Fox rocks, but U.K. digital zaps News Corp.
NEW YORK — Heavy spending for the launch of BSkyB digital TV in Great Britain tipped News Corp. into the red for the June quarter despite glowing numbers at its film and TV group, Fox Entertainment, the company said Wednesday.
Weak numbers at the Fox News cable channel and the Fox broadcast net also weighed down earnings, which, on a per-share basis, came in 3¢ under Wall Street’s expectation.
News Corp. racked up losses of $10 million, compared with a $233 million profit the year before, while revenue firmed only slightly to $3.3 billion. The company cited promotion and marketing expenses connected with the digital launch of its 40%-owned British Sky Broadcasting and a fast build-out of Latin American satellite operations.
For the year as a whole, News Corp. posted record revenues of $13.6 billion, but profits were down 41% to $678 million.
However, at Fox Entertainment, which News Corp. spun off late last year into a separate, publicly traded company, revenue rose in all three divisions, approaching $2 billion, and net income surged from $3 million to $35 million in the latest quarter.
Twentieth Century Fox Film’s “Titanic,” co-produced with Paramount, established a new record of 57 million video unit sales. This helped power cash flow last year, along with “There’s Something About Mary,” “Dr. Dolittle,” “Never Been Kissed,” “Entrapment” and, from May, the release of “Star Wars: Episode l — The Phantom Menace.” On the down side, “The Siege,” “The Thin Red Line” and “Ravenous” didn’t meet expectations, the company said.
In television, Fox was churning them out. The studio produced 29 primetime network series for the fall TV season, including 13 new ones, making it the nets’ largest supplier of primetime programming. Last year, it launched “The Family Guy” and “Futurama” on Fox and “Martial Law” on CBS. Other offerings include “The X-Files,” “Ally McBeal,” “Dharma & Greg” and “The Practice.”
Studio cash flow jumped to a positive $39 million from a loss of $3 million in the year-earlier period.
Fox said its TV stations increased market share by 6% during the period and saw profit rise “in very difficult conditions” as broadcasters suffered from a tepid advertising climate that is looking much stronger in July. Fox stations in New York and Los Angeles ranked first in their respective markets for the month of July, execs added.
The Fox broadcast network was a sore spot, although execs said a recent deal to take back some commercial spots from affiliates likely will bolster the net’s books to the tune of $50 million to $60 million this fiscal year.
News Corp. chief financial officer David DeVoe said the company has been exploring a number of opportunities to grow its broadcast business since the Federal Communications Commission voted Aug. 5 to relax station ownership rules, but added that nothing is imminent.
The FCC ruling made it possible to own two stations in the same market, and they won’t both count toward the national coverage cap of 35%. News Corp. already hit that limit and wants it raised, DeVoe said.
In all, cash flow in TV broadcasting and related businesses rose 6% to $226 million.
Fox’s cable net programming lost $19 million. Fox News lost money, but added 9 million subscribers during the fiscal year, reaching 41 million. The company said Fox News’ ratings rose 200% over last year, revenues rose 79% and costs were held to single-digit increases.
Equity losses in affiliates, including Fox Liberty Networks and the struggling Fox Family Worldwide, rose to $50 million from $30 million. Liberty will soon exit the regional sports venture, having agreed to hand over its half of Fox/Liberty to News Corp. in exchange for a bundle of News Corp. stock. Fox posted a loss of $35 from its half stake in Fox Liberty, which posted a 15% increase in revenue to $195 million.
At Fox Family, losses mounted to $10 million and revenues fell 28% to $129 million. While industry players and Wall Street continue to be skeptical on the viability of the network, previously owned by Pat Robertson, News Corp. is “taking a hard look” at the cable net’s programming, has worked out a new lineup and is seeing earnings improve, DeVoe said.
News Corp.’s assets, spread across the globe, also include magazines and inserts, newspapers and book publishing.
In a weak market, News Corp. shares fell 50¢ to $31.63 on Wednesday. Fox dipped 56¢ to $22.69.