News Corp Earnings, Revenue Miss Expectations

Unlike many of the other media giants this quarter, News Corp did not surprise to the upside. Its earnings and revenue were lower than last year and fell short of Wall Street expectations.

News Corp.'s headquarters in New York.
Mark Lennihan
News Corp.'s headquarters in New York.

In its fiscal third quarter the company reported adjusted earnings of 26 per share, a penny short of expectations and down from 29 cents a year ago. Revenue also fell short, down to $8.256 billion, from $8.785, and about two hundred thousand dollars short of expectations.

Interestingly, CEO Rupert Murdoch did not participate in the conference call — leaving that leadership role to COO Chase Carey. (For a look at Murdoch's succession plan, check out my blog)

On the earnings call Carey stressed that the company's strength is in its cable networks and TV business. Cable networks generate over 60 percent of the company's operating income. Advertising at the domestic cable channels grew 14 percent, led by the FX Network, where ratings grew 20 percent. Higher viewers overseas, especially at STAR India also helped the company — international cable channels' ad revenue grew 18 percent.

Carey presented an optimistic outlook, saying the ad market looks strong and the company's confident it'll achieve growth in the next several quarters. He pointed to the dual revenue strength at the broadcast and cable networks. He also praised the value of Fox News, which should translate into higher compensation, with new affiliate agreements in the works. He credited Netflix for creating incremental revenue from Netflix Content and stressed that the company is protecting its core revenue. As to the pending BSkyB deal, Carey simply said "we'd like to conclude a deal."

Results at the studio are way down — revenue fell to $1.55 billion from $2.44 billion — on tough comparison to last year's quarter, which included Avatar. But Carey stressed that this is the last quarter the company will face these tough comparisons.

And even as CEO Rupert Murdoch pushes forward towards selling MySpace, it continues to drag on the company. The struggling social network is part of the 'Other' division, which earned $217 million in revenue and lost $165 million in operating income. This loss was "primarily due to increased losses at MySpace, stemming largely from lower advertising and search revenues."

Questions? Comments?