NEW YORK — Sending a signal that he’ll stay put, News Corp. prexy Peter Chernin was disdainful of speculation that he wants the top job at Disney — with his boss Rupert Murdoch hearing every word.
Oath of loyalty came Wednesday as Murdoch and Chernin led a trans-Atlantic earnings call touting News Corp.’s strong showing in the last quarter, with 20th Century Fox driving growth for the conglom and chalking up strong profits thanks to record-breaking DVD sales for such releases as “Day After Tomorrow” and “I, Robot.”
Fox’s cable nets also were a key profit booster, while the broadcast network proved one of the few money drains for the sprawling conglom, posting a $26 million loss.
Murdoch reiterated that his company surely intends to buy back stock from Liberty Media’s John Malone in exchange for cash and some assets, but that he’s not going to allow anyone to “have our cupboards cleaned out of all our cash.”
Murdoch also revealed that he’d like a Fox News Channel spinoff business net launched by the end of the year. Fox’s new cable reality channel will debut in the spring.
Overall, net profits at News Corp. grew by 80% to $386 million compared with the year-earlier quarter. Murdoch said that included $36 million in costs incurred as a result of moving News Corp. headquarters from Australia to the U.S. Revenues came in at $6.6 billion, up 18%. Virtually all properties saw growth save Fox Television and Sky Italia.
Chernin’s purview, the Fox Entertainment Group, performed well for parent company News Corp. — minus the dismal ratings of Fox’s fall primetime lineup. Studio reported operating income of $407 million, up 57% from the same quarter a year earlier. Chernin said the studio’s profit margins for the quarter logged in at 20% — a historic feat for Fox or any other studio, according to him.
No Mouse move
“Look, I’m very happy here,” Chernin said when asked about the speculation that he is in the running with Disney prexy Bob Iger to succeed Michael Eisner as Disney chief exec.
“I continue to believe that this is the strongest media company with the strongest growth. I just signed a new contract, and this is where I intend to keep working,” said Chernin.
Jazzed about the stability DVDs are providing the otherwise topsy-turvy film biz, Chernin said he expects sales to remain on the rise and continue as the prime growth driver for the studio. Last quarter, home entertainment exceeded a record $1.2 billion in sales.
He said the strong 2004 summer release slate turned into gold when the DVDs were released during the holiday season. Of the 25 million DVDs shipped on summer releases, 9 million were “Day After Tomorrow.”
Aside from new releases, Chernin said the catalog DVD releases of “Star Wars Trilogy” and TV shows “The Simpsons” and “24” have racked up impressive sales. He also noted that Fox Searchlight releases “Garden State” and “Napoleon Dynamite” have been strong performers.
“We’re not saying that we have solved the riddle of the risk in the movie business, but we do believe we have a pretty good idea of how to handle it,” Chernin said.
Chernin said he believes that the studio can continue to post strong profit margins, pointing to the upcoming slate of releases, which include “Robots” in March, “Star Wars: Episode III — Revenge of the Sith” in May and “Fantastic Four” on July 4. He said toon “Robots” is tracking better than “Ice Age,” which grossed more than $170 million for Fox.
The conglom’s television division, which includes the Fox Broadcasting Network, Fox owned-and-operated TV stations and international broadcaster Star, reported operating income of $153 million, down $6 million from the same quarter a year earlier. While the network recorded losses of $26 million, TV stations were relatively flat. Star’s operating income more than doubled, due to higher ad revs in India.
Again and again, Chernin and Murdoch said they were disappointed by the ratings on the broadcast side but said that Fox is already rebounding with the season bow of “24” and the latest edition of “American Idol,” not to mention this weekend’s Super Bowl telecast. Both added they remain committed to a year-round development sked.
Last quarter’s growth at Fox’s cable nets were led by Fox News Channel, FX and Fox Regional Sports nets. Cable side operating income was $227 million, up a healthy 46%. FX, home of hit “Nip/Tuck,” saw double-digit revenue growth, while the National Hockey League lockout actually boosted ratings at the Fox Regional Sports nets. Fox News reported operating income growth of 46% compared with the same quarter a year ago.
News Corp.-owned publishing house HarperCollins was a solid performer last quarter, with operating income up 9% to $62 million. Top sellers included Lemony Snicket’s “A Series of Unfortunate Events” books (whose sales were helped by the movie release of the same name) and Michael Crichton’s “State of Fear.”
Conglom’s newspapers and mags mostly showed operating gains.
Murdoch spent much of his presentation time discussing Sky Italia, which showed a wider loss of $105 million last quarter. Losses narrowed 7% in local currency terms, according to the company.
He said Sky Italia is a strong property despite last month’s one-two punch by Italo media mogul and Prime Minister Silvio Berlusconi. Berlusconi’s broadcast group Mediaset bowed a digital terrestrial scheme that allows anyone with a prepaid card and set-top box to watch a premium soccer game for a nominal fee.
Murdoch had been banking on the series A live soccer monopoly to power growth at young Sky Italia.
Murdoch disputed that Berlusconi’s move hurts his overall business blueprint for Sky Italia and said he encountered the same sort of competition when launching BSkyB in the U.K.
“When we started in Britain … we had everybody against us … and they remain hysterically against us,” Murdoch said. “Yet we’ve built a business that is not only growing fast but is worth many billions of dollars. We remain confident we will repeat this in Italy.”
On the touchy subject of Malone and Liberty Media, Murdoch said there is plenty of room for negotiation, predicting the matter will be resolved within six to nine months.
Malone caught Murdoch off-guard when snatching up voting stock in News Corp. last fall as Murdoch’s conglom began the process of moving its headquarters from Australia to the U.S. Malone now holds a 14% stake in News Corp. (the Murdoch family holds 29.5%).
One thing Murdoch said he wouldn’t do is sell off any asset he considers integral to News Corp.’s stable.
Murdoch said News Corp.’s buyback of Fox Entertainment shares would be completed this spring.
News Corp. shares were up 5¢ to close at $17.67 on Wednesday. Fox Entertainment Group shares closed down 2¢ at $33.88.