News Corp. Earnings Jump in Second Quarter

Updated: Cable networks, Fox lead gains

By Jon Lafayette -- Broadcasting & Cable, 2/8/2012 4:31:27 PM

Updated 8:00 p.m. ET

News Corp. reported higher second quarter profits thanks to big gains at its cable and broadcast TV networks.

Net income was $1.06 billion, or 42 cents a share, up 65% from $642 million, or 24 cents per share, a year ago. This year's net includes $169 million in one-time gains, as well as a $36 million charge related the company's newspapers in the U.K. and Australia. Without those charges, net income would have been 39 cents a share vs. 29 cents a year ago.

There was also an $87 million charge against earnings related to the costs of the ongoing investigation of the company's phone hacking scandal, which led to the closing of the U.K. paper The News of the World last year. So far this year, News Corp. has paid $104 million on the scandal. About 15% of that has gone to victims to settle cases.

Revenues rose 2% to $8.98 billion, led by gains in cable networks, television and filmed entertainment.

"The significant growth we reported in the quarter in the Cable Network Programming, Television and Filmed Entertainment segments clearly validates our strategy to develop and distribute superior wide-ranging content," said CEO Rupert Murdoch in a statement. "I am particularly pleased with the success of our business strategies in spite of the uncertain economic conditions that we continue to face."

Operating income for News Corp.'s cable network programming unit rose 20% to $882 million from $735 million a year ago.  Revenue rose 9%. Earnings rose $55 million, or 25%, at the regional sports networks because of reduced rights costs caused by the NBA lockout.

Advertising revenue at the domestic cable channels grew 6% thanks to higher prices and ratings growth at FX. Those gains were partially offset by advertising declines at the RSNs which lost revenues because of the loss of NBA games due to the lockout. Excluding the RSN's advertising revenues at the domestic cable networks were up 14%, led by FX.

Affiliate revenue rose 9% at the domestic cable channels.

Operating income for the television unit, which includes Fox Broadcasting, rose 25% to $189 million from $151 million. The company said the growth was the result of increased broadcast network ad revenues driven by a stronger fall schedule led by The X Factor and New Girl, Major League Baseball and National Football League programming. Retransmission consent revenues rose 100%.

Programming costs were up because of the new series and the cost of producing additional World Series games.

At the local stations, a decline in political advertising pushed ad revenue lower.

"The advertising markets, while not quite as robust as they were six-plus months ago, remain solid, Deputy Chairman and COO Chase Carey told analysts during the company's earnings call. "In the March quarter, the broadcast network is still seeing scatter pricing at a premium to the strong upfront pricing and the stations excluding last year's Super Bowl are seeing the March quarter up around 5% on last year with the business getting stronger."

On the cable side, Carey said FX continues to see "strong double digit growth while local sports at the lower end are up mid-single digits."

News Corp. offered financial guidance saying that, excluding the costs of the phone hacking investigation, which it declined to project, total segment operating income for the year is expected to grow at a rate in the low- to mid-teens from 2011's $4.975 billion.