05 November 2010

News Corp. Profit Rises on Higher Ad, Subscriber Fees


News Corp., the owner of Fox News and the Twentieth Century Fox film studio, said first-quarter profit rose 36 percent because of higher advertising and subscriber fees at its television channels.

Net income climbed to $775 million, or 30 cents a share, from $571 million, or 22 cents, a year earlier, the New York- based company said today in a statement. Excluding a tax benefit, earnings were 27 cents a share. Analysts on average estimated 24 cents, according to Bloomberg data.

Profit was driven by increases in the TV and publishing advertising markets. The company is also wringing higher fees out of television distributors for its broadcast and cable channels. Last week, Fox secured new deals with Dish Network Corp. and Cablevision Systems Corp., which agreed to pay what it called an “unfair price” to end a programming blackout.

“These deals are critical to driving the Fox network’s financial success to reflect its real value,” News Corp. Chief Operating Officer Chase Carey said today on a conference call. “Over the next couple of years as we continue to close new agreements we will be taking this business to a whole new level of profitability.”

Chairman and Chief Executive Officer Rupert Murdoch wasn’t on the call because he’s been traveling overseas, the company said. The last time he skipped an earnings call was November 2006, Bloomberg data show.

Sales in the first quarter ended Sept. 30 gained 3.2 percent to $7.43 billion, compared with the $7.41 billion average of 11 analysts’ estimates compiled by Bloomberg.

Case Closed

News Corp. rose 38 cents, or 2.6 percent, to $15.22 in late trading after U.S. markets closed. The Class A shares gained 23 cents to $14.84 today in regular Nasdaq Stock Market trading and are up 8.4 percent this year.

Cablevision and News Corp. resolved their dispute Oct. 30, after Fox broadcast stations and some Fox cable channels had been cut off to 3 million customers for two weeks. It was the longest blackout of a major broadcast network for a million or more people in at least a decade, and may signal media companies are gaining the upper hand in seeking payment for over-the-air telecasts that used to be free.

News Corp. is turning to so-called retransmission fees after advertising sales took a hit during the U.S. recession. Fox has also seen viewership fall, 16 percent among viewers 18 to 49 in the first six weeks of the TV season, threatening its six-year run as the ratings leader.

Cablevision and Dish probably will pay 55 cents per subscriber per month in the first year, rising to $1 in the fifth year, analyst Michael Nathanson of Nomura Securities International Inc. estimated in a Nov. 1 report.

TV Profit

Operating profit for the television unit more than doubled as a 22 percent jump in local-station ad revenue offset higher programming costs at the Fox broadcast network.

The cable networks, such as FX, increased operating income 28 percent to $659 million, on a 17 percent gain in revenue. At the U.S. channels, advertising grew 16 percent and affiliate fees rose 14 percent.

As part of Murdoch’s efforts to add to subscription operations, the company is bidding for the 61 percent of pay-TV operator British Sky Broadcasting Group Plc it doesn’t already own. In June the biggest U.K. pay-TV operator rejected News Corp.’s buyout offer of 700 pence a share, or 7.8 billion pounds ($12.5 billion). BSkyB’s independent directors are seeking more than 800 pence from News Corp.

Today, News Corp. formally asked for approval from European Union antitrust regulators, which set a Dec. 8 deadline for reviewing the BSkyB transaction. U.K. regulators may still decide to raise objections.

Box Office

During the quarter, the film studio generated $243.6 million at the box office with its top release being “Predators,” according to Box Office Mojo. That compares with $333.8 million a year ago when “Ice Age: Dawn of the Dinosaurs” was released.

Film operating income fell 28 percent to $280 million.

Advertising increased an average of 13 percent at the company’s newspapers around the world, including the Wall Street Journal and the Times of London. Publishing operating profit was up 51 percent to $178 million.

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. and its Dow Jones division in providing financial news and data.

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