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Film, books fuel surge in News Corp. profits

Media giant posts $233 mil net profit for Q4

NEW YORK — The return to health of 20th Century Fox and HarperCollins, as well as stronger profits from television, enabled News Corp. to post a net profit of $233 million in its fourth quarter compared with a loss of $238 million a year earlier.

The loss a year ago was due mainly to a $448 million onetime charge on restructuring the troubled book publishing business. With that excluded, however, News Corp.’s quarterly profit rose 87% to $266 million.

The quarterly result brought News Corp.’s fiscal 1998 full-year net profit to $1.22 billion before abnormals, compared with $1.009 billion in fiscal 1997. News Corp. said it was the largest profit it had ever achieved, primarily because of surging profits in film and television.

But the studio’s fourth-quarter improvement was more a reflection of what the studio did not do than what it produced. With the impact of “Titanic” felt mainly in the second and third quarters, the studio posted a meager profit of $6 million in the quarter from releases like “Hope Floats” and “Object of My Affection,” offset by losses on “Bulworth.”

While “The X-Files” and “Dr. Dolittle” were released before the end of the quarter on June 30, News Corp. said both pics will be reflected largely in fiscal 1999 results.

Despite the relatively small profit, the quarter compared favorably with the devastating $119 million of losses a year earlier on “Speed 2” and “Volcano,” enabling the studio to report a full-year operating profit of $254 million. That was up 140% over fiscal 1997 — mostly due, of course, to “Titanic,” which has grossed $1.8 billion around the world.

News Corp. chairman Rupert Murdoch said earlier this year he expected the pic to generate a profit of $100 million for the company. That comment was made well before the pic’s theatrical run ended, however, and News Corp. chief financial officer David Devoe said the estimate would likely prove to be conservative, but that the final profit contribution would depend on the film’s video performance.

HarperCollins demonstrated a turnaround performance similar to the studio, recording $11 million in operating profit in the quarter compared with just $1 million a year ago. News Corp. said the improvement was “due to a more focused publishing program, decreased returns and some significant bestsellers.”

For the full year, the publisher’s operating profit trebled to $37 million.

The best performer in the quarter was Fox’s television business, which increased operating profit 16% to $196 million on 6% higher revenue of $822 million.

The vast majority of the improvement was due to profit growth at Fox’s owned-and-operated stations, Devoe said, noting that the Fox Broadcasting network turned in a bigger profit this time around.

The station group’s profit growth is coming both from improvement at the New World stations acquired early last year as well as Fox’s older stations, which posted profit growth of at least 10%, News Corp. said.

Devoe said the New World stations had lifted their profit margins from somewhere in the 30s (as a percentage) to the “low 40s” while Fox’s older stations generated profit margins of around 50%.

The growth in profit from TV came despite the first-time inclusion of losses from Fox News Channel. News Corp. did not disclose the channel’s losses, but Devoe said it was less than $100 million for the full year. The television division’s operating income for the year was $630 million, up from $447 million in fiscal 1997.

News Corp.’s magazines and inserts business increased operating income 26% to $100 million in the quarter, largely due to the inclusion of Heritage Media’s coupon business, acquired a year ago. The improvement was particularly noticeable given that TV Guide’s operating profit fell, News Corp. said.

News Corp. agreed earlier this year to sell TV Guide to United Video Satellite Group for $2 billion in cash and stock, a deal that effectively puts the mag into a joint venture between News Corp. and John Malone’s Liberty Media.

News Corp.’s newspapers division suffered a 12% dip in operating profit in the quarter to $123 million, which the company blamed on the decline in the Australian dollar.

The result shows how over the past year the film and television side of News Corp. has become proportionally more important.

In total for the year, News Corp. increased operating profit 35% to $1.79 billion. Of that amount, the studio and television accounted for 49% of News Corp.’s operating profit compared with 41% in fiscal 1997. The improvement is important for News Corp., which is preparing to file documents with the Securities and Exchange Commission for its upcoming initial public offering of Fox Group, a company housing the film and TV assets of the company.

The fourth-quarter numbers, released after the stock market closed, were broadly in line with Wall Street’s expectations. News Corp. stock closed up 68¢ Wednesday to $27.18.

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