'Grim' local ad market slows News Corp.
EmptyNews Corp. has seen "a marked deterioration" in ad momentum and currency trends since August, management said Wednesday, forcing it to reverse its full fiscal-year operating profit guidance to a double-digit decline.
Chairman and CEO Rupert Murdoch called the local ad market "grim" and warned that the current sluggishness "could well turn into a prolonged economic slump."
Asked about the DVD business, president and COO Peter Chernin had to admit that recent weeks had brought "quite a bit of softening" for releases of other studios. "There are some cautionary signs," he warned.
Chernin also signaled the beginning of weakness in online ad momentum. Citing recent reports of softness in display ads, he said "we're clearly starting to feel that."
In August, News Corp. predicted a 4%-6% gain in fiscal year operating profit. But CFO David DeVoe changed that projection Wednesday to a decline in the low- to mid-teen percentage range. He cited a marked deterioration in confidence because of the recent financial crisis, which drags down local TV and newspaper ads worldwide and accounts for 40% of the shortfall. "Plus, the dollar has strengthened 20%" since August, which adds about a third to the guidance reduction, he said.
Overall, Murdoch called the current market "extremely challenging for the media sector." News Corp.'s reaction will be "to manage down our already lean headcount wherever appropriate" while also investing in developing growth businesses" he said.
News Corp. posted a fiscal first-quarter profit decline of 30% to $515 million because of a $447 million write-off related to its investment in German pay TV giant Premiere and the fact that it has sold DirecTV and Gemstar-TV Guide since the year-ago period. Quarterly revenue rose 6.3% to $7.51 billion.
Revenue at the company's TV stations fell 17% in the quarter, with brass citing weak auto, financial and movie ad trends.
News Corp.'s film unit reported operating income of $251 million, down from a near-record $362 million in the year-ago period, which included the theatrical releases of "The Simpsons Movie" and "Live Free or Die Hard." Management said the rest of the fiscal year has a stronger lineup of films. (partialdiff)