Fox Won't Be Big Buyer if Cap Is Raised

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Even if the station-ownership rules are loosened as expected, don't expect News Corp. to embark on a major shopping spree. That's how the Murdochs—News Corp. Chairman Rupert and his son, deputy COO Lachlan—described their plans last week. News Corp.'s takeover of Chris-Craft last year put the Fox station group over current Federal Communications Commission restrictions, which limit a owner to stations reaching no more than 35% of U.S. TV homes. By the FCC's calculation, Fox stations reach more than 37%.

Even if networks succeed in their lobbying to get the FCC to raise the cap to 45%, which is likely, the Murdochs won't be big buyers.

"But I would think that the matter of company strategy, we would only be interested in one or two very selective markets," said Rupert Murdoch. "We are not out to increase the reach dramatically." However, he would like to buy stations in markets where Fox already operates, creating a duopoly.

Lachlan added that the company is interested primarily in trading stations with other owners. "I think, with the 35 stations that we currently operate, we have ample opportunity to facilitate in swaps for the markets that we would like to acquire as opposed to paying into cash or shares."

The Murdochs' remarks came as the News Corp. and its Fox Entertainment subsidiary posted earnings for the third fiscal quarter ended March. The TV-station group increased revenues just 6% to $463 million. But that's largely because Fox Network had the Super Bowl last year and didn't have it this year. Operating cash flow grew a weak 4% to $179 million.

Despite the success of Joe Millionaire, Fox Network suffered from the same comparison plus preemption of some commercials during war coverage. Revenue increased just 1% to $558 million while cash flow flipped from negative $45 million to positive $37 million.

The cable-network group was strong, lifted by prewar interest in Fox News Channel. Revenues increased 18% to $515 million, and cash flow jumped 27% to $106 million.

"I'd say the bigger story is how well Fox News is doing with the end of the war," said News Corp. President and COO Peter Chernin. "Since the war, Fox News has managed better than any of its competitors to hold on to its new viewers." Nielsen ratings show that CNN and MSNBC have lost every bit of the audience gains they posted during the war but Fox News has hung on to a big slice of its increase.

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