News Corp. (NYSE:NWS-A) continued the big media success of the last quarter, as the company reported quarterly profits that were three times what they were in their third fiscal quarter ending in December 2007. All the major media companies exceeded expectations in the last quarter, surprising analysts and shareholders.
A large part of News Corp.'s success was due to the swapping of the shares the company held in DirecTV for the shares Liberty Media (Nasdaq:LCAPA) held in News Corp. It brought an increase of $1.7 billion to the company for the quarter.
Revenue came in at $8.75 billion - a rise of 16 percent - which was more than the $8.66 billion looked for by analysts.
Earnings for the quarter ended at $2.7 billion, or 91 cents a share. That was in comparison to the $871 million, or 27 cetns a share generated in the third quarter. Even taking away the one-off share swap with Liberty Media, you still had significant growth.
Film
The film unit had a significant drop in operating income of 36 percent, as overall revenue declined to $1.62 billion from $1.8 billion. Operating income fell from $410 million to $261 million in comparison to last year during the same quarter.
Much of that is attributed to affiliate income falling by 57 percent to $109 million, as the loss of income from DirecTV, as well as British Sky Broadcasting Group PLC accounted for the drop.
Television
News Corp. was similar to their television competitors in earnings growth, as writers' strike lowered costs, while advertising rates increased significantly to drive earnings to $419 million, a 53 percent increase.
Overall television revenue grew from $1.57 billion to $1.8 billion. The NFL postseason play was a major driver of revenue growth.
Cable Networks
The cable divison had a healthy quarter, as profits rose to $330 millon, a 17 percent increase. Revenue surged by 27 percent to $1.27 billion.
Even with the costs related to starting up the Big Ten Network and the Fox Business Network, the strength of fees paid by satellite and cable operators, as well as strong advertising rates, overcame the costs of starting the new networks.
Fox Interactive/MySpace
The digital unit, which includes MySpace and Fox Interactive was able to cut losses to $7 million, from last year's $104 million. Sales for the division grew by 17 percent to end the quarter at $725 million.
According to the company, they're looking at expanding into India and South Korea with MySpace, which will increase costs in the unit by about 46 percent for this year. They will also be adding music downloads and other more promotions across the social network.
The agreement with Google (Nasdaq:GOOG) to sell advertising across the digital properties was the major generator of revenue in the division.
News Corp. president Peter Chernin confirmed Fox Interactive Media would miss their revenue goal of $1 billion for fiscal 2008, but it wouldn't be by much. Considering the tough economic climate, he didn't seem too upset about the "slight" miss.
Chernin added that contrary to rumors, the company isn't in talks with Time Warner (NYSE:TWX) about AOL, Microsoft (Nasdaq:MSFT) or Yahoo (Nasdaq:YHOO) concerning MySpace strategies to work together. He said the company is comfortable with keeping it as a standalone unit within FIM.
"Without a doubt we have challenges and in some cases, things have gone slower than expected," Chernin said. "We are committed to growing this business."
Newspapers
Earnings for information services and newspapers also enjoyed a strong performance in the quarter, as it grew by 38 percent to $216 million, based on a 55 percent surge in revenue, which ended the quarter at $1.74 billion.
The strong Australian economy helped fuel the gains, as advertising was very strong, while the acquisition of Dow Jones & Co., which included the prize of The Wall Street Journal, was another big part of the solid numbers.
Newsday
Murdoch said on the conference call he is confident News Corp. will close the deal on Newsday within the next seven days, even though there is one higher bid from Cablevision (CVC), as well as one that is the same from Mort Zuckerman, who owns the New York Daily News.
He said the business would add $100 million in cash flow to News Corp. annually. Murdoch as said he won't increase the bid for the company, and News Corp. will remain disciplined in its pursuit of Newsday. He also said combing operations with the New York Post would decrease operating costs significantly.
Murdoch said he doesn't perceive there being any regulatory problems in acquiring the Long Island newspaper.
Guidance
Not including the acquisition of Dow Jones & Co., Chief Financial Officer Dave DeVoe said he holds to the operating income projection of growing in the mid-teens for the fiscal 2008 totals over the 2007 results.
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