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Cable Boosts 3Q News Corp. Profit - Broadcasting & Cable

Cable Boosts 3Q News Corp. Profit

UPDATED: Phone hacking scandal results in $63 million charge
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Updated 8:55 a.m.

Costs connected with the scandals surrounding its British
newspapers didn't stop News Corp. from reporting higher profits as its cable
networks registered another strong quarter.


Net income rose 47% to $937 million, or 38 cents a share, in the company's
fiscal third quarter, from $639 million, or 24 cents a share, a year ago.


The quarter includes a $63 million charge related to the cost of the ongoing
investigations of the cellphone hacking scandal that led to the closure of the
British paper The News of the World
and a $111 million pre-tax gain from British Sky Broadcasting's share
repurchase program. The prior year's quarter had a $125 million charge stemming
from litigation at its marketing services business. Excluding all special
charges, earnings per share were 37 cents, compared to 26 cents a year ago, the
company said.


Revenues rose 2% to $8.4 billion.


"Once again, News Corporation showed strong operational momentum in the
quarter, driven by significant growth at our Cable Network Programming and
Filmed Entertainment segments," CEO Rupert Murdoch said in a statement.
"With our disciplined approach to monetizing our brands, I believe we are
better situated than ever to capitalize on the increasing global demand for our
superior content."

During the company's conference call with analysts, News
Corp. COO Chase Carey addressed the company's reaction to last week's report by
a British Parliamentary committee on the hacking scandal that said that Murdoch
was not fit to run a major international company. Carey said he flatly rejected
that assertion, calling it a "purely partisan" finding. "Rupert is taking great
business risks, especially in the U.K., where he's led News Corp.'s heavy
investment, building Sky, creating greater consumer choice to 10 million homes,
and creating 19,000 jobs. We invested in The
Times
and The Sunday Times, titles
that were we're nearly out of business before Rupert made the decision to save
them. He's one of the smartest, most forward thinking executives of our time
and both the board and I rebuff any notion that he is unfit to run this
company," Carey said.

Operating income rose 15% to $846 million at News Corp.'s
cable network programming segment. Revenues were up 16%, while expenses grew
17% because of the launch of UFC programming and production of additional NBA
games following the league's lockout.

"Our Channels business is a growth business, still in its
evolution and we're committed to investing in content to strengthen our
leadership position. We're not merely going to focus on squeezing the margins,"
Carey said.

Income at the company's domestic channels increased 17%,
driven by double-digit growth at the regional sports networks, FX Network and
Fox News, the company said.


Affiliate revenue growth rose 15% reflecting higher rates at all of the
domestic networks, including the RSNs and Fox News.

Advertising revenue at the domestic cable channels grew 10%
in the quarter, with double-digit gains at Fox News and the National Geographic
Channels.


Operating income at News Corp. television segments, including the Fox broadcast
network, fell 11% to $171 million. The decline reflects the absence of
advertising revenues and operating profit generated by last year's Super Bowl.
Excluding the effects of the Super Bowl, ad revenue at the TV stations and
broadcast networks were flat, with higher prices offset by lower ratings for American Idol.

Asked about expectations for future American Idol ratings, Carey noted that it had recently surpassed
NBC's The Voice as the most-watched
TV show.

"It was down more than we would've liked this year, but it's
a big valuable franchise and makes a lot of money. We certainly think we've got
a lot of life left in it and I think our challenge is -- more next year is to
put some fresh energy," he said.  "Our
challenge is...to put some fresh energy and I think we did well a year ago, probably
not well enough this past year."

With the upfronts imminent, Carey provided some about ad
market trends. In national broadcast scatter, "we're seeing  a solid market with current pricing of low to
midteens above last year's upfront, and June quarter cancellations were in line
with historical averages."

He added that on the cable front, "current scatter is
healthy with entertainment scatter up midteens" and on the local side, "the
markets have been softer, and we're seeing a mixed pacing with heavy auto
spending offset by declines in other categories."

The
company said its revenues from retransmission doubled from a year ago.

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