Conglom's income up 16% on TV, papers
With News Corp. shares down 10% this year as investors try to comprehend News Corp.’s appetite for newspapers, Rupert Murdoch stressed the value of Dow Jones and the possibility of acquiring Newsday in reporting the conglom’s third-quarter results.
News Corp.’s net income more than tripled to $2.7 billion in the period ended March 31, though the majority of that figure can be ascribed to a tax-free gain from its DirecTV swap with Liberty Media. On a consolidated net basis, the company posted a 16% gain to $1.4 billion, citing strength in the Fox broadcast net, cable programming and, yes, newspapers.
Revenue increased 16% to nearly $8.8 billion.
Early in a 90-minute conference call with analysts and investors, Murdoch took a few minutes to hammer home the long-term strategy behind the $5 billion acquisition of Dow Jones and its crown jewel, the Wall Street Journal. Neither that buy, nor the company’s expected purchase of Newsday from Tribune Co., represents an investment purely in print, Murdoch said.
“That is not our intent, nor is it factually correct,” he said. “What’s being lost in all this chatter is a crucial fact — it’s not just a global newspaper.” The many digital assets of Dow Jones, he added, are “its biggest growth area.”
Addressing complaints about the changes to the storied paper’s news coverage, he called it merely a “reordering of content” and said even more space is being devoted to business news than before.
“This is destined to be an extra-inning game, to use an overused metaphor,” Murdoch said. “Those who expect to see results in 12 weeks are kidding themselves. They’re setting too high a bar.”
The film unit, which has enjoyed a great run over the past several years, saw operating net drop 36% to $261 million from the year-earlier level of $410 million. While it reaped plenty of coin from pics like “Juno” and “Alvin and the Chipmunks,” release costs for “Jumper” and “Horton Hears a Who!” hurt the balance sheet, with the bulk of their revenue to be booked in future quarters.
The recent pic crop has performed well but must be compared with a record-setting group of theatrical and homevid titles a year earlier such as “Little Miss Sunshine” and “A Night at the Museum.”
Peter Chernin, News Corp.’s prexy and chief operating officer, acknowledged the potential damage to the film studio and TV ops of a SAG walkout just seven weeks from now. In fact, he said, a “de facto slowdown” is already causing pain.
“It’s difficult for anyone to start a movie at this point because you’re afraid of having it shut down,” Chernin said. “It’s a shame for an industry that has already weathered one major strike to be at this point again.”
Absent were any traces of Chernin’s upbeat comments, echoed by other media execs, on the eve of the 100-day writers strike late last year as they stressed the silver lining of long-overdue cost cuts and a rethinking of the TV biz. Ditto for Disney execs reporting earnings on Tuesday.
In the third quarter, the TV unit showed no signs of trouble, recording a 53% spike in operating net to $419 million as Fox booked lower programming costs and higher ad sales.
Chernin asserted that MySpace, the linchpin of Fox Interactive Media, would do fine as a standalone entity. The company is not talking with Microsoft or Yahoo about a combination.
“We control 52% of the money in social networking,” he said. “Anytime you have the greatest market share in the fastest-growing segment of the Internet, you have to feel pretty good about it.”
Still, Chernin conceded a difficult economy will keep the interactive unit, which also includes IDG, Photobucket and Fox Sports, from reaching earlier projections of $1 billion in revenue in 2008.
Chernin said News Corp. remains bullish on Blu-ray, which he sees as a $1 billion business at retail this year.
Asked to compare News Corp.’s video-on-demand strategy with those of other congloms, notably Time Warner, which said it would move to a day-and-date model with VOD and homevid, he said the company was “monitoring. But it’s too soon to declare that we’re moving every one of our releases” to day-and-date.