NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS

The carrying values of the Company’s intangible assets and related accumulated amortization for the fiscal years ended June 30, 2018 and June 30, 2017 were as follows:


	As of June 30,
	2018		2017
	(in millions)
Intangible Assets Not Subject to Amortization
Trademarks and tradenames	$	441	$	179
Newspaper mastheads		298		299
Distribution networks		308		390
Imprints		239		237
Radio broadcast licenses		188		185

Total intangible assets not subject to amortization		1,474		1,290


Intangible Assets Subject to Amortization
Channel distribution agreements^(a)		—		335
Publishing rights^(b)		299		329
Customer relationships^(c)		849		310
Other^(d)		49		17

Total intangible assets subject to amortization, net		1,197		991

Total Intangible assets, net	$	2,671	$	2,281

^(a)

Net of accumulated amortization of $76 million as of June 30, 2017. As a result of the Transaction, the Company settled the pre-existing contractual arrangement between FOX SPORTS Australia and Foxtel. The settlement resulted in a write-off of the channel distribution agreement intangible asset, which was reflected in Other, net in the Statements of Operations. See Note 3—Acquisition, Disposals and Other Transactions.

^(b)

Net of accumulated amortization of $213 million and $181 million as of June 30, 2018 and 2017, respectively. The useful lives of publishing rights range from 4 to 30 years primarily based on the weighted-average remaining contractual terms of the underlying publishing contracts and the Company’s estimates of the period within those terms that the asset is expected to generate a majority of its future cash flows.

^(c)

Net of accumulated amortization of $447 million and $399 million as of June 30, 2018 and 2017, respectively. The useful lives of customer relationships range from 2 to 25 years. The useful lives of these assets are estimated by applying historical attrition rates and determining the resulting period over which a majority of the accumulated undiscounted cash flows related to the customer relationships are expected to be generated.

^(d)

Net of accumulated amortization of $87 million and $83 million as of June 30, 2018 and 2017, respectively. The useful lives of other intangible assets range from 2 to 15 years. The useful lives represent the periods over which these intangible assets are expected to contribute directly or indirectly to the Company’s future cash flows. During fiscal 2018, New America Marketing’s FSI media distribution network was determined to no longer have an indefinite life due to the impact of changes from print circulation trends within the newspaper industry which is expected to continue to contract in the future, as consumers move to more digital products.

The Company recognized impairment charges of $50 million and $58 million for the fiscal years ended June 30, 2018 and 2017, respectively, related to indefinite-lived intangible assets.

Amortization expense related to amortizable intangible assets was $100 million, $91 million and $91 million for the fiscal years ended June 30, 2018, 2017 and 2016, respectively.

Based on the current amount of amortizable intangible assets, the estimated amortization expense for each of the succeeding five fiscal years is as follows: 2019—$120 million; 2020—$112 million; 2021—$108 million; 2022—$103 million; and 2023—$97 million.

The changes in the carrying value of goodwill, by segment, are as follows:


	News and Information Services			Book Publishing			Digital Real Estate Services			Subscription Video Services			Other			Total Goodwill
	(in millions)
Balance, June 30, 2016	$	1,765		$	260		$	1,209		$	476		$	4		$	3,714
Acquisitions		136			10			2			11			—			159
Impairments^(a)		(20	)		—			(24	)		—			(4	)		(48	)
Dispositions^(b)		—			—			(20	)		—			—			(20	)
Foreign currency movements		3			1			16			13			—			33

Balance, June 30, 2017	$	1,884		$	271		$	1,183		$	500		$	—		$	3,838

Acquisitions^(c)		2			—			123			1,574			—			1,699
Impairments^(d)		(158	)		—			(19	)		(41	)		—			(218	)
Dispositions		—			—			—			—			—			—
Foreign currency movements		2			(4	)		(26	)		(73	)		—			(101	)

Balance, June 30, 2018	$	1,730		$	267		$	1,261		$	1,960		$	—		$	5,218

^(a)	In the News and Information Services segment, the write-down of goodwill primarily relates to a reporting unit in the U.K. In the Digital Real Estate Services segment, the write-down of goodwill relates to the Company’s DIAKRIT reporting unit.

^(b)	Relates to REA Group’s sale of its European business.

^(c)	Primarily relates to the Transaction in the Subscription Video Services segment and the acquisition of Smartline and Hometrack in the Digital Real Estate Services segment.

^(d)

In the News and Information Services segment, the write-down of goodwill primarily relates to the News America Marketing reporting unit, and in the Subscription Video Services segment the write-down primarily relates to the FOX SPORTS Australia reporting unit. In the Digital Real Estate Services segment, the write-down of goodwill relates to the Company’s DIAKRIT reporting unit.

The carrying amount of goodwill as of June 30, 2018 reflected accumulated impairments, principally relating to the News and Information Services segment, of $3.6 billion.

Annual Impairment Assessments

Fiscal 2018

In accordance with ASC 350, the Company’s goodwill and indefinite-lived intangible assets are tested annually in the fourth quarter for impairment or earlier if events occur or circumstances change that would more likely than not reduce the fair values of below their carrying amounts. See Note 2—Summary of Significant Accounting Policies.

The performance of the Company’s annual impairment analysis resulted in impairments of $43 million of goodwill and indefinite-lived intangible assets in fiscal 2018. Significant unobservable inputs utilized in the income approach valuation method were discount rates (ranging from 8.5%-25.0%), long-term growth rates (ranging from (1.0)%-3.0%) and royalty rates (ranging from 0.5%-7.5%). Significant unobservable inputs utilized in the market approach valuation method were EBITDA multiples from guideline public companies operating in similar industries and a control premium of 10%. Significant increases (decreases) in royalty rates, growth rates, control premiums and multiples, assuming no change in discount rates, would result in a significantly higher (lower) fair value measurement. Significant decreases (increases) in discount rates, assuming no changes in royalty rates, growth rates, control premiums and multiples, would result in a significantly higher (lower) fair value measurement.

During the third quarter of fiscal 2018, due to the impact of adverse trends on the future expected performance of the business, the Company revised its future outlook with respect to the News America Marketing reporting unit which resulted in a reduction in expected future cash flows. As a result, the Company determined that the fair value of this reporting unit declined below its carrying value and recorded a $165 million impairment of goodwill and indefinite-lived intangible assets. For this reporting unit and intangible asset, significant unobservable inputs utilized in the income approach valuation method were discount rates (ranging from 12.5%-14%), long-term growth rates (ranging from (1.9%)-0.9%) and a royalty rate of 2.5%.

Additionally, during the third quarter of fiscal 2018, as part of the Company’s long range planning process and in preparation for the Transaction, the Company assessed the long-term prospects for Foxtel and FOX SPORTS Australia. As a result of lower-than-expected revenues at Foxtel, the Company revised its future outlook for the FOX SPORTS Australia reporting unit, whose revenues are heavily predicated on Foxtel subscribers. Based on the revised projections, the Company determined that the fair value of the reporting unit was less than its carrying value and recorded a $41 million impairment of goodwill in the fiscal year ended June 30, 2018. For the impaired reporting unit, significant unobservable inputs utilized in the income approach valuation method were a discount rate of 9.5% and a long-term growth rate of 2.0%. See Note 6—Investments.

Fiscal 2017

The performance of the Company’s annual impairment analysis resulted in impairments of $88 million of goodwill and indefinite-lived intangible assets in fiscal 2017. Significant unobservable inputs utilized in the income approach valuation method were discount rates (ranging from 9.0%-25.0%), long-term growth rates (ranging from 0.0%-3.3%) and royalty rates (ranging from 0.5%-7.5%). Significant unobservable inputs utilized in the market approach valuation method were EBITDA multiples from guideline public companies operating in similar industries and control premiums (ranging from 10%-15%). Significant increases (decreases) in royalty rates, growth rates, control premiums and multiples, assuming no change in discount rates, would result in a significantly higher (lower) fair value measurement. Significant decreases (increases) in discount rates, assuming no changes in royalty rates, growth rates, control premiums and multiples, would result in a significantly higher (lower) fair value measurement.

Fiscal 2016

The performance of the Company’s annual impairment analysis did not result in any impairments of goodwill or indefinite-lived intangible assets in fiscal 2016. Significant unobservable inputs utilized in the income approach valuation method were discount rates (ranging from 9%-14.5%), long-term growth rates (ranging from 0%-3.5%) and royalty rates (ranging from 0.5%-3.4%). Significant unobservable inputs utilized in the market approach valuation method were EBITDA multiples from guideline public companies operating in similar industries and control premiums (ranging from 10%-15%). Significant increases (decreases) in royalty rates, growth rates, control premiums and multiples, assuming no change in discount rates, would result in a significantly higher (lower) fair value measurement. Significant decreases (increases) in discount rates, assuming no changes in royalty rates, growth rates, control premiums and multiples, would result in a significantly higher (lower) fair value measurement.