21st Century Fox Posts Mixed Quarterly Earnings, Shares Rise

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Rupert Murdoch

The company reported quarterly earnings Wednesday of 47 cents per share on $6.8 billion revenue.

21st Century Fox reported quarterly earnings Wednesday of 47 cents per share on $6.8 billion revenue, which amounted to mixed results compared to what Wall Street analysts were expecting.

The conglomerate controlled by CEO Rupert Murdoch was expected to earn 39 cents per share on $6.9 billion revenue. A year earlier in the same quarter, the company posted $8.2 billion revenue. Earnings on an adjusted basis were 42 cents per share, still above expectations.

Falling revenue is in part due to the exclusion of the direct broadcast television businesses of Sky Italia and Sky Deutschland, which were sold in November.

The Fox broadcast network has been a drag on earnings lately, though the hit show Empire has helped shore things up there. Still, the "television" segment saw declining revenue and operating income in the quarter.

Beyond television, the other two segments — cable network programming and filmed entertainment — posted higher revenue and operating income.

Cable network programming posted a 5 percent increase in operating income to $1.2 billion on a 14 percent improvement in revenue to $3.6 billion mostly because of affiliate fee increases. 

Filmed entertainment saw an 8 percent increase in operating income to $382 million on a 5 percent boost in revenue to $2.4 billion, led by theatrical releases Taken 3 and Kingsman: The Secret Service as well as theatrical and home entertainment distribution of DreamWorks Animation's The Penguins of Madagascar.

Television, the company's weak link, saw a 51 percent decline in operating income to $141 million on revenue that sunk 22 percent to $1.2 billion. Chase Carey, the COO, blamed the shortfall on tough comparisons, given the absence of the Super Bowl this time around. He also said costs associated with a higher volume of new shows dented income.

Two of those shows, Empire and Gotham, earned shout-outs from Carey during a conference call with analysts. "Hits are more valuable than ever. When you get a phenomenon like Empire, it's great. ... It's tremendously important," he said.

Still, ratings at the network aren't impressive, nor is the dwindling financial performance. "The Fox network is not where we think it should be," Carey acknowledged.

While revenue generated by affiliate fees and content rose, advertising revenue sunk 20 percent to $1.8 billion, and Carey called the TV ad business a "short-term challenge." He said that consumers won't tolerate 16 minutes of commercials per hour unless they are relevant and entertaining.

Carey also addressed the impact of Internet streaming services on cable bundles, including the trend toward a skinnier cable offering of fewer channels at a bargain price. He concluded that there's a lot of life still left in the traditional model.

"The predominant majority will want a bundle," he said.

In after-hours trading, shares of 21st Century Fox were trading 1 percent higher.

Murdoch didn't participate in the call with analysts but issued a statement that read, in part: "Our results reflect the underlying strength of our business even as it was impacted by an unfavorable comparison for our broadcast television businesses without the Super Bowl and ongoing currency headwinds."

Murdoch also touted the ICC Cricket World Cup broadcasts on Star Sports India, which he said broke viewing records for both digital and linear TV.

Email: Paul.Bond@THR.com