News Corp. Talks Splits

Story first appeared in The Associated Press.

News Corp. is reportedly considering splitting its publishing and entertainment businesses into two companies.

The Wall Street Journal, citing people familiar with the matter it did not name, says a split would put the 20th Century Fox film business, the Fox TV networks into a separate company from News Corp.'s newspaper and book publishing businesses.

The Journal reports that a final decision has not yet been made. The newspaper is owned by News Corp.

The newspaper says Murdoch has long opposed the idea but has warmed to it. His family controls about 40 percent of the company.

The discussions come as the company deals with an investigation into alleged phone-hacking by its U.K. newspapers.

A call to News Corp. representatives was not immediately returned.

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Murdoch Unfit for Leadership

Story first appeared in The Associated Press.

News Corp. chief Rupert Murdoch is unfit to lead his global media empire, an influential group of British lawmakers said Tuesday.

In a scathing report, the lawmakers said his company misled Parliament about the scale of phone hacking at one of its tabloids.

Parliament's cross-party Culture, Media and Sport committee said News International, the British newspaper division of Murdoch's News Corp., had deliberately ignored evidence of professional malpractice, covered up evidence and frustrated efforts to expose wrongdoing.

Murdoch has insisted he was unaware that hacking was widespread at his now-shuttered News of the World tabloid, blaming underlings for keeping him in the dark.

The legislators said if that was true, he turned a blind eye and exhibited willful blindness to what was going on in his companies.

It was concluded that Rupert Murdoch is not a fit person to exercise the stewardship of a major international company," the report by the panel of 11 lawmakers said.

A Labour Party panel member said the decision had not been unanimous, and Conservative lawmakers — who opposed condemning Murdoch — said that the split had been along party lines.

The judgment on Murdoch implies that News Corp., which he heads, is also not a fit to control British Sky Broadcasting, in which News Corp. holds a controlling stake of 39 percent.

The committee agreed unanimously that three key News International executives misled Parliament by offering false accounts of their knowledge of the extent of phone hacking at the News of The World — a rare and serious censure which usually demands a personal apology to legislators.

Murdoch closed down the 168-year-old Sunday tabloid last July amid public revulsion at the hacking of voice mail messages of celebrities and victims of crime, including murdered schoolgirl Milly Dowler.

Throughout the scandal, News International's approach was to cover up rather than seek out wrongdoing.


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Cable-TV, Film Lift Profits For News Corp.

Wall Street Journal

News Corp.'s net income climbed 11% in the latest quarter, as gains in its cable-television networks and film business offset declines at its newspaper and broadcast-TV divisions.

Reflecting what media executives say are improving but still cautious conditions in advertising spending and the economy, News Corp. expanded the range of its earnings guidance for its full year, ending next June.

The New York-based media company said it expects profits to increase in a percentage range from the high single digits to the low double digits, excluding special items. Three months ago, News Corp. said it expected profits to rise by a high-single-digit percentage.

News Corp.'s broadcast-TV business isn't doing as well as 

its cable-TV. Above, 'So You Think You Can Dance.'

Economic conditions are "clearly in better shape than they were a year ago," though a recovery is still a "little fragile," Chairman and Chief Executive Rupert Murdoch said on a conference call.

News Corp., which owns The Wall Street Journal, reported net income of $571 million, or 22 cents a share, for its fiscal first quarter, ended Sept. 30. A year earlier, net income was $515 million, or 20 cents a share. The year-earlier results also included a $422 million write-down of News Corp.'s investment in a German TV company now known as Sky Deutschland. Revenue fell 4.1% to $7.2 billion.

The cable-TV division posted another strong performance. Gloom continued, however, for the broadcast TV and newspapers business. In general, results were helped by cost cutting at several businesses.

As advertising spending has eroded, News Corp. businesses across the glob have stressed alternative ways of making money. In the U.S., News Corp. is pressing cable- and satellite-TV companies to pay cash fees for the rights to pipe the Fox network into people's homes. Traditionally, network owners haven't been paid cash for their broadcast networks.

Mr. Murdoch said the company may not make a self-imposed deadline of next summer to start charging user fees to access all the company's news Web sites. Analysts say it may be difficult to retain ad revenue if subscribers flee paid Web sites for free alternatives.

Operating income at the film-and-TV production unit rose 56%. Box office returns from the latest installment of the "Ice Age" series and DVD sales of the most recent "X-Men" movie helped drive the increase. The year-earlier period also included a weaker slate of films.

Operating income rose 41% for News Corp.'s cable channels, which continue to benefit from higher fees paid by cable- and satellite-TV companies. Advertising sales slipped for the cable channels from a year earlier, however, as they did in the prior quarter. Investors worry the fees may not have much room to grow, removing a major growth engine for the company.

News Corp. executives said international cable channels are a new growth area.

At News Corp.'s broadcast-television division, which includes the Fox network and local TV stations affiliated with Fox, operating income dropped by about half to $38 million in the quarter. News Corp. executives said trends for local television stations are improving from a year earlier, when Mr. Murdoch said "business just stopped" at the height of the financial crisis.

The newspapers unit posted an 81% drop in operating profit. Reduced expenses couldn't offset steep ad declines. In addition to The Journal, News Corp. publishes the New York Post in the U.S., four U.K. national papers and a string of papers in Australia. Mr. Murdoch said The Journal is profitable but "barely."

He also said the company plans to keep "absolute control" of the name and content of its Dow Jones Indexes business, which News Corp. has put up for auction. He said he couldn't comment on whether the company would merge Dow Jones Indexes with another index.

The division housing the MySpace social-networking site posted a loss as ad sales fell. MySpace has slashed its work force, installed new management and shifted tack to focus on its online video, games and music offerings as it faces competition from Facebook and other popular Web hangouts.

"It's clearly still a work in progress," said Chase Carey, News Corp.'s president and chief operating officer, said on the conference cal.

News Corp. has had preliminary discussions about a deal to buy at least parts of NBC Universal, an alternative to Comcast Corp.'s negotiations to acquire a controlling stake in the TV-and-movie company from General Electric Co. Mr. Murdoch said on the call Wednesday that the company wasn't interested in NBC "as such." "When things come around, we'll kick the tires, but we're not in any talks with anybody at the moment," he said.

Comcast and GE, which is the majority owner of NBC Universal, have worked out the general outlines of a deal, according to people familiar with the matter. An announcement could be ready as early as next week or the week after, those people and others familiar with the talks say.

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.

The 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.”

Forecast

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.

MySpace

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.