News Corp suffered from the economic downturn as expected, with revenue dropping to $7.67 billion.
But what really hurt NewsCorp's quarter was $680 million in impairment and operating charges, mostly at MySpace's division, Fox Interactive Media.
These charges resulted in a fiscal fourth quarter net loss of $203 million. The company's operating income fell just short of analyst expectations.
If you exclude some charges, profit came in at 19 cents per share, a penny above analyst estimates. In fiscal 2010, the company says it expects to improve operating income by high single digits, saying that while July was "very good" the company expects a tough few months ahead.
The big news: CEO Rupert Murdoch plans to charge for all the company's news sites. On the earnings call he said "The digital revolution has opened many new models of distribution, but it has not made content free." Murdoch pointed to the Wall Street Journal's subscription service as proof that people will pay for content, saying "Quality journalism is not cheap, and an industry that gives away its content is simply cannibalizing its ability to produce good reporting."
And we're not just talking about newspapers, Murdoch also addressed Time Warner's plan for "TV Everywhere," offering cable content to subscribers online, in order to keep subscribers paying. Though he didn't embrace this specific plan, he did say they're looking for new ways to monetize content online, experimenting with new hardware and software. New President and Chief Operating Officer Chase Carey even said that the ad-supported model doesn't work, even on the broadcasting side, raising the idea of demanding that cable distributors pay to carry the Fox network.
Murdoch was sanguine about the economy, saying that "the worst may be behind us" and that ad pricing for the fall TV season is "doing well."
Of course he acknowledged that this was a "most difficult year," the toughest in the company's history, and there's no clear signs of a fast recovery.
Like the other media moguls he emphasized the company's cost cutting and the fact that the will well positioned to grow when the economy does recover.
The economic downturn took its toll on the company's advertising revenues. The TV division's operating income dropped to $95 million from $279 million in the year-ago quarter. Operating income in the Newspaper division plummeted to $96 million from $263 million in the year-ago quarter. Cable network programming continues to be a bright spot at News Corp as it was this quarter at rivals Time Warner and Viacom, operating income in that division jumped to $434 million from $313 million in the year-ago quarter..
And about that $6.5 billion in cash on News Corp's balance sheet.... Murdoch says they'd rather use that money to build rather than buy assets. And the way he put it implies questions about the wisdom of buying MySpace. He said on the call "we always find we get the best returns by building rather than buying." Those massive impairment charges on Fox Interactive Media certainly bear out Murdoch's theory.
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