News Corp. lifted net earnings 9% to $243 million in its first quarter on 16% higher revenue of $2.9 billion, it said Wednesday, with a strong performance from Fox Television offsetting a downturn at 20th Century Fox.
Operating income in television during the quarter, which ended Sept. 30, jumped 158% to $137 million, both because of a “strong operating performance” at the Fox TV Stations group and improvement at Fox Broadcasting, News Corp. reported.
In contrast, film operating income dived 43% to $43 million compared to the quarter a year earlier, when “Independence Day” inflated the studio’s earnings.
Better than expected
The overall result was a little better than expected. “It was a solid decent quarter,” said Lehman Bros. analyst Larry Petrella. News Corp. stock rose 31¢ to $19.56.
The big increase in the TV station group’s earnings largely reflects the addition of New World Communications’ 10 TV stations early this year. News Corp. said these stations had “made substantial improvements in their sales margins,” which more than doubled their operating income compared with a year ago.
The impact of the New World acquisition on News Corp.’s earnings was highlighted by News Corp. chairman/CEO Rupert Murdoch, who told Wall Street analysts on a conference call that about half of the 25% growth recorded in News Corp.’s total operating income was attributable to the New World stations, according to analysts who were on the call.
At the same time Fox’s existing station group also did better, reporting operating income growth averaging 34% on 17% higher revenue, News Corp. said.
News Corp. said the improvement at Fox Broadcasting flowed from higher ratings, which in adults 18-49 are up 11% in the quarter. The company does not break out specific earnings for the station group and the network.
The studio’s performance was solid, News Corp. said, adding that “comparisons are difficult” with last year because of “Independence Day.” It added that the quarterly result was helped by homevideo release of the “Star Wars Trilogy” and off-network syndication of “X-Files” and “NYPD Blue.”
News Corp. said its Asian satellite TV service, Star TV, had 50% growth in revenue in the quarter “with both advertising and subscription revenues up.” Murdoch told the analyst conference call that Star could be breaking even within 18 months, analysts said.
Murdoch, who has not participated in such a call in several years, also told analysts that he was hopeful of winning renewal for NFL broadcast rights when negotiations are concluded later this year. He noted that Fox had a better chance of fighting off a counter-bid from CBS than NBC or ABC because Fox’s package is more expensive than that of the other two networks, analysts said.
The print side of News Corp. continued to show strong growth. In newspapers, operating income rose 15% to $102 million driven by strength both in Australia and the U.K.
Magazines and inserts increased operating income 34% to $71 million, largely due to growth in the inserts business. TV Guide reported “relatively flat revenues and operating profits,” News Corp. said.
News Corp.’s troubled book publishing business, HarperCollins, also stabilized with operating income of $13 million, in line with last year.