Fox Studio, TV Divisions Boost News Corp. Q2 Profits Despite Hacking Investigation

News Corp. CEO Rupert Murdoch credits the film division, the cable networks and the TV network. Publishing? Don’t ask

Last Updated: February 8, 2012 @ 2:39 PM

News Corp. bested analyst expectations in the fiscal year’s second quarter and improved upon its financial results from last year thanks to its Fox studio, its cable networks and the television division.

Publishing? Don't ask.

In its earnings report, filed Wednesday, the company posted revenue of $8.98 billion, a two percent increase over the same frame a year ago, and profits of $1.5 billion, a 16 percent increase.

The revenue total beat expectations by less than a percentage point, but its earnings per share of $0.39 exceeded those forecasts by almost 15 percent.

"The significant growth we reported in the quarter in the Cable Network Programming, Television and Filmed Entertainment segments clearly validates our strategy to develop and distribute superior wide-ranging content," CEO Rupert Murdoch, who was not on the earnings call, said in a statement. "I am particularly pleased with the success of our business strategies in spite of the uncertain economic conditions that we continue to face."

The Fox studio showed the most growth, profiting $393 million in the quarter, more than doubling the profit from 2011’s Q2.

The News Corp. release credited the home entertainment performances of “Rio,” “Rise of the Planet of the Apes,” “X-Men: First Class” and “Mr. Popper’s Penguins,” as well as the theatrical runs of “Alvin and the Chipmunks: Chipwrecked” and Oscar heavyweight “The Descendants.”

Last year's frame had middling box office performers like "Unstoppable" and "Gulliver's Travels."

COO Chase Carey also made a point of mentioning revenue from its deals with digital distributors like Netflix and Amazon.

"I don't see how that business doesn't get larger," Carey told analysts. He said it seemed like every week a new group was talking about a new streaming project and that "without question" that business would continue to grow.

News Corp.'s cable division did not post as significant a gain as the film side, but it continued to be the biggest revenue and profit driver, totaling $882 in income — a 20 percent jump from last year. Revenue increased nine percent.

News Corp CFO David Devoe said on the earnings call that "cable continues to drive overall company results."

A little bit of everything contributed to the higher figures, from a nine percent growth in affiliate revenue to a six percent increase in advertising revenue. FX in particular continued to stand out as a top performer, while the NBA lockout both reduced costs and limited an even bigger surge in ad revenue.

Profits from the Television division — the network and produciton studio — bumped up 25 percent to $189 million thanks to higher ad revenues. Big new shows like "X-Factor" and "The New Girl" teamed with sports programming were the main draws.

Anything left? Oh, publishing.

Income there declined 43 percent to $218 million due to lower advertising revenues at the Austrailian newspapers and lost income from the closure of the News of the World,

The News of the World, a widely popular British tabloid, closed as a phone hacking scandal undermined its credibility and endangered its future. That cost $91 million, as reported in the company's last earnings report.

But the hits continues, and not just from the News of the World. Carey said the company was looking at at least $100 million worth of losses for the year from its Australian publishing division and $150 million in the U.K.

The phone hacking scandal hit News Corp. in another area as well — "Other" — where it reported losses of $191 million, $87 million of which came from the ongoing investigations into hacking.

News Corp. has reported that the investigation has cost the company $104 million so far in the fiscal year, but that the vast majority of costs is due to lawyers and professional fees rather than settlements.

Still, the rising cost of the hacking scandal has caught the company by surprise. News Corp. will no longer factor in the costs of this investigation into its fiscal forecasts because it no longer believes it can reliably forecast them. The cost in the second quarter was "substantially higher" than its projections after the first quarter.