Conglom posts 2% revenue gain; U.K. scandal still takes a toll

Gains fueled by cable programming, the worldwide B.O. of “Ice Age: Continental Drift” and higher retrans coin at Fox Television Stations powered News Corp.’s fiscal first quarter.

The conglom reported a 2% increase in revenue versus the year-ago quarter, to $8.14 billion, while operating income was essentially flat at $1.38 billion.

News Corp. continues to feel the pinch from the phone-hacking scandal that has enveloped its U.K. newspapers. News Corp. took a $67 million charge in the quarter attributed to the costs of ongoing investigations, compared to a $17 million charge in the year-ago period. It also took a $5 million charge related to costs of preparing for the split of its media and entertainment operations from its publishing assets.

Cable nets were once again the star of News Corp.’s balance sheet, registering a 23% year-over-year increase in operating income, to $953 million, largely driven by the company’s regional sports networks and Fox News Channel.

“This segment continues to drive overall company results,” chief financial officer David DeVoe said on Tuesday’s earnings call, adding that the cable nets generated over two-thirds of News Corp.’s total segment operating income. DeVoe said higher sports costs at satcaster Star India and the strengthening U.S. dollar partially offset that strong domestic growth.

The film side saw a 15% lift in operating income, to $400 million, driven by the latest “Ice Age” pic and its $850 million global B.O. haul. The TV stations unit saw retrans revenue more than double in the period, driving a $23 million improvement in operating income (to $153 million) though Fox stations also felt the pinch of lower primetime ratings thanks to competition from Olympics coverage on rival NBC.

Overall, first-quarter net income rose to $2.23 billion from $738 million a year earlier, in large part due to the company’s recent sale of its stake in digital video company NDS. Adjusted earnings came to 43 cents per share, largely beating analysts’ expectations, compared with 32 cents a year ago. The improving picture at News Corp.’s core film and TV operations was offset by the publishing losses and weakness at its overseas satellite TV holdings.

“Our operational discipline and focus on innovation continued to drive the company’s momentum in our fiscal first quarter, led by double-digit growth in our channels business and the global success of our film and television content,” chairman and CEO Rupert Murdoch said in announcing the results. “Even against considerable currency headwinds due to a stronger dollar, we were able to increase News Corp.’s revenue and adjusted segment operating profit over the prior year quarter while continuing to make key investments to position us for future growth.”

Earnings came amidst continued speculation over News Corp.’s acquisition plans, including a possible purchase of newspaper assets of the Tribune Co. But News Corp. prexy and chief operating officer Chase Carey mostly sidestepped questions about whether his company was aggressively looking for new assets. Instead, Carey said the conglom would assess the strategies of its newly split-off publishing division before deciding how to add to each company’s balance sheet. News Corp. OK’d he split in June and expects it complete next summer. Carey also had high praise for its studio’s distribution arrangement with DreamWorks Animation. The two companies inked a pact in August that would feed DWA’s toon fare through Fox for an 8% distribution fee.

DeVoe predicted steady operating income growth into next year, excluding costs related to the U.K. scandal and publishing division spin-off. But, he said, the company would take a hit from higher upfront marketing costs associated with releasing DWA’s first few pictures: “The Croods” (March 22), “Turbo” (July 19) and “Mr. Peabody and Sherman” (Nov. 1).

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