Dip due to fall in TV ad sales, film studio
News Corp. offered the grimmest report yet of any media conglom in this unsettled earnings season.Quarterly net income plummeted 30% due to TV advertising softness and a slump for the previously thriving film studio. Profit hit $515 million for the fiscal first quarter ended Sept. 30, down from $732 million a year ago. Total revenue managed a 6% gain to $7.5 billion. Operating income at the film studio dropped 31% as underperforming releases piled up, among them “Meet Dave,” “The Rocker” and “Babylon A.D.” Film revenue fell 20% to $1.26 billon. Revenue slid 15% in the TV unit, and operating income plunged an astonishing 70% to $54 million, mainly due to local stations hit hard by the withdrawal of major automakers and other ad buyers. Some areas — cable and satellite especially — saw more encouraging numbers, and the scatter ad market on the Fox net and the general ad picture in cable are both decent. These brighter spots did not counter the bad news, however. Chairman and chief exec Rupert Murdoch didn’t sugarcoat things. “All media companies are being tested and the year ahead will be difficult,” he said. Accordingly, News Corp. lowered its fiscal 2009 guidance substantially and now projects a decline of annual operating profit in the low to mid teens. In 2008, that number was just over $5.1 billion. News Corp. shares fell 9.5% to $9.94, their decline accelerating along with the Dow’s late-session selloff. In an eventful conference call with analysts and journalists to discuss the results, Murdoch and chief operating officer Peter Chernin defended the current structure, strategy and management at the film studio. There are no plans to follow other congloms’ lead and reduce output or consolidate operations. Fox will wind up 2008 with 20 releases — double that of Disney and Paramount, both of which, along with Warner Bros., have slimmed down their slates. “A Night at the Museum 2” and the “Wolverine” spinoff from “X-Men” should improve things in ’09, execs said, as will a projected reduction in the number of pics industrywide. “This time next year we’re going to see a considerably smaller number of movies, and we’ll get a bigger share of the box office,” Murdoch said. Asked about News Corp.’s asset mix, Murdoch asserted, “I definitely wouldn’t break it up.” Launching or acquiring subscription-based businesses, which offer a revenue stream running parallel to ad sales, will be a priority, he said. No more sales of local stations are planned following the eight disposed of in July, Chernin emphasized. Murdoch described the station landscape as a “grim picture,” with automakers in particular cutting spending by 40%-50%. The Fox net is protected from the worst of Detroit’s troubles, Chernin argued, by the fact that buys are “highly integrated.” Ford, for example, doesn’t just buy 30-second spots on “American Idol.” It pays in advance ($35 million last season) for various kinds of brand opportunities throughout the show. Ad rates for the Fox net in the upfront averaged about 3%, with scatter rates at least as good, the company said. “We were expecting worse” in the network biz, Chernin said. “That being said, we’re cautious. There’s not a lot of visibility beyond the second quarter.” It says something about the economy that News Corp.’s fixation with print media — long seen as hopelessly challenged — was not the focus of the call. And results for the print segment, including the recently absorbed Dow Jones, were strong. Operating net surged 44% to $134 million. Chernin also reported discussions with News Corp. about reupping his contract, which expires next summer. “I’d characterize them as constructive and friendly,” Murdoch said of the talks.