News Corp. chief operating officer Chase Carey reiterated support for James Murdoch on Tuesday and said the company isn’t contemplating any management changes after a phone hacking scandal erupted in the U.K. last summer.
“We have great confidence in James. James has done a good job,” Carey said during a conference call to discuss quarterly earnings, which were higher at all divisions save publishing.
Revenue rose 7% to nearly $8 billion and operating income jumped 21% to $1.4 billion on gains in cable, broadcasting, film and Sky Italia.
Net income dipped to $738 million from $775 million in part on a $91 million restructuring charge at the U.K. newspaper biz and a one-time fee for withdrawing the BSkyB bid — both fallout from the hacking scandal that has claimed several top execs. James, chairman Rupert Murdoch’s heir apparent, who runs international, is due to be grilled on events Nov. 10 for second time before a Parliamentary committee.
Carey called fiscal first-quarter earnings a chance to shift gears from scandal to the company’s core operations, which are humming.
“I am in no way minimizing the issues we face in the U.K. but there is not a lot more I can say than what we have already said. We are cooperating fully and will do what we need to do to put things right.”
There were some major business decisions: like the one News Corp. and its partners made not to sell video streaming service Hulu.
“We made the decision with our partners that Hulu was more valuable to own and build rather than sell,” he said, saying it provides “invaluable” digital opportunities. News Corp. and partners Walt Disney, Comcast’s NBCUniversal and Providence Equity Partners took Hulu off the auction block last month.
Earlier this week, the company resolved a down-to-the-wire carriage dispute with DirecTV for what Carey called “a deal that is fair to both of us.” He implied that the company got mostly what it wanted and that it expects more coin as other contracts come up for renewal. Fox’s cable nets are “younger” than rivals, he said, and not given fair value.
Operating income at the cable networks rose 18% to $775 million.
Ad revenue at domestic nets grew 14% driven by pricing and ratings growth at FX. International channels grew revenue 24% led by STAR India and Fox Latin America.
Affiliate revenue rose 9% at the domestic channels and 24% internationally.
Filmed entertainment saw operating profit up 24% to $347 million driven by the worldwide theatrical perf of “Rise of the Planet of the Apes,” and “Rio” and “X-Men: First Class” on home video.
“Rio” beat targets, Carey said. He’s encouraged by a possible steadying of the homevideo market after years of decline.
“It’s too early to say it’s really stabilized, but it’s a bit better than it has been … It feels like a business where Blu-ray and digital are getting some traction.”
Broadcast profit grew 27% to $133 million with Fox off to its best start in history, execs said, citing a robust national advertising market, the broadcast of the 2011 Emmy Awards, and a jump in retransmission consent revenues. These increases were partly offset by lower political ad revenue at local stations and higher marketing costs at the network to support new series “Terra Nova,” “New Girl” and “The X Factor.”
Carey said strong scatter premiums “have pulled back somewhat” and business in the current quarter looks flat excluding political advertising.
Publishing saw operating income drop 38% to $110 million, reflecting in part the impact from closing The News of The World in the U.K. and lower revenue from the Australian newspapers. The Wall Street Journal had higher advertising and circulation revenue.
In the wake of the hacking scandal, which revived complaints of nepotism and lax board oversight, James, his older brother Lachlan Murdoch, who isn’t active in the company now, and several other directors received an unusually high percentage of votes by outside shareholders against re-election at News Corp.’s annual meeting last month.
Carey wasn’t clear if the company would take any action in response. It’s not obligated to. The Murdoch family and its allies hold nearly half of all the voting shares.
“We take those votes very seriously and the board will and is discussing those votes,” Carey said.
Italian satcaster Sky Italia saw income rise 45% to $119 million.