Bump provided by cable networks, offset by profit slide at 20th Century Fox; MySpace remains “a problem”
News Corp. turned in its latest earnings report to investors on Wednesday, and Rupert Murdoch's sprawling media giant delivered exactly what was expected: solid profit during its 2011 fiscal first quarter — even as some of its businesses, like MySpace, continue to struggle.
The company’s operating income was $1.15 billion during the quarter, an 8 percent increase over the same period a year ago.
The bump, provided by double-digit profit increases at its cable networks — including Fox News — television stations and publishing segments — including the Wall Street Journal — was offset by declines elsewhere, including at 20th Century Fox.
“Our global cable network programming business continues to lead News Corp.’s financial and operational momentum,” Murdoch said in a statement announcing the results. “With continued subscriber growth in new and established channels, and a global advertising recovery, our domestic and international channels now account for 25% of our revenues, and uniquely position us for profitable expansion.”
The profit growth at its domestic cable channels, including Fox, was driven by a 16 percent increase in advertising revenue.
But the picture wasn't entirely rosy. News Corp.’s film division reported quarterly operating income of $280 million, off more than $100 million year-over-year. The company attributed the slide to a “difficult comparison to the prior year’s record results” that included “Ice Age: Dawn of the Dinosaurs” — the highest international grossing animated film of all time, and the fourth highest international grossing film ever.
The company also blamed the decline, in part, on “launch costs for the worldwide release of Wall Street: Money Never Sleeps.”
"Fox film has had a disappointing few quarters without any breakout hits," deputy chairman Chase Carey — subbing for Murdoch — told investors during a conference call. But Carey said the company is thrilled about its deal with James Cameron for a pair of sequels to the sci-fi smash "Avatar."
Fox Television increased its profit contribution during the quarter due to higher syndication revenue from “How I Met Your Mother” and the DVD releases of “Glee,” “Sons of Anarchy” and “Modern Family.” Carey warned that the cost of Fox's recent cable carriage negotiations would continue to impact earnings, but that the deals are "critical" to maximizing the profitabilty of Fox programming.
Carey characterized Fox's fall season as "a bit of a disappointment" and said the company had hoped the World Series would've lasted to at least Game 6, instead of ending at five.
But the biggest disappointment for News Corp. executives has clearly been MySpace. "We've been clear: MySpace is a problem," Carey said bluntly. "Current losses are not acceptable or sustainable."
He said that the company feels "really good" about the recent MySpace relaunch, but admitted the company may need to address the social network's lack of a "clear path to profitability" in the months ahead.