News Corp. CEO touts 'fragile' recovery

'Ice Age' sequel, record Fox News profit drive Q1 results

NEW YORK -- News Corp. chairman and CEO Rupert Murdoch sees economies and advertising markets around the world "emerging from the bottom," but cautioned on Wednesday that his conglomerate will continue to operate cautiously as the recovery is "still a little fragile" and 2010 is likely to be a "year of stability."

President, COO and vice chairman Chase Carey predicted ad revenue to be up "a touch" in the current quarter and also for the whole fiscal year. Murdoch acknowledged that outperforming the year-end period of last year when the financial crisis wreaked havoc should be "pretty easy" though, adding that internally the company may start comparing ad momentum to trends from two years ago to get a better sense about fundamental health.

They made the comments on News Corp,'s quarterly earnings call, on which the company broadened its full fiscal-year guidance range to the upside after it reported a fiscal first-quarter profit gain of 11% on double-digit increases at its film, cable network and book units. The results were driven by record profits at Fox News and a fiscal first-quarter record in film thanks to the third installment of "Ice Age."

Murdoch said U.S. TV trends have seen "a marked improvement" over the year-ago period with TV station ad revenue in the latest quarter, which is the firm's fiscal first, being the best in seven quarters. October ad pacings are about flat, and November is looking up in the mid teen percentage range, he added.
Plus, Fox network scatter market ad sales are strong, he said, before touting the early fall season lead of the network.

Murdoch also said Wednesday that News Corp. is not in acquisition talks with General Electric on NBC Universal right now. But the company has explored a potential deal. "We're not interesting in NBC as such," he said when asked about the topic in a possible signal that his firm could sell off broadcast operations in case talks get earnest.
Murdoch also said News Corp.'s relationship with Comcast Corp. wouldn't suffer if the cable giant wins NBC Universal. "We have good relations with them," he said, adding the firm would still be a partner on cable carriage deals and a competitor in the broadcast space.

Carey later declined any comment on the status of talks about a potential acquisition of the Travel Channel.

After the market close, News Corp. reported a fiscal first-quarter profit gain of 11% to $571 million on double-digit profit increases at its film, cable network and book units.

The profit for the period ending Sept. 30 was reported after the market close Wednesday and compared with a profit of $515 million in the year-ago period, which included a $422 million write-down of the firm's stake in Sky Deutschland.

Operating profit rose 9% to $1.04 billion. Revenue declined 4% to $7.2 billion though. 

In the film unit, News Corp. hit a fiscal first-quarter record operating profit of $391 million, compared with $251 million reported in the year-ago period driven by higher revenue. The success of "Ice Age: Dawn of the Dinosaurs," which has become the highest international grossing animated film of all time with more than $880 million in boxoffice to date, helped drive the quarter's film results as did home entertainment contributions from "X-Men Origins: Wolverine" and "Taken."

TV operating profit fell more than 50% to $38 million due to weaker results at Fox Broadcasting Company amid higher primetime program costs and lower advertising revenue, as well as the Fox TV stations amid continued local ad woes and fewer political ads.

The cable network segment boosted operating profit 41% to $495 million driven by better results at the Fox News Channel, which hit its highest quarterly profit ever, international Fox channels, STAR and sports networks.

The digital unit, which includes MySpace, saw a 26% revenue decline and lower profit due to weaker search and ad results. When pressed on the topic, Murdoch explained that search revenue from Google was down, because "we have not been making our minimum guarantees."

Here some other highlights from the earnings call:

* Analysts repeatedly asked for financial guidance about retransmission consent fees that News Corp. is looking to earn from the carriage of the Fox network.
Carey would only say that most carriage deals expire over the next two to three years.

* Asked about Fox News' tensions with the White House, Murdoch said they have "probably" been good for ratings, but he also signalled that the conflict seems to have quieted down. "We don't really have any continuing problem there," he said.

* Asked about the bickering between MSNBC and Fox News, Murdoch said: "We did not start this abuse, which we felt went way beyond (the norm)." He also said he doesn't believe it is good business.

* Carey and Murdoch both signalled less interest in acquisitions than building businesses internally. "We are not going to rush into big things unless we see (huge potential)," Murdoch said.
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