News Corp. rides non-broadcast assets to big FY Q1


The corporation, which just finished its fiscal 2010 Q1 as of 9/30/09, soared on film and cable increases, making up for setbacks in other areas, including television and broadcast network operations. In all, it reported a 9% gain in operating income to $1.04B, and an 11% gain in net income, to $571M. Total revenue came in at $7.2B.

“The strategic steps we took last year to ensure stability during the downturn have proven successful, with significant cost reductions offsetting much of the revenue declines in our Television and Newspapers and Information Services segments, said Chairman/CEO Rupert Murdoch. “The economies in which we do business are clearly in better shape than they were a year ago, and we have further positioned our operations to take advantage of the improvements we are seeing globally. We will continue to manage our businesses smartly and confidently under the security of a strong balance sheet.”

Murdoch admitted that 2009 has been one of the toughest years ever, particularly for the television group, but there are many positive signs that the business has finally bottomed out and is poised to rebound in 2010.

The company’s television group, which includes Fox Television Stations and network Fox Broadcasting Company, dropped from $83M to $38M in operating income. The stations group suffered a 26% loss in operating income due to lower local advertising and the lack of political advertising in an electoral off-year. The network suffered from higher costs coupled with less advertising, fewer football games in the period due to the late start of the NFL and lower baseball revenues.

The football situation obviously cures itself going forward and benefits on the back end. On the baseball side, Murdoch noted that FBC benefitted from good LCS and is doing even better with one of the hottest World Series in recent years.

Network is a good story for Fox, which is doing well in the scatter market, out-pricing the deals it was able to strike during upfront. But visibility remains short and it remains difficult to peer very far at all into the future.
Murdoch pointed out that FBC is winning four out of seven nights in its demographics of choice, something that usually doesn’t happen until “American Idol” joins the schedule.

Operating revenue from cable assets soared from $350M to $495M. Services such as Fox News Channel benefit from carriage fees which are independent of fluctuations in the advertising market, and also benefitted from decreased news coverage costs.

Newspaper was a major drag, going from operating income of $134M to $25M. Murdoch noted that there were success stories, however, particularly in the US with the Wall Street Journal and, which boasts over 1M paid subscribers.

The film division was one of the real News Corp. heroes, going from $251M to $391M in operating revenue. It cited the international success of “Ice Age: Dawn of the Dinosaurs” as a major factor.

As for the White House, Murdoch said FNC did not start the abuse, decided it had to respond, and will stop when they stop.

RBR-TVBR observation: What can we learn from News Corporation? This: If you can find a way to develop a strong and reliable revenue stream that is not dependent on the volatile advertising market, by all means do so.

Easier said than done, we know, and there are companies we can think of that would point out that such diversification is no guarantee of permanent black ink. But it sure doesn’t hurt.