Media Money

The suffering global ad market took its toll on News Corp's fiscal third quarter earnings, reported after the bell Wednesday.

Matt Dunham / AP Rupert Murdoch

Stripping out all the one time items, News Corp

NWS loading...

Quote  |  Chart  |  News  |  Profile

[NWS  Loading...      ()   ] disappointed analyst estimates, reporting a 47 percent drop in operating income to $755 million and a 16 percent decline in revenue to $7.4 billion. Including a $1.2 billion gain for selling an ownership stake earnings were $2.7 billion, pretty much in line with the year-earlier number that also included one time items, namely the swap of the company's stake in DirecTV to Liberty.

Advertising is suffering and the newspaper business is in the worst possible position. The newspaper division's operating income was down 97 percent. Dow Jones' flagship Wall Street Journal showed a 33 percent decline in ad revenue for the quarter. And the company's newspapers around the globe are suffering from a decline in classified and other ad revenues.

The other area that was really trounced by the advertising recession is the company's owned and operated local stations. Fox TV Stations' operating income decreased 72 percent, bringing TV segment's operating income down some 99 percent. It's pretty shocking that the division that includes American Idol and the top rated entertainment network for the key 18-49 year-old demographic made only $4 million in operating income.

• News Corp Earnings Worsen as Ads Decline

The cable networks were, as expected, the company's main area of strength, with the Fox News Channel nearly doubling its operating income in the past year. Murdoch insistently pointed out that the cable network division includes far more than just its US brand names, saying the company has dozens of smaller channels that are at earlier stages of growth.

CEO Rupert Murdoch is newly optimistic that the economy is in an upswing, "It is increasingly clear that the worst is over," he said on the earnings call. "There are emerging signs in some of our businesses that the days of precipitous decline are done and revenues are beginning to look healthier."

But at the same time, when asked if the company will repurchase shares with its $6 billion war chest of cash, he said he's waiting, saying "it's early days yet." What exactly will he do with the cash? For now, not much. Murdoch dismissed the idea of a major acquisition like AOL, saying that the company's best assets have grown organically.

Murdoch is optimistic the economy will rebound and bring suffering newspapers along with it, but the question remains: How? The answer seems to be a digital subscription model, similar to what's working at the Wall Street Journal.

It sounds like digital e-readers like the Kindle will be key to Murdoch's new 'pay-for-content' model but he was cautious not to endorse Amazon's Kindle in particular. He also clarified the rumors that News Corp is developing its own gadget, saying that while it may invest in other companies' experiments and it wants to benefit from revenues through such a device, the company doesn't make gadgets. Murdoch was as vague as possible when addressing the question of how long it'll take for digital dollars to replace lost print revenues. He finally admitted it could take more than just a few years. Many fear digital revenues will never make up for that loss.

• Get After-Hour Quotes for NewsCorp
• Slideshow: Biggest Types of Personal Debt in the United States

Peter Chernin received quite the farewell on the earnings call. I've never heard such gushing from analysts or between executives, about anything! Murdoch gushed about Chernin and what an asset he's been to the company. Chernin gushed about the company and what a leader it is. Analysts pre-empted their questions with adoring comments about how much they've enjoyed working with Chernin over his many years at the company.

All this flattery and reminiscing speaks to just how important Chernin is to News Corp and how much his absence will be felt. Yes, Chernin will continue to contribute to the company through his production deal at the studio. And yes, Murdoch was already involved in many of the operations that will now report directly to him. But there's no doubt about it -- it's a major loss at a time when News Corp needs consistent leadership.

Questions?  Comments? 

Tools:

PrintEmail

Next Post

Previous PostBack to Main Page

• 

POPULAR MEDIA MONEY POSTS

• 

• Can YouTube Revolutionize Citizen Journalism? 

• 

• Modern Warfare 2's Record-Breaking Launch 

• 

• Fox's Murdoch Lashes Out At Google 

COMMENTS

More Comments

 

« First | « Previous

Next » | Last »

Thank you for joining our discussion. Your comment has been posted.

ADD COMMENTS

Please Sign In or Register to participate.

In order to add a comment you must click here and accept our terms and conditions.

Edit Screen Name

Please sign-in/optin or register to be able to submit comments.

Remaining characters

CNBC welcomes your contribution. Please respect our community and the integrity of its participants. CNBC reserves the right to moderate and approve your comment.

PREVIEW COMMENT

Your comments have not been posted yet.
Please review your submission to make sure you are comfortable with your entry.

Your Comments: