News Corp. (NWS-A) was running on all cylinders in its first quarter of its fiscal year, as it performed beyond expectations, and had success across most of its properties; although net income dropped to $732 million from $843 million last year. Most of that's because of a sale of investments, which boosted the profits at the time.
Sales were also a nice surprise, as they exceeded most analysts' projections, coming in at $7.07 for the quarter. Most thought overall sales would come in at about $6.5 billion.
Leading the way was the film studio division, which grew profits by 51 percent, much of that coming from the successful release of "The Simpsons" movie. Revenue was also solid, ending up growing by 30 percent for the quarter within the unit. Also performing good for the division was "Live Free or Die Hard."
Other strong performers for the division was DVD sales from last years' hits "Night at the Museum" and "Eragon."
The cable network unit was also a great performer for the quarter, increasing revenue by 24 percent and net income grew by 16 percent. When you consider the costs of launching two new networks during the quarter (Fox Business Network and The Big Ten Network), this is a notable achievement.
The film studio division and cable network unit combined for 38 percent of sales for the media company and 62 percent of operating profits.
Another division holding a lot of promise for the future is Fox Interactive Media, which generated about $200 million in revenue for the quarter, an increase of 80 percent over the revenue from the same quarter last year. Murdoch added in his conference call that the unit was also profitable.
Murdoch especially addressed concerns about competition from Facebook for MySpace. He mentioned how much larger MySpace is than Facebook in traffic, as well as the recent strategy to hypertarget users with relevant ads should lead to much stronger ad revenue from the social networking site in the future.
The ad targeting started with 10 categories, and is now has 50 advertisers, including Toyota Motor Corp. and Microsoft (MSFT). By the end of the year the company says the categories should increase to over 1,000, as MySpace attempts to capture the various niche interests of its users. Sales are also expected to grow exponentially globally, as they increase to about half of all sales for the Internet site.
The new partnership with Google (GOOG) in its OpenSocial initiative should also help boost the site as well, along with opening up the web site to programmers which will enable them to add unique features to the site; something very attractive and popular to users.
In some of its older businesses like newspapers, revenue did increase by 19 percent, but profits fell by 25 percent, revealing the commoditization of the industry and the growing trend of users getting their content on the Internet. It's possible over the next couple years that this could surge forward based on their acquisition of Dow Jones (DJ). But even their print properties have struggled recently. Earnings came in at $93 million for the newspaper unit.
Magazine and inserts profits also didn't do much, with profits staying about the same at $79 million.
HarperCollins profits also fell significantly over the quarter, falling 35 percent to $36 million.
The broadcast television division wasn't too impressive this quarter either, with sales up only about 4 percent, reaching $1.15 billion. Profits declined by 4.7 percent to end at $183 million.
Another added, unexpected bonus to the company, depending on how long it lasts, is the writers' strike. Fox is probably in the strongest position to last out the strike, not only because of the way they schedule American Idol and "24" to start after the new year, but also because of their cartoon strategy as well. Those things and the upcoming Super Bowl could cause them to surge in growth even more during this period of time.
The upcoming two quarters for the company could be extremely strong based on that alone. That and the savings of not having to create new pilot episodes will strengthen their results also.
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