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Wednesday, August 26, 2009

News Corp. Reports Loss on Web Writedowns, Ad Drop

By Bloomberg Press

Aug. 5 (Bloomberg) -- News Corp., owner of the Fox broadcast network and the Wall Street Journal, reported a fourth-quarter loss of $203 million on write downs at its Internet unit and plunging advertising revenue.

The loss of 8 cents a share compared with net income of $1.13 billion, or 43 cents, a year earlier, the New York-based company said today in a statement. Excluding some charges, profit was 19 cents a share, compared with the 18-cent average of analysts’ estimates compiled by Bloomberg.

news corporateThe worst U.S. recession since World War II battered ad sales at News Corp.’s TV stations, social-networking Web site MySpace and newspapers, which include the New York Post and the Sunday Times. Chairman and Chief Executive Rupert Murdoch said he plans to begin charging for access to all the company’s news Web sites this fiscal year, using WSJ.com as a model.

“The tumultuous and unprecedented change affecting the entire media sector, particularly at newspapers and broadcasters, cannot be ignored,” Murdoch said on a conference call. “The digital revolution has opened many new methods of distribution, but it has not made content free.”


Adjusted operating income will increase in the “high single digits” on a percentage basis in fiscal 2010, Chief Financial Officer David DeVoe said on a conference call today. The forecast is based on adjusted operating income of $3.44 billion for fiscal 2009, DeVoe said. Growth will be driven by the cable channels, Sky Italia and the film studio, he said.

Analysts predict full-year operating profit of $3.71 billion, the average of estimates compiled by Bloomberg.

News Corp., also owner of Fox News and the Twentieth Century Fox film studio, was little changed at $10.58 in after- hours trading. The shares have gained 16 percent this year on the Nasdaq Stock Market, while the 16-company Standard & Poor’s 500 Media Index has risen 11 percent.

Impairment charges in the fiscal fourth quarter were mainly tied to Fox Interactive Media, the unit that includes MySpace, and reduced earnings by 17 cents a share. Advertising sales fell at MySpace, and the company had increased costs to introduce MySpace Music.

News Corp.’s total sales dropped 11 percent to $7.67 billion in the period ended June 30, missing the average analyst estimate of $7.73 billion.


The division that includes Fox Interactive reported a wider adjusted operating loss of $136 million. TV operating income slid 66 percent to $95 million, and newspapers fell 63 percent to $96 million.

Earlier this year, Murdoch appointed Chase Carey, CEO of DirecTV Group Inc., as News Corp.’s president and chief operating officer. Carey, who started work July 1, replaced second-in-command Peter Chernin, who stepped down after 12 years as operating chief.

Murdoch, 78, also hired former AOL chief Jonathan Miller in April to overhaul digital operations, and Miller replaced MySpace’s management, bringing in former Facebook Inc. executive Owen Van Natta. In June MySpace fired almost 30 percent of its U.S. staff after Facebook surpassed MySpace in U.S. users for the first time in May.

“Given that you have traffic not growing anymore at MySpace, there’s concern that a big chunk of revenue is going to come out of there,” Michael Morris, a New York-based analyst with UBS AG, said before results were released.

A $900 million advertising agreement between MySpace and Google Inc. expires next year.

‘American Idol’

In the TV season that ended in May, Fox’s prime-time audience slipped 16 percent from a year earlier, the steepest drop among the big four networks, according to Nielsen Co. News Corp.’s Fox, which airs top-rated show “American Idol,” remains the most-watched network among the 18-to-49 age group.

Murdoch said pricing is “doing well” for advertising sold in advance of the fall TV season. He also said that Fox is holding back more ad inventory than in previous years to sell closer to the air date.

Last week Time Warner Inc. said second-quarter profit fell 34 percent, less than analysts estimated, as movie earnings countered ad drops at AOL and magazines. Viacom Inc., the owner of MTV, said profit slid 32 percent, hurt by the film unit. Walt Disney Co., the world’s largest media company, said net income dropped 26 percent on falling ad and theme-park sales.

CBS Corp. plans to report earnings Aug. 6.