Bullish Murdoch Touts News Corp. Earnings

Fox stations help TV segment turn $2-million loss in final quarter of 2008 into $29-million gain in 2009

By Claire Atkinson -- Broadcasting & Cable, 2/2/2010 4:33:39 PM

Clearly buoyed by the company's progress in remaking all kinds of established business models in recent months, News Corp. Chairman and CEO Rupert Murdoch delivered the most colorful earnings preamble in some time as the company reported fiscal second-quarter numbers Feb. 2.

Mentioning new COO Chase Carey's progress in establishing a dual-revenue stream for News Corp.'s Fox broadcast network, thanks to the Time Warner Cable retransmission agreement and other efforts to return the print business to a subscription model, Murdoch championed News Corp. as never before.

"Content plans have gathered around our ideas, and instead of existential debates over value, now we're haggling over valuations," said Murdoch, who added that he had been visiting innovative research labs in Asia and the floor of the Consumer Electronics Show in Las Vegas. "From crisis comes clarity and strength.

"Excuse the immodesty," he continued. "Content is not just king, it is the emperor of all things electronic." 

Without mentioning Apple's iPad, he derided buzz around tech devices saying that they were "empty vessels without content."

Separately, when asked about the status of a late-night block at Fox, Murdoch said the company is not yet having any substantive talks with Conan O'Brien to move his show to Fox network.

"There are different opinions within the network, and if the program people could show us we can do it and be confident of making a profit, we'd do it in a flash." When asked if talks were ongoing, Murdoch responded that there have been conversations but no "real negotiations." He added that an 11 p.m. slot might make for some difficult negotiations with Fox stations that carry syndicated programming at that hour.

Several times during the call, both Murdoch and Carey took pains to praise Fox News chief Roger Ailes for building what was described as the world's most profitable network. Recent online news reports had floated the suggestion that Ailes might be ready to leave the organization.

Retransmission was again the focus of analysts' questions, though News Corp. management had very little to give away on that front, except to say that the Time Warner Cable deal was what Carey described as a "transforming event."

In the next two years News Corp. will renegotiate about half of its deals with the affiliates. "Big cable companies are making great operating profits," said Murdoch, "What we are asking for isn't going to kill the cable companies."

As for the strength of the ad market, he said both local and national TV ad markets were improving, and that there were "surprisingly strong signals that the trend will continue in the next few months."

Murdoch declined to discuss the upfront, saying it was too early to predict how it would shakeout. But Carey added, "Given that we are selling scatter at 15% we're in a good place."

Fox TV stations helped News Corp.'s TV segment turn a $2 million loss in the final quarter of 2008 into a $29 million gain for the period ending 2009. The Fox TV Stations benefited from a warmer ad climate and turned in a 19% rise in operating income over the previous year when the economy had fallen off a cliff.
The Major League Baseball American League Championship Series and World Series both helped to boost ad coffers even while the stations saw lower political money than during the previous election year. News Corp. also said the stations achieved record market share for the quarter; revenue rose 6% against an estimated market decline of around 2%, said the company. 
Better numbers at stations and reduced losses at MyNetwork TV, didn't offset lower contributions from Fox Broadcasting however. Even while ad revenue was up, higher license fees for returning series and sports dinted the network performance.
News Corp.'s cable networks continued to do well reporting operating income of $604 million for the quarter to Dec. 31, up $156 million over the year ago period. That growth was driven largely by increased affiliate fees from the cable news network.
News Corp. also recorded a $29 million loss on digital media dispositions.  They also have $10 million in restructuring charges.