Film coin fills News Corp. coffers
Chernin seeks more research on day-and-date impactAnother record quarter in its film division boosted News Corp.'s fiscal third-quarter revenue and profit as the theatrical run of "Night at the Museum" and such DVD releases as "Borat" and "The Devil Wears Prada" bolstered the entertainment conglomerate's results.
Although cable giant Comcast Corp. recently signaled that day-and-date film release trials show no negative effect on studio financials, News Corp. president and COO Peter Chernin said during Wednesday's earnings conference call that his company needs to do more research before being able to fully evaluate the impact on its high-margin DVD sales and rule out any cannibalization.
Chairman and CEO Rupert Murdoch showed no interest in raising a recent $60-per-share takeover offer for Dow Jones & Co. and signaled that talks between the firms could go on behind the scenes. He said he wouldn't comment on the issue in much detail until a formal conclusion is reached "one way or another."
Asked by an analyst whether News Corp.'s film strength can continue after several record years, Chernin expressed confidence. While the latest period was "a very unique quarter," he said "all indications in our movie business are positive," and he once again lauded film unit brass as "the best management" in the business.
News Corp.'s filmed entertainment unit reported a 30% revenue increase to $1.8 billion and record third-quarter operating income of $410 million — up 82% from the year-ago period and its third record in the past four quarters. "Little Miss Sunshine," "Ice Age: The Meltdown" and "Eragon" also contributed to the strong DVD performance.
Chernin said that News Corp. will be careful to protect such DVD strength, saying that day-and-date pilots have shown that the business model is "clearly positive for cable operators." But early data received from Comcast is "not conclusive yet" on the DVD front, he added.
Addressing investor fears that a Dow Jones acquisition would stop aggressive stock buybacks by News Corp. and reduce its cash war chest, Murdoch said the company has about $7 billion in cash, and brass said they feel the company could easily afford a deal and continued buybacks.
"As you have seen from our earnings, we have the ability to leverage our assets and expertise ... to provide strong growth platforms for any business within the News Corp. family," he said.
Management once again expressed disappointment with losses at the MyNetworkTV network, with Chernin vowing financial progress every quarter as the year continues to unfold.
News Corp. reported a fiscal third-quarter profit of $871 million, up 6.2% from $820 million in the year-ago period, It also recorded a record operating profit of $1.20 billion, up 23%. Revenue rose 21% to $7.53 billion, exceeding Wall Street estimates.
News Corp.'s TV unit saw its quarterly operating profit fall from $286 million to $273 million as the MyNetworkTV losses and lower contributions from Indian satellite TV firm Star more than offset better Fox network and TV station results. Network operating income jumped 49% on higher advertising rates.
News Corp.'s cable networks division grew its operating profit 34% to $282 million driven by gains at the Fox News Channel — up 49% — and FX. But higher programming costs for the regional sports networks and marketing spending for "Dirt" on FX weighed on the bottom line.