Finishing up a dismal earnings season for media companies, News Corp. reported a 70% drop in net income and a 16% decline in revenue last quarter, with its broadcast TV, newspapers and MySpace divisions leading the way down and only its cable unit bucking the trend.
Rupert Murdoch's media empire earned $300 million, excluding one-time events, on $7.38 billion in revenue. The numbers were a bit below analysts' estimates, but investors seemed pleased that News Corp. maintained its guidance for the fiscal year that ends June 30 and indicated that the worst of the advertising slump might be over.
"We are not back to the boom phase, but at the very least we have hit a floor and seem to be getting some bounce off it," Murdoch said during a conference call with analysts and reporters.
News Corp.'s stock rose 63 cents to $10.65 before earnings were announced, most likely helped by the halo effect of Walt Disney Co.'s better-than-expected results Tuesday. In after-hours trading, the shares climbed an additional 3%.
Although investors focused on Murdoch's forward-looking comments, there was no missing the ad declines' effect on many of News Corp.'s businesses. Most notably, broadcast TV revenue in the company's fiscal third quarter that ended March 31 fell 29% to $1.28 billion. Operating income sank to $4 million from $419 million.
Although the Fox network has seen a 13% drop in prime-time ratings, its revenue is expected to fall only 6% for the fiscal year ending June 30. The main drag has been local TV stations, whose ad sales fell almost 30% in the quarter.
However, Murdoch noted that within the last few weeks he has seen enough positive signs to predict that by the end of the fiscal year the decline would be a less disastrous 23%, demonstrating how lower declines are the new up.
Results were markedly different in cable, however, thanks largely to the success of Fox News Channel, which has negotiated gains in its affiliate fees thanks to strong ratings. Those deals bore fruit in the quarter, as News Corp.'s cable revenue rose 11% to $1.42 billion and operating income was up 30% at $429 million.
Cable was the most profitable business segment for News Corp. in the quarter. With the Big Ten Network and more than 140 international channels still in what soon-to-depart President Peter Chernin described as "aggressive growth mode," cable is now arguably the conglomerate's most important division.
