The ‘Ahas!’ were audible Wednesday as News Corp. COO Chase Carey admitted what he called “the world’s worst-kept secret”: Fox’s plan to launch a national sports network to compete with ESPN.
“That’s the plan we’re on. That’s what we’re planning to execute,” he said on an earnings conference call with analysts. Carey stayed mum on the launch date, preferring to stoke pent-up demand, he said. “If we were launching something next month, we’d have to announce it. We’re not.”
News Corp. unveiled robust fiscal second quarter earnings that were powered by growth at its cable networks. But softness at the Fox broadcast net, Sky Italia and the Australian newspaper biz forced the conglom to lower its profit estimates for the fiscal year ending in June.
Net income for the December quarter surged to $2.4 billion from $1.1 billion. Revenue rose 5% to $9.4 billion.
At Fox, “The X Factor” and post-season NFL football declined from the year before. Carey was candid about “X Factor’s” underwhelming perf and said the network needs to invest in developing new signature series.
“Clearly, ‘X-Factor’ was a disappointment for us. Maybe early in the year we were a little too optimistic,” he said.
“We need to create shows that are franchise shows for us to build a business around. We need to have shows that can be a signature that you build a night around… That’s the core challenge for us as we move forward,” Carey said.
Broadcast television operating income rose 19% to $224 million, fueled by higher retrans revenue and local political advertising at Fox O&O stations, offset by lower national advertising at the broadcast network on lower primetime ratings. Total revenue was flat at about $1.5 billion.
Cable networks profit grew 7% to $945 million year-over-year on a 19% revenue surge powered by regional sports, Fox News, FX and National Geographic. The gains were offset, however, by a 26% jump in expenses in part from higher sports programming costs.
Affiliate revenue rose 13% domestically and 42% internationally driven by the addition of Fox Sports Australia and Fox Star Sports Asia.
Advertising revenue rose 8% domestically and 29% internationally, respectively.
Last fall, News Corp. acquired the 50% of ESPN Star Sports it didn’t own for $220 million and renamed it Fox Star Sports Asia. It also paid $2.2 billion for Consolidated Media Holdings, which owned half of Fox Sports Australia. That move allowed News Corp. to consolidate the net’s earnings for the first time.
Filmed entertainment profit dipped by $10 million to $383 million; “Taken 2” and “Life of Pi” were top performers. Revenue was flat at $2 billion.
Sky Italia swung to a loss of $20 million from a $6 million profit the year before. Revenue dipped 6% to $890 million. Sky reported a net loss of 28,000 subscribers in the quarter.
Carey said News Corp. will cut its cost base at the satcaster, and he wasn’t upbeat about the Italian economy recovering anytime soon.
Publishing, which includes HarperCollins, Dow Jones and U.S., U.K. and Australian newspapers, saw earnings tip higher to $234 million from $218 million. Revenue of $2.1 million was a hair higher.
News Corp. said the latest profit figure includes $1.4 billion in gains on the additional ownership in Fox Sports Australia and Fox Star Sports Asia; $56 million in charges related to the phone hacking scandal in the U.K. (vs. $87 million the year before) and $23 million in costs related to the planned separation of News Corp. into two companies.
The split into an entertainment company called Fox Group and a publisher that will keep the News Corp. name is on track to close by the end of June, Carey said.