New York, N.Y.
Revenue: $15.2 billion
Loss: $6.3 billion
For News Corp. and its topper, Rupert Murdoch, it was a year of both disappointment and satisfaction.
Murdoch’s dream of a global satellite empire was quashed last fall — after more than a year of talks — when proposed partner DirecTV inked a deal with EchoStar. The Fox Network is struggling to boost ratings and the advertising climate remains soft, although News Corp. execs were relatively upbeat on the ad front during a conference call in mid-August.
Meanwhile, News Corp.’s investment in Pasadena, Calif., tech company Gemstar TV Guide has cost it dearly. As Gemstar stock sank this year, News Corp. took a charge of more than $4 billion in the fiscal third quarter, and an additional $1.7 billion hit in the fourth quarter, resulting in a hefty net loss for the year.
Gemstar, pressured by Murdoch and other investors, is seeking to oust founder CEO and controlling shareholder Henry Yuen or move him into a nonoperating capacity.
Gemstar is best known for developing interactive TV program guides to make channel surfing easier. But the shares have been battered for management’s aggressive accounting and overzealous patent litigation. Gemstar was one of the only media companies that didn’t certify its financial reports with the Securities & Exchange Commission on Aug. 14.
Yet Murdoch’s reputation has never been brighter as his company wades through rough economic waters without a distressed merger or big-ticket purchase to spook investors.
In what many considered a financial coup, News Corp. (and partner Haim Saban) sold cable network Fox Family to Walt Disney last year for a hefty $3 billion in cash. Disney assumed more than $2 billion in debt.
News Corp. has been actively lobbying against the DirecTV-EchoStar deal and may well make another run for DirecTV if the merger falls through.
Wall Streeters are betting that federal antitrust regulators will balk at a marriage of the nation’s only two satcasters. The Federal Communications Commission is expected to rule on the deal this fall.
Meanwhile, News Corp. has smaller fish to fry. The company is negotiating to buy Telepiu, the loss-making Italian pay TV business owned by Vivendi Universal. Murdoch and partner Telecom Italia own Telepiu rival Stream and they say combining the two platforms is the only way to make the business viable. News Corp. and Vivendi continue to haggle over price.
News Corp. and Fox Entertainment have been active on the TV station front, snapping up a UPN affiliate in Chicago for $425 million in cash several months ago. The year before, Murdoch beat out UPN owner Viacom to buy a big group of UPN affiliates owned by Chris-Craft.
Management seems extremely stable compared to the turmoil that’s racked rival media congloms. Murdoch remains firmly in control, with Peter Chernin an effective second-in-command, and Murdoch’s two sons Lachlan and James cycling through the conglom’s businesses.
New Corp. does, however, have its soft spots. The Fox net is in the midst of a slow, painful recovery and ad-driven businesses, including newspaper publishing, continue to suffer from a global economic slowdown.