Murdoch: Content is emperor, not king

News Corp. boss: no interest in Miramax, MGM deal unlikely

NEW YORK -- News Corp. chairman and CEO Rupert Murdoch said Tuesday that the debate over the preeminence and importance of content in the digital era is over. "Content is not only king. It is the emperor of all things electronic," he said, adding that consumers are ready to pay for quality content.  

His comments came on a conference call after his conglomerate said it swung to a fiscal second-quarter profit of $254 million, including a pre-tax charge of $500 million for a legal settlement, from a year-ago loss on profit increases at most units, including the film, TV and cable networks division.

"Avatar" helped boost revenue in the quarter, which also included much of the promotional costs for the film, with profits from the film coming in starting this quarter, management said.

Meanwhile, News Corp. is unlikely to acquire MGM and is not even considering a bid for Miramax, Murdoch said Tuesday.

He said MGM has old, but good movies, which could be interesting to his firm at the right price. However, other bidders seem "more interested," he said before concluding. "I think you can count us out of that altogether."

Asked about his interest in Miramax, Murdoch said he can "rule us out of Miramax right away."

News Corp.'s quarterly charge, $315 million on an after-tax basis, stems from a settlement announced over the weekend with newspaper coupon and ad-insert firm Valassis. The year-ago period loss of $6.4 billion included an impairment charge.

Operating profit in the latest period rose 44% to $1.2 billion. Quarterly revenue rose 10% to $8.7 billion. Investors have been looking for a return to consistent revenue gains at media firms after the U.S. recession.

"Our strong top-line revenue growth demonstrates that News Corporation is emerging from this recession with renewed vigor and strength," said Murdoch. "Moreover, our underlying operating trends this quarter far outpace those of the same quarter last year. We continue to reap the benefits from the restructuring and cost containment measures we instituted before the downturn began."

Based on the strong quarterly results and the record-breaking performance of "Avatar," as well as improving advertising trends, News Corp. raised its full fiscal year guidance to an operating profit gain in the low 20% range. Previously it had expected a high single to low double digit percentage gain.

Murdoch also lauded his management team, saying it "knows how to nurture our core businesses, while taking prudent, creative risks like 'Avatar' that lead the industry forward." Murdoch later spoke of "an exciting new era of 3D entertainment" that the film helped ring in.

In the film unit, News Corp. nearly tripled its fiscal second-quarter record operating profit from $112 million to $324 million driven by continued DVD success of "Ice Age: Dawn of the Dinosaurs" and "Night at the Museum: Battle of the Smithsonian," as well as the pay-TV performance of "Taken." The boxoffice success of "Avatar" also helped boost film revenue from less than $1.5 billion to $1.9 billion.

Among the other highlights from Tuesday's conference call:

* Murdoch confirmed that U.K. satellite TV company BSkyB will launch a 3D network in the near future.
* TV station revenue is trending up 18%-plus over the year-ago period in the current quarter.
* Asked if a recent retransmission consent deal with Time Warner Cable fixes the broadcast business model he had previously called challenged, Carey said it helps to set News Corp. "on a course where we can generate the profits" needed. Murdoch said retrans "breathes a new life into the broadcast business," and the TWC deal sets a precedent for News Corp.
* Murdoch lauded long-time lieutenant Roger Ailes for having made Fox News "the most influential and profitable" news network in the world. Some in the blogosphere have speculated about recent tension between Ailes and Murdoch.
* The CEO also said MySpace has started seeing some signs of stabilization in traffic trends.
* Murdoch told listeners that more of News Corp.'s newspapers will launch paid online subscriptions this year, and the firm is in talks with device makers over the introduction of subscription models.
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