News Corp. reported Wednesday that its first-quarter
earnings rose 36%, led by the performance of its cable networks.
Net income was $775 million, or 30 cents per share, compared
to $571 million, or 22 cents a share, a year ago.
Revenues rose 3% to $7.4 billion from $7.2 billion.
"Our global cable network programming business
continues to lead News Corporation's financial and operational
momentum," said chairman and CEO Rupert Murdoch in a statement.
"With continued subscriber growth in new and established channels
throughout the world, and a global advertising recovery, our domestic and
international channels now account for 25% of our revenues, and uniquely
position us for profitable expansion of these franchises in the years to come.
At the same time, our Television segment enjoyed significant operating income
growth compared to the first quarter a year ago as local ad markets continue to
rebound."
Operating income for News Corp.'s cable network
programming group rose to $659 million from $514 million thanks to a 17%
increase in revenue. Operating income at the domestic cable channels was up
23%. Ad revenues at the domestic cable channels was up 16% and affiliate revenues
were up 14%.
News Corp.'s Television segment's operating
income rose to $105 million from $67 million as gains at its television station
group offset lower income from Fox Broadcasting. Fox Broadcasting's
results were lower despite higher ad revenues from NFL games because of higher
program cancellation costs and higher promotional costs.
"The new season has been a bit of a disappointment
and we would have liked to have had a Game Six in the World Series. But the
strength of the NFL and the ad market has enabled us to largely offset those
shortfalls," said COO Chase Carey during the company's earning call
with analysts. "More importantly we're very excited about the new
energy in American Idol, and the continued progress on X Factor
for next fall, with the potential to build real year-round tent poles."
Fox just ended a highly publicized retransmission
standoff with Cablevision Systems. Carey declined to provide details of the
agreement, saying only that "we feel very good" about the terms.
Carey said that retrans agreements with cash payments were vital to the future
of the broadcast business.
"These deals are critical to driving the Fox
Network's financial success to reflect its real value," Carey said.
"Now four of the largest distributors and have set the market for our
broadcast business. 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."
Revenue from retrans will enable Fox to continue to
compete for important sports franchises, Carey said. While those are expensive,
they also represent unique programming that drives record ratings at a time
when viewing is fragmenting and being disrupted by DVRs and other digital
technology. "There's no second World Series. There's no
second super Bowl. They come with big pricetags but they're a big part of
building Fox," he said.
At the stations, ad revenue was up by 22%, thanks in part to
increase spending in the auto, telecommunications and financial sectors, plus a
jump in political spending to $26 million. CFO David DeVoe said that ad
revenues were on track for an 11% gain going forward without political ads.
The ad market has been a strong driver of better results
for News Corp. and other media companies for several quarters. "Our
stations are looking at 20% year on year growth in the December quarter while
network scatter continues to be priced at double digit increases to the
upfront," Carey said. "Though the broader economy still faces great
uncertainty, there are no signs today that these anxieties are impacting the ad
market as we begin to look beyond January 1. Nonetheless, we remain cautious
and alert for the risks."
Twentieth Century Fox Television had higher syndication
revenue from How I Met Your Mother and home entertainment sales from Glee,
Sons of Anarchy and Modern Family.
