star game, in
addition to the telecast of the Emmy Awards®, which were not telecast on FOX in the prior year. These increases were
partially offset by the non-renewal of the Boston Red Sox broadcasts in the local Boston market and the finale of American Idol, which was telecast on FOX in the corresponding period of the prior year. For the three months ended September 30,
2003, the Television Stations segment generated Operating income of $221 million, which was $12 million, or 6% higher than the corresponding period of the prior year. Operating Income Before Depreciation and Amortization increased $13 million to
$237 million from $224 million in the corresponding period of the prior year. This increase was due to lower local program production costs as a result of non-renewal of the local Boston Red Sox broadcasts and the broadcast of pre-season National
Football League (NFL) games in certain markets, and cost savings at the duopoly O&Os.



Television Broadcast Network. For the quarter ended September 30, 2003, the Television Broadcast Networks revenues decreased $30 million to $394 million from $424 million in the corresponding
period of the prior year. This 7% decrease was due to ratings decreases for prime time programming, primarily related to the corresponding period of the prior years highly successful American Idol, which was not telecast on FOX in the
current period. These decreases were partially offset by revenues from the Emmy Awards®, which was telecast on FOX this
year. Operating losses for the Television Broadcast Network segment increased $37 million to a loss of $45 million and Operating Income Before Depreciation and Amortization decreased $38 million to a loss of $41 million compared to the corresponding
period of the preceding year. The increase in operating losses was driven by the revenue decrease noted above, as well as by increases in prime time programming costs for the Emmy Awards® and series cancellations.



Cable Network Programming. Total revenues for the Cable Network Programming segment increased by $73 million or approximately 14% from $523 million to $596
million for the quarter ended September 30, 2003. This increase reflects improved results across all of the Cable Network Programming channels. Fox News Channels (Fox News), FX Networks (FX), SPEED Channels
(SPEED) and the majority-owned regional sports networks (RSNs) revenues increased 25%, 4%, 29%, and 14%, respectively, from the corresponding period of the prior year.



At Fox News, advertising revenues increased 35% from the corresponding period of the prior
year due to increased pricing. Affiliate revenues increased by 4%, attributed to an increase in subscribers versus the corresponding period of the prior year, partially offset by a 6% increase in amortization of cable distribution investments. As of
September 30, 2003, Fox News reached approximately 84 million Nielsen households, a 4% increase over the corresponding period of the prior year.



At FX, affiliate revenues increased 9% from the corresponding period of the prior year, reflecting an increase in subscribers, partially offset by a 2% increase in
amortization of cable distribution investments. As of September 30, 2003, FX reached approximately 82 million Nielsen households, a 4% increase over the prior year. This improvement was partially offset by a 2% decrease in advertising revenues
resulting from current period charges for shortfalls in guaranteed viewers.



At
SPEED, affiliate revenues increased by 27%, reflecting an increase in subscribers and average per subscriber rates versus the prior year, including a 3% decrease in amortization of cable distribution investments. Advertising revenues increased 22%
from the corresponding period of the prior year due to improved pricing and increased audience. As of September 30, 2003, SPEED reached approximately 59 million Nielsen households, a 10% increase over the prior year.



At the RSNs, affiliate revenues increased 15% over the prior year primarily from an increase
in direct to home (DTH) subscribers and higher average per cable subscriber rates. Advertising revenues increased 9% primarily due to higher pricing per game for MLB telecasts resulting from an improved sports advertising market.



The Cable Network Programming segment reported Operating income of $102
million, an increase of $19 million from the first quarter of fiscal 2003. Operating Income Before Depreciation and Amortization for the Cable Network Programming segment increased $15 million to $143 million from $128 million from the corresponding
period of the prior year. These improvements were primarily driven by the revenue increases noted above. The revenues increases were partially offset by increased costs for breaking news and programming enhancements at Fox News, higher programming
costs due to new original programming, Nip/Tuck, and series cancellation costs for Lucky and The Orlando Jones Show at FX, higher programming costs at SPEED and higher average rights fees for professional events at the RSNs.



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Interest expense, net. Interest expense decreased $38 million for the quarter ended September 30, 2003 from
$46 million to $8 million due to reduced amounts Due to affiliates of News Corporation resulting from repayments.



Equity earnings (losses) of affiliates. Equity earnings of affiliates of $7 million increased $5 million from earnings of $2 million from the corresponding
period of the prior year. This increase was primarily related to improved results at National Geographic Channel-Domestic.



|Affiliate:                                   |  | Ownership Percentage |  | For the three monthsended September 30, |     
|-------------------------------------------- |  | -------------------- |  | --------------------------------------- | ----
|                                             |  | 2003                 |  |                                         | 2002
|                                             |  |                      |  | (in millions)                           |     
|National Geographic Channel - Domestic       |  | 66.70%               |  | $                                       | (2  
|National Geographic Channel - International  |  | 50%                  |  |                                         | (1  
|National Sports Partners                     |  | 50%                  |  |                                         | (11 
|Regional Programming Partners                |  | 40%                  |  |                                         | 12  
|Other                                        |  | Various              |  |                                         | 9   
|                                             |  |                      |  |                                         |     
|Total equity earnings (losses) of affiliates |  |                      |  | $                                       | 7   
|                                             |  |                      |  |                                         |     



The Companys share of National
Geographic Channel-Domestics loss was $2 million for the three months ended September 30, 2003, as compared to a loss of $7 million in the corresponding period of the prior year. Affiliate and advertising revenues increased due to a
significant growth in distribution. As of September 30, 2003, National Geographic Channel-Domestic reached approximately 46 million Nielsen households, a 32% increase over the corresponding period of the prior year.



The Companys share of Regional Programming Partners (RPP) income was
$12 million for the three months ended September 30, 2003, as compared to income of $6 million in the corresponding period of the prior year. This improvement was primarily due to significant cost savings at the Metro Channels and lower programming
costs at Madison Square Garden Network.



The Companys share of National
Sports Partners (NSP) loss was $11 million for the three months ended September 30, 2003, as compared to losses of $5 million in the corresponding period of the prior year primarily due to lower advertising revenues from the
absence of The Last Word and other programs which were telecast in the corresponding period of the prior year, lower sublicense revenue from collegiate events and higher programming rights due to the timing of certain collegiate football
games as compared to the corresponding period of the prior year.



Minority interest in subsidiaries.Minority interest in subsidiaries decreased $7 million to $2 million for the quarter ended September 30, 2003 due to the Companys acquisition of substantially all of the outstanding
equity of New Millennium II held by third parties. (See New Millennium II in Liquidity and Capital Resources below.)



Other, net. For the three months ended September 30, 2003, Other, net consisted of a gain related to the settlement of the Companys insurance claim
primarily for its broadcast tower at the World Trade Center in New York, New York.



Provision for income tax expense on a stand-alone basis.The effective tax rate for the first quarter of fiscal 2004 was 37% as compared to 36% for the corresponding period of the prior year. The effective tax rate is higher
than the U.S. statutory rate due to certain foreign income being taxed at higher rates.



Liquidity and Capital Resources



The Companys principal
sources of cash flow are internally generated funds, various film financing alternatives and borrowings from The News Corporation Limited (News Corporation) and its subsidiaries. As of September 30, 2003, News Corporation had
consolidated cash and cash equivalents of $4.9 billion, excluding the cash of the Company, and a revolving credit facility of $1.75 billion. We believe that cash flow from operations and the funds available from News Corporation will be adequate for
the Company to conduct its operations. The Companys internally generated funds are highly dependent upon the state of the advertising market and public acceptance of film and television products. Any significant decline in the advertising
market or the performance of its films could adversely impact its cash flows from operations.



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The principal uses of cash flow that affect the Companys liquidity position include the following: investments in
the production and distribution of new feature films and television programs, the acquisition of and payments under programming rights for entertainment programming and sporting events, operational expenditures, interest and income tax payments.



Net cash flows provided by operating activities during the three months ended
September 30, 2003 were $226 million as compared to $135 million for the corresponding period in fiscal 2003. For the quarter ended September 30, 2003, higher net income and lower inventory spending, due to a reduction in the number of new films in
production, was partially offset by higher pension contributions of $25 million and higher accounts receivables. The increase in accounts receivable was due to the initial domestic syndication of Judging Amy and Angel and the cable
syndication of M*A*S*H.



Net cash flows used in investing
activities for the three months ended September 30, 2003 and 2002 were $72 million and $497 million, respectively. The current period included cash used for payments for cable distribution investments and funding of the investments in NSP and
Regency Television. The corresponding period of the prior year included the cash used for the acquisition of WPWR, as well as funding of the investments in Regency Television, National Geographic Channels and NSP.



Net cash flows used in financing activities were $190 million during the three months ended
September 30, 2003 as compared to net cash provided of $382 million in the corresponding period of the prior year. The change in financing activities is primarily due to repayments to affiliates of News Corporation. In the corresponding period of
the prior year, the Company redeemed all of the outstanding 93/4% Senior Discount Notes due 2007 and all of the
outstanding 87/8% Senior Notes due 2007 in the amount of $947 million.



Under a tax sharing agreement between the Company and News Corporation (Tax Sharing
Agreement), the Company is included in the consolidated tax return of News Corporation. Amounts paid in accordance with the Tax Sharing Agreement, which are included in Due to affiliates of News Corporation, were $111 million and $35 million
during the quarters ended September 30, 2003 and 2002, respectively.



New
Millennium II



In September 2003, the Company purchased substantially all
of the outstanding equity of Tintagel Investors L.L.C. (Tintagel), the entity that held the Preferred Interest in New Millennium II (NM2), for $25.5 million plus accrued and unpaid Preferred Payments in the amount of
approximately $106,000. As a result of the acquisition of this equity interest, the Company has consolidated the assets and liabilities of Tintagel for accounting purposes and all Preferred Interests and Preferred Payments in NM2 have been
eliminated. The June 30, 2003 outstanding NM2 Preferred Interest of $762 million was included in Minority interest in subsidiaries on the consolidated balance sheet and Preferred Payments were included in Minority interest in subsidiaries in the
statement of operations. Tintagels September 30, 2003 outstanding indebtedness of $717 million is included in Borrowings on the unaudited consolidated condensed balance sheet and the corresponding interest is included in Interest expense, net.
Tintagel continues to be a separate legal entity from the Company with separate assets and liabilities.



Guarantees



The Company, News
Corporation and certain of News Corporations other subsidiaries are guarantors of various debt obligations of News Corporation and certain of its subsidiaries. The principal amount of indebtedness outstanding under such debt instruments as of
September 30 and June 30, 2003 was approximately $10 billion. The debt instruments limit the ability of guarantors, including the Company, to subject their properties to liens, and certain of the debt instruments impose limitations on the ability of
News Corporation and certain of its subsidiaries, including the Company, to incur indebtedness in certain circumstances. Such debt instruments mature at various times between 2004 and 2096, with a weighted average maturity of over 20 years.



In the case of any event of default under such debt obligations, the Company
will be directly liable to the creditors or debtholders. News Corporation has agreed to indemnify the Company from and against any obligations it may incur by reason of its guarantees of such debt obligations. As of September 30, 2003, News
Corporation was in compliance with all of its debt covenants and had satisfied all financial ratios and tests and expects to remain in compliance and satisfy all such ratios and tests.



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As of June 30, 2003, the Company guaranteed sports rights agreements for SportsChannel Chicago Associates
(SportsChannel Chicago), which aggregated approximately $1,007 million. On September 30, 2003, SportsChannel Chicago received notice that each of the Chicago Cubs, Bulls, Blackhawks and White Sox have exercised their right to terminate
their rights agreement with SportsChannel Chicago effective September 30, 2004. Upon termination of the rights agreements, the remaining guarantee would be approximately $43 million through fiscal 2005.



Ratings of News Corporation Public Debt



As of September 30, 2003, News Corporations debt ratings from Moodys (Ba1 for
subordinated notes and Baa3 for senior unsecured notes) and Standard & Poors (BBB-) for the debt guaranteed by the Company and others were within the investment grade scale.



Acquisitions



WPWR-TV



In August 2002, the Company acquired WPWR-TV in the Chicago designated market area (DMA) from Newsweb Corporation for $425 million. This transaction has been treated as a purchase in accordance with Statement of
Financial Accounting Standards (SFAS) Nos. 141, Business Combinations, and 142, Goodwill and Other Intangible Assets.



Hughes Transaction



In April 2003, News Corporation, General Motors Corporation (GM) and Hughes Electronics Corporation (Hughes) reached an agreement in which News Corporation would acquire 34% of Hughes (the
Hughes Transaction). News Corporation will acquire GMs approximate 19.9% interest in Hughes for approximately $3.8 billion (subject to upward adjustment), of which approximately $768 million (subject to upward adjustment) may be
paid in News Corporation American Depositary Receipts representing preferred limited voting ordinary shares (ADRs). News Corporation will acquire through a merger an additional 14.1% of Hughes for approximately $2.7 billion that is
payable, at News Corporations option, in cash, News Corporation ADRs, or a combination thereof. Simultaneously with the closing of this transaction, News Corporation will transfer its 34% ownership interest in Hughes to the Company in exchange
for promissory notes representing $4.5 billion and approximately 74.2 million shares of the Companys Class A Common Stock, thereby increasing News Corporations ownership interest in the Company from 80.6% to approximately 82%. News
Corporations voting percentage will remain at 97%. The closing of the transaction is subject to a number of conditions, including regulatory approvals.



Contingencies



Regional Sports Networks



In January
2003, Fox Sports Net, Inc. (Fox Sports Net) exercised its right to put its 50% direct ownership interests in SportsChannel Chicago and SportsChannel Pacific Associates (collectively the SportsChannels) to RPP. In March 2003,
RPP and Fox Sports Net agreed on a $150 million purchase price for the interest in the SportsChannels, payable in the form of three-year promissory notes of the subsidiaries of RPP, which own only the interests in the SportsChannels, the terms of
which are under negotiation. The transaction is expected to close in the first half of fiscal 2004. Following the closing of this sale, the SportsChannels will be held 100% by RPP and indirectly 40% by Fox Sports Net and 60% by Rainbow Media Sports
Holdings, Inc., and each will remain a Fox Sports Net affiliate.



Hughes



In April 2003, a putative derivative and shareholder class action (Norman
Levin v. K. Rupert Murdoch et al., 03 CV 2929) was filed in the United States District Court for the Southern District of New York against the Companys board members and the Company (as nominal defendant), alleging among other things that in
approving the Hughes Transaction, they breached their fiduciary duties to the Companys public shareholders. On September 15, 2003, the plaintiff agreed to dismiss the action with prejudice as to himself and without prejudice to putative class
members other than himself. On September 19, 2003, the Court entered the agreed upon order of dismissal.



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In April 2003, six putative shareholder class actions were filed in state courts in Delaware (four actions) and
California (two actions) against GM and certain of its board members, alleging that in approving the Hughes Transaction, the defendants breached their fiduciary duties to public holders of GMs Class H shares. Hughes and its board members are
defendants in certain of these actions and also are alleged to have breached fiduciary duties to the same shareholders. News Corporation was a defendant in two of the Delaware actions and was alleged to have aided and abetted the other
defendants purported breaches of fiduciary duties. The Delaware actions were consolidated on May 6, 2003, and a consolidated complaint was filed on August 29, 2003. News Corporation was not named as a defendant in the consolidated complaint.



Recent Accounting Pronouncements



In January 2003, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. (FIN) 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51. FIN 46 requires an enterprise to consolidate a variable interest entity if it is determined that the enterprise is a
primary beneficiary of that entity, subject to the criteria set forth in FIN 46. Assets, liabilities, and non controlling interests of newly consolidated variable interest entities will be initially measured at fair value. After initial measurement,
the consolidated variable interest entity will be accounted for under the guidance provided by Accounting Research Bulletin No. 51, Consolidated Financial Statements. FIN 46 is effective immediately for variable interest entities created
or entered into after January 31, 2003. For variable interest entities created or acquired before February 1, 2003, FIN 46 applies in the second quarter of fiscal 2004. The Company is currently in the process of evaluating the impact of adopting FIN
46 on its consolidated balance sheets and statements of operations.



In May
2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 amends SFAS No. 6, Elements of Financial Statements, to improve accounting for
certain financial instruments that, under previous guidance, issuers could account for as equity. The new statement requires that those instruments be classified as liabilities in statements of financial position. SFAS No. 150 is effective for all
financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 in July 2003 had no material impact on the
consolidated condensed balance sheet and statement of operations of the Company. The FASB is addressing certain implementation issues associated with the application of SFAS No. 150. On October 29, 2003, the FASB decided to defer certain provisions
of SFAS No. 150 related to noncontrolling interests in subsidiaries included in consolidated financial statements. The Company will monitor the actions of the FASB and assess the impact, if any, that these actions may have on its financial
statements.



Subsequent Events



On October 10, 2003, the Company announced that it had reached an agreement in principle to
sell the Los Angeles Dodgers, together with Dodger Stadium and the teams training facilities in Vero Beach, Florida and the Dominican Republic, to an investment group headed by Mr. Frank McCourt. This agreement is subject to MLB approval and
customary closing conditions.



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK



The Company is exposed to the impact of foreign currency fluctuations and utilizes derivative instruments in a limited manner to modify its exposure to foreign exchange rate movements. The Companys policy is to
enter into derivative and other financial instruments only to the extent considered necessary to meet its business objectives. The Company does not enter into these transactions for speculative purposes.



Foreign Exchange Rate Risk



The Company uses foreign exchange forward contracts and options to minimize its limited
exposure to exchange rate movements. The foreign exchange contracts have principally been used to hedge the costs of producing films abroad and are principally denominated in the Czech Koruna, the South African Rand and the Euro. The Company
designates forward contracts and options used to hedge future production costs as cash flow hedges.



At September 30, 2003, the notional amount of financial instruments with exposure to foreign currency risk was approximately $36 million and the net unrealized gain was approximately $1 million. The potential loss in
fair value for such financial instruments from a 10% adverse change in quoted foreign currency exchange rates would be approximately $3.7 million. Consistent with the nature of the economic hedge provided by such foreign exchange contracts, such
gains or losses largely would be offset by corresponding decreases or increases, respectively, in the U.S. Dollar value of future foreign currency obligations.



ITEM 4. CONTROLS AND PROCEDURES



The
Companys Chairman and Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934) as of the end of the period covered by this quarterly report and, based on this evaluation, have concluded that the disclosure controls and procedures are effective.



There have been no changes in the Companys internal control over financial reporting that occurred during the Companys first
fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



Part II.Other Information



ITEM 1. LEGAL PROCEEDINGS



In April 2003, a
putative derivative and shareholder class action (Norman Levin v. K. Rupert Murdoch et al., 03 CV 2929) was filed in the United States District Court for the Southern District of New York against the Companys board members and the Company (as
nominal defendant), alleging among other things that in approving the Hughes Transaction, they breached their fiduciary duties to the Companys public shareholders. On September 15, 2003, the plaintiff agreed to dismiss the action with
prejudice as to himself and without prejudice to putative class members other than himself. On September 19, 2003, the Court entered the agreed upon order of dismissal.



In April 2003, six putative shareholder class actions were filed in state courts in Delaware (four actions) and California (two actions)
against GM and certain of its board members, alleging that in approving the Hughes Transaction, the defendants breached their fiduciary duties to public holders of GMs Class H shares. Hughes and its board members are defendants in certain of
these actions and also are alleged to have breached fiduciary duties to the same shareholders. News Corporation was a defendant in two of the Delaware actions and was alleged to have aided and abetted the other defendants purported breaches of
fiduciary duties. The Delaware actions were consolidated on May 6, 2003, and a consolidated complaint was filed on August 29, 2003. News Corporation was not named as a defendant in the consolidated complaint.



ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS



Not Applicable



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ITEM 3. DEFAULTS UPON SENIOR SECURITIES



Not Applicable



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



Not Applicable



ITEM 5. OTHER INFORMATION



Not
Applicable



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



(a)
Exhibits



|31.1 | Certification of the Chairman and Chief Executive Officer pursuant to SEC Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|31.2 | Certification of the Chief Financial Officer pursuant to SEC Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



|32.1 | Certification of the Chairman of the Board and Chief Executive Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. *
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|32.2 | Certification of the Senior Executive Vice President and Chief Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. *
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|* | Filed herewith
|- | --------------



(b) Reports on Form 8-K



The
following current report on Form 8-K was filed by the Company during the Companys first fiscal quarter:



| | (i) | Current Report on Form 8-K of the registrant filed August 13, 2003 relating to the earnings announcement by Fox Entertainment Group, Inc. of its financial results for the Fourth
Quarter and Fiscal year ended June 30, 2003
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



SIGNATURE



Pursuant to the requirements of
the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|Date: November 6, 2003 |  | FOX ENTERTAINMENT GROUP, INC.
|---------------------- |  | -----------------------------
|                       |  |                              
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