Films pump profits at News Corp.

'Borat,' 'Devil Wears Prada' drive up revenue

NEW YORK — Rupert Murdoch’s News Corp. delivered a 6.2% increase in net income in the quarter, driven by a strong perf by its film unit, which reaped boffo results from “Night at the Museum” and DVD revenue from “Borat” and “The Devil Wears Prada.”

Studio revenue increased 30% in the quarter to $1.8 billion from $1.39 billion a year ago, results that included homevid revenue from “Eragon,” “Little Miss Sunshine” and “Ice Age,” as well as DVD sales of “Prison Break” and “24.”

Overall, net income at News Corp., which includes the Fox Television network, Twentieth Television and MySpace.com, was $871 million, up from $820 million a year ago. Revenues increased 21% to $7.53 billion from $6.19 million a year ago, beating an average estimate of $6.81 billion from analysts polled by Thomson Financial.

News Corp. revealed a $5 billion unsolicited bid for Dow Jones, publisher of the Wall Street Journal, last week but Murdoch gave no update on efforts to convince the controlling Bancroft family to sell the company.

“We made the offer in what we believe is a full and more than fair price because our two companies are a perfect fit,” Murdoch said.

Despite the strong performance, News Corp. shares were off slightly due to uncertainty over the bid, which would deplete the company’s $7 billion cash reserve. News Corp. shares slipped 39 cents to $23.22 on the NYSE.

In addition to filmed entertainment, cable was another strong performer for the company, turning in revenue of $998 million, up from $839 million last year and operating income of $282 million, a 34% increase. Growth was driven by higher affiliate fees generated by Fox News Channel, FX Network and Fox’s regional sports networks.

A weak spot for the company was broadcast television, which despite hits like “American Idol,” “24” and “House,” saw profits slip 4.5% as losses from the startup MyNetwork TV offset growth at the Fox broadcast net.

MyNetwork TV launched with a slate of English-language telenovelas last fall, but is changing strategy to resemble a more traditional broadcast network in the coming season.

“I think we were clearly off-base in the telenovela strategy and we’ve removed all of those except for one night of telenovelas and that will be gone soon,” said COO and prexy Peter Chernin.

Chernin said that the company would demand quarterly progress from MyNetwork TV, which is expected to drastically reduce losses in the coming fiscal year, which begins in July.

Losses at MyNetwork TV masked growth at the Fox broadcast network, which will finish first in the 18-49 demographic this season and reported third quarter operating income up 49% versus a year ago due to higher pricing for advertising for “American Idol,” “House” and “24.”

Chernin said strong last-minute ad sales, known as the “scatter” market, “bodes well” for the coming upfront sales period, which begins next week. He acknowledged, however, that there is some inherent uncertainty in this year’s upfront due to confusion over DVR ratings and pricing standards.

Interactive revenue increased 65% to $135 million, primarily due to higher advertising sales at MySpace.com.

The strong film perf was the headline for the quarter, but News Corp. execs said that the studio’s record results were due to some unique circumstances, including huge foreign and domestic box office for “Night at the Museum” and continued homevid spillover from “Borat” and “Ice Age.”

“This was a very unique quarter, but we continue to believe all indications in our movie business are positive and we believe we have the best management,” Chernin said.

Separately, the company announced plans to become the first global media conglom to become “carbon neutral” by 2010 by investing in renewable energy and replacing vehicles with hybrids. Company estimated it released the equivalent of 641,150 tons of carbon across 52 countries in fiscal 2006.

“If we are to connect with audiences on this issue, we must first get our own house in order,” Murdoch said in an address to New York employees on Wednesday.

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