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News Corp. profits from cable, bulks up on sports

February 06, 2013|By Meg James
  • News Corp. Chief Operating Officer Chase Carey said the recent Los Angeles Dodgers TV rights deal, which competitor Time Warner Cable snagged for more than $7 billion over 25 years was "too rich for our blood."
News Corp. Chief Operating Officer Chase Carey said the recent Los Angeles… (Andrew Harrer / Bloomberg )

News Corp. continues to bet big on sports.

Rupert Murdoch's media company is planning a new national 24-hour Fox Sports cable channel and has been adding regional sports networks to its portfolio. But a top company executive conceded Wednesday that the TV sports landscape is becoming increasingly tricky -- and expensive.

“We believe we are making the right decisions in navigating this invaluable yet complicated business,” News Corp.'s chief operating officer, Chase Carey, told analysts during a call to discuss the company's earnings.

Fox, he said, had no qualms about losing the mammoth TV rights deal for the Los Angeles Dodgers to competitor Time Warner Cable, which has pledged $7 billion to $8 billion over 25 years to backstop the Dodgers baseball team in exchange for the television rights.

“Too rich for our blood,” Carey said.

Fox Sports' Prime Ticket channel will carry the Dodgers during the upcoming baseball season, before the TV rights switch. Carey declined to say whether the loss of the Dodgers would force the company to lower the fees it charges to distributors to carry Prime Ticket.

The company, he said, has enough other sports to maintain a “healthy and vibrant” channel. Fox has two local sports channels, Prime Ticket and Fox Sports West, in the Los Angeles region.

In December, News Corp. shelled out $584 million to acquire a 49% stake in an East Coast regional sports channel -- New York Yankees Entertainment and Sports Network, and an additional $250 million in upfront costs. News Corp. separately spent $270 million (including $130 million in cash) for an Ohio regional sports network, Sports Time Ohio.

Cable television -- including regional sports networks Fox News Channel, FX and National Geographic Channel -- drove profits for the global media company in the fiscal second quarter.

Net income for the quarter, which ended Dec. 31, more than doubled to $2.38 billion, or $1.01 a share, up from $1.06 billion, or 42 cents, in the year-earlier period -- slightly exceeding Wall Street expectations.

News Corp. generated $9.43 billion in revenue during the quarter, an increase of 5% from $8.98 billion a year earlier. The revenue increase was driven by an additional $398 million -- growth of 18% -- in the company's cable network programming segment.

But sports proved to be a double-edged sword. Expenses at its cable network division jumped 26% in the quarter, largely because of the higher costs of some of its sports deals. The Fox Broadcasting network also experienced some sports-induced pain. It had to pay more because of its expanded coverage of college football. Then, the World Series lasted only four games in October, robbing the network of its chance to hit a ratings home run.

Fox Broadcasting had a bad slump in the fall with the abbreviated World Series and the Simon Cowell singing competition show “The X Factor” turning into a “disappointment,” Carey said.

Meanwhile, the company forked over an additional $56 million to settle lawsuits and other costs related to the phone hacking scandal at the now shuttered News of the World tabloid in London.

However, the company's publications division generated slighter higher operating income, in part, boosted by the launch of another London tabloid, a Sunday edition of the Sun.

ALSO:

Time Warner Cable's deal with the Dodgers guarantees sub fees

Fox will keep Prime Ticket going even without the Dodgers

Rupert Murdoch says Los Angeles Times purchase not a sure thing

Rising sports programming costs could have consumers crying foul

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