TV Ads Boost News Corp.'s Results for Quarter

Though Lower Ratings Leave Fox Fourth in 18-49 Demo

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NEW YORK ( -- Lower programming write-offs and higher advertising sales at the Fox broadcast network and the Fox Stations Group helped News Corp. boost its TV segment profit for its fiscal first quarter ended Sept. 30.
Peter Chernin
Peter Chernin Credit: Fox

Revenue at News Corp.'s TV division for the quarter rose 5.2% to $1.1 billion, thanks to increased ad sales on Fox and the Fox stations. Profit rose 20% to $192 million from the year-ago quarter, aided by political ad dollars in the market leading up to this week's midterm elections. News Corp.'s fiscal year begins July 1.

Ratings down, for now
Those higher ad sales for the quarter, unfortunately, coincided with lower ratings in key demographics at the tail end of the period, when the new fall TV season began. Fox traditionally kicks off its fall season at the end of August, and according to Nielsen Media Research, the network is in fourth place season-to-date (Sept. 18 to through Nov. 5) attracting 3.87 million viewers in the 18- to 49-year-old demographic, compared with 4.2 million last year during the comparable period. In the 18-to-34 demo, Fox drew 1.7 million viewers, compared with 2 million over the same time.

The network typically does poorly in the calendar fourth quarter and rebounds in the first and second quarters once ratings powerhouses "American Idol," and "24" return to the prime-time schedule in January.

In addition to the broadcast networks, which now include My Network TV, the New York-based media giant owns the Twentieth Century Fox film studio, Fox News Channel, the New York Post and MySpace.

News Corp. also reported additional costs relating to the launch of My Network TV and investments in local station group websites and a new service, Fox On Demand, offered by local station groups and sibling DirecTV.

Strong showing for cable group
The cable industry may have had a tough upfront, but Fox cable networks did well for the period. Excluding Fox News Channel, operating profit at News Corp.'s cable channels, which include RSN, FX and Speed, increased 31% vs. last year's comparable quarter. The cable segment profits rose to $249 million from $197 million in the first quarter last year on revenue of $889 million.

Fox News Channel's advertising performance, usually a headline on News Corp.'s quarterly results statements, was curiously absent, suggesting that ad growth has slowed at the cable news outlet. Operating income at Fox News Channel was in line with the comparable quarter, according to the statement, which did not outline specifics. Revenue growth at Fox News Channel came from higher affiliate and licensing fees. The channel is currently renegotiating its 10-year cable distribution agreements and announced deals with Cablevision and DirecTV in recent weeks. It is also discussing a new business news service. Fox News Channel also had higher programming and marketing costs for the quarter, which New Corp. Chief Operating Officer Peter Chernin said related to increased talent costs.

Mr. Chernin, speaking on an analysts' call from Japan, where the company is launching a version of MySpace, said Fox has had previous tough fall quarters, and though it was disappointing, he said the company wasn't panicked. He added that broadcast scatter pricing for remaining TV ad inventory was in the low to mid-single digits above rates based on upfront ad-sales pricing.

"We certainly feel pretty good and we sold a lot of our volume in the upfront, so we don't have a tremendous amount of scatter right now," he said.

Overall earnings
Overall, Net income at News Corp. was $843 million, compared with a loss of $433 million in the comparable quarter last year, when the company had accounting costs. Revenue rose 4.1% to $5.91 billion from a year ago.

Mr. Chernin also mentioned that Google began providing a new search facility on MySpace this week and that target revenues from Fox Interactive Media, which include MySpace, were in the $500 million range.
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