NEW YORK — News Corp. slipped to a loss of nearly $4 billion in the latest quarter on a massive writedown for its stake in troubled Gemstar. Hollywood pics and cable nets, however, swelled Fox profits, and Wall Street bid the stock higher.
The Fox broadcast net spilled red ink as ratings tanked, but execs are upbeat on the upfront as they prepare to unveil the fall sked Thursday. Lineup includes new shows by Joss Whedon (“Buffy the Vampire Slayer”) and David E. Kelley (“The Practice”). “We have a terrific pilot season, particularly in drama,” said chief operating officer Peter Chernin during a conference call.
Chernin and chairman-CEO Rupert Murdoch promised to keep a close eye on Gemstar’s operations and financial disclosure, and to repair huffy relations with cable operators and investors. They recently turned the company over to former Fox exec Jeff Shell, and Murdoch said he sees a turnaround in 12-18 months.
Making Oz history
News Corp.’s quarterly loss was the biggest in Australian corporate history, continuing the trend of financial firsts this year. Vivendi Universal just posted the largest loss in French corporate history and AOL Time Warner carried that flag for the U.S. “It’s a pure technicality,” Murdoch told reporters.
But excluding the $4.2 billion charge, which reflected a steep drop in Gemstar’s stock price, News Corp.’s earnings rose to $236 million for its fiscal third quarter ended in March, from $127 million the year before.
Revenue rose 18% to $3.85 billion. Operating income surged 54% to $549 million. The shares jumped 7.85% to $28.45, pulling other media stocks higher as Murdoch said the ad market “is showing the first clear signs of return to health.”
He raised News Corp.’s full-year earnings projections — an uncommon practice among media companies of late — and chastised investors for letting the stock languish at three-year lows.
Film figures flush
Rosy numbers were fueled by Fox Entertainment. Subsid swung to a $108 million profit from a $9 million loss on revenue up 28% to $2.5 billion.
Filmed entertainment saw operating income nearly quadruple to $161 million. Cash flow tripled to $180 million. Revenue rose 21% to $1.1 billion. Company cited strong worldwide perf of “Moulin Rouge” and domestic homevid sales of “Kiss of the Dragon,” plus library sales on video and DVD. Also, prior year included losses from “Monkeybone” and “Say It Isn’t So.”
“Ice Age,” which has pulled in $300 million worldwide, will jazz up the bottom line for the current quarter; Fox also is distributing “Star Wars: Episode II — Attack of the Clones,” which opens this week.
Chernin called the film results “extraordinary” and noted the studio has gone more than a year without a big money-losing movie (only a few “minor” losers). He said Fox is offloading risk more with co-production deals, seeking lower fees for talent and managing production and marketing costs better.
Slate highlights he mentioned include the Steven Spielberg/Tom Cruise sci-fi thriller “Minority Report,” “Solaris,” “Daredevil,” “The League of Extraordinary Gentlemen,” “X-Men” sequel “X2” and “Master and Commander.”
Studio remains a prolific producer of primetime series. Syndication revenue from “Buffy,” “King of the Hill” and “The Practice” rolled in last quarter, partly offset by higher production costs from new shows and pilots.
The TV unit, which includes stations, network and Star TV in Asia, saw operating income rise to $114 million from $99 million, partly due to the addition of the Chris-Craft station group last year. Stations benefited from the Super Bowl on Fox, stronger local news and syndicated product and a decision to replace the Fox Kids block with stronger firstrun product. Fox has duopolies in eight markets.
Fox network fell to negative cash flow of $45 million from a positive $1 million the year before as ratings lagged. Execs said aggressive development of new shows, cheaper shows and other cost cuts will lead to renewed profitability. This summer the net will break out “American Idol,” the U.S. version of a U.K. series, plus more NASCAR, a handful of new reality shows and a newsmagazine from Fox News topper Roger Ailes.
Cable nets were a high point. Operating income nearly tripled to $73 million from $24 million as Fox News, FX and Fox Sports near full distribution on cable systems, collect higher ratings and affiliate fees and see costs start to fall.
On the international front, Murdoch had tough words for Vivendi Universal, which is reconsidering plans to merge its Italian pay TV platform Telepiu with smaller rival Stream, owned by News Corp. and Telecom Italia. “If it doesn’t go through, we’ll sue them,” Murdoch said, but later he conceded the French conglom has the contractual right to walk away.
Italian regulators approved the merger Monday, but imposed some conditions Vivendi didn’t like. “At any rate, Stream will continue in business as a very active competitor,” Murdoch said.
At News Corp.’s other businesses:
- Publishing, led by HarperCollins nearly doubled operating income to $22 million from $12 million. Revenue rose to $242 million from $210 million.
- Newspapers saw income ease to $126 million from $124 million. Revenue was off, to $606 million from $639 million.
- Magazines and inserts’ operating income was up to $72 million from $67 million. Revenue was down to $241 million from $249 million.