News Corp. sees value in upfronts

Stance differs from NBC Uni's; TV sturdy in Q2

News Corp.'s Fox network will not "abandon the upfront" process, president and COO Peter Chernin said Monday as the company reported its highest quarterly operating profit ever thanks to strong broadcast and cable TV unit results.

Meanwhile, chairman and CEO Rupert Murdoch discounted the threat of a U.S. recession, lauding "the resilience of the United States economy" and predicting that the Fed's recent rate cuts and an economic stimulus package prepared in Washington will "go a long way" toward avoid a recession.

But even amid a slowing or declining economy, News Corp. would be "better positioned than any other media company," Murdoch said, highlighting the conglomerate's international expansion and buildup of subscription businesses. "We are no longer dependent on the strength of one market or medium."

As one case in point, Chernin said Fox has "not seen any weakness" in ad sales momentum, with few cancellations, no make-goods and strong scatter-market pricing.

Meanwhile, Chernin said the upfront is "a valuable platform" for advertisers to plan their spending and for Fox to interact with them. NBC Universal CEO Jeff Zucker recently hinted that his firm could stop putting on upfront presentations as early as this year.

Chernin reiterated, though, that Fox will continue to "get waste out of the (current) system," with a cut in the number of TV pilots among the key moves, he said.

Asked about the writers strike, Chernin said only that discussions were "positive" and he was "optimistic." He cited a media blackout in declining further comment.

Meanwhile, Murdoch also confirmed Monday that the entertainment conglomerate will "definitely not" counter Microsoft's bid for Yahoo.

After the market close, News Corp. reported a increase in its fiscal second-quarter profit as higher advertising revenue at the Fox broadcast network and Fox News Channel outweighed tough comparisons in the film unit.

The latest profit of $832 million for the quarter ending Dec. 31 compared with $822 million a year ago. Operating income jumped 23% year-over-year -- as it did in the previous quarter -- to $1.4 billion, driven by double-digit percentage gains in most divisions. Revenue rose 9.5% to $8.6 billion.



Operating income at News Corp.'s film division declined 14% to $403 million from a year-ago record of $470 million. The latest quarter benefited from such DVD releases as "Live Free or Die Hard" and "The Simpsons Movie" as well as theatrical releases "Juno" -- the highest-grossing Fox Searchlight release ever -- and "Alvin and the Chipmunks."

Chernin again touted the focus of his film team on the bottom line.

"We maximize profits (rather than) chase market share," he said, predicting that the higher-margin Blu-ray Disc business and strong upcoming films and DVDs will keep the unit on a solid trajectory this fiscal year. He also predicted that Blu-ray sales would exceed $1 billion industrywide this year.

The conglomerate's broadcast TV unit more than doubled its operating profit from $112 million to $245 million, as improvements at Fox Broadcasting and MyNetworkTV were offset by lower contributions from TV stations, driven by a 90% decline in political advertising income.

Again, the company's cable networks were strong contributors. Their fiscal second-quarter operating income increased 23% to $337 million, with the Fox News Channel's contribution nearly doubling and the first inclusion of the National Geographic Channel also boosting results. This was partially offset by startup costs for Fox Business Network and the Big Ten Network.

The company's Fox Interactive Media unit, which includes MySpace, had quarterly operating income of $35 million on revenue of $233 million, executives said. Chernin said FIM's momentum accelerated after a somewhat sluggish fiscal first quarter.

In its affiliates group, News Corp. recorded a $299 million one-time write-down for British Sky Broadcasting's stake in U.K. broadcaster ITV.

Overall, News Corp. raised its full-year guidance for operating profit growth from the low teens to midteens percentages.
comments powered by Disqus