Studio struggles against year-ago benchmark set by 'Avatar'

“Avatar” was, of course, a blessing to News Corp. But over the last three quarters, the blockbuster has also been something of a curse, with Rupert Murdoch’s media empire facing tough year-on-year financial comparisons.

In reporting its fiscal third-quarter results, News Corp. said Wednesday that revenues fell 6% to $8.3 billion and net profits plummeted 24% to $639 million. The strength of its TV businesses was not enough to offset the difficult comps. On the bright side, execs said the period ended March 31 is the last in which they would face the steep “Avatar” comparisons.

News Corp. profits in the quarter were also hurt by a one-time $125 million charge from a legal settlement related to a marketing business.

Cable nets remained the standouts for News Corp. with operating profits up 25% to $735 million on a revenue gain of 13% to $2 billion. Ad revs in the U.S. were up 14%, helped by 20% ratings growth at FX. Affiliate revenues rose 10% in the U.S. Internationally, ad revenues were up 18%. News Corp. prexy Chase Carey said Fox News should have new distribution agreements in place with more than half of its affiliates by summer 2012. “We are expecting a big increase that reflects the strength of Fox News. It’s second only to ESPN in clout in the marketplace,” he said.

Murdoch was not on the conference call on Wednesday.

The film studio took the biggest hit on comparisons to last year’s over-the-top results from “Avatar.” Operating profits fell 50% to $248 million vs. $497 million in the company’s third quarter of 2010, which resulted in the best quarterly numbers in News Corp. history. It could have been worse. “Black Swan,” which has done $300 million at the box office, helped studio financials in the quarter. On premium VOD offerings, Carey described the current effort as a “test” and couldn’t say when a decision would be made on whether News Corp. would make them a permanent offering.

The TV segment got a big boost from the NFL playoffs and Super Bowl in the period, with profits rising $152 million to $192 million on revenue increases of 23%. Also helping out were retrans fees and lower programming costs because “24” was no longer on the air. Carey said he expects to have retrans agreements in place with 80% of the markets where it operates O&O stations by the end of 2012.

In publishing, operating profits fell by $207 million to $36 million, largely because of legal settlement costs related to the Integrated Marketing Services business. Without the one-time charge, operating profits would have dropped by $82 million, stemming in part from lower ad dollars from Australian and U.K. newspapers, from startup costs associated with iPad-only newspaper the Daily and increased newsprint costs. Carey said the Daily lost $10 million in the quarter, adding that it is “real early days” and that it has only been pay-based for about a month.

At the division housing the struggling MySpace social networking site, operating losses were $165 million, deeper by $15 million from the year-ago period. The losses stem from lower ad and search revenues at MySpace.

When asked about the status of News Corp.’s proposal to buy the 61% of satcaster BSkyB it doesn’t own, Carey said, “We are looking to complete the regulatory process.” Execs said they were disturbed by the escalating share price at BSkyB and said they would be disciplined about their bid, walking away if they don’t think it is “a reasonable deal.”

Carey confirmed that News Corp. is teamed with the Italian holding company Exor to look at buying Formula One but described talks as “exploratory” at this point.

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