Theatrical, DVD lifts News Corp. operating income 23%

By Ned Randolph -- Video Business, 11/7/2007

Operating income for the quarter, reported as the first quarter of fiscal 2008, was $1.05 billion, and revenue increased 19% to $7.1 billion.

However, net income fell to $732 million or 23¢ per share in the quarter, compared to $843 million or 27¢ per share a year ago. The company said the drop was mainly due to the one-time sale of assets in its international Sky divisions.

News Corp.'s Film Entertainment Division operating income grew 51% over the prior year to $362 million, driven by the theatrical success of The Simpsons Movie, which has grossed more than $524 million in worldwide box office, and Live Free or Die Hard, which surpassed $375 million in worldwide box office sales. Other titles, including Eragon, Night at the Museum and the pay-TV availability of Little Miss Sunshine also performed strongly, the company said.

Fox Television earned $183 million in the quarter, a decline of $9 million from last year because of lower advertising and political spending. Its Television Cable Network Programming earned $289 million, up from $249 million last year; Direct Broadcast Satellite Television earned $48 million, up from a loss of $13 million last year; magazines grew by $1 million to $79 million; newspapers and book publishing fell.

Chairman and CEO Rupert Murdoch said the company achieved growth while investing in future profit generators.

"The 19% revenue growth and 23% operating income growth in the quarter was achieved despite spending to expand our cable portfolio both domestically and internationally [and] despite continued investment in our Internet offerings," Murdoch said.

News Corp. will continue to invest and expand its online presence and ad revenue with MySpace and other Internet properties to drive future growth, he said.

"The financial momentum at these businesses, along with the success of our theatrical slate in the quarter, has given us a great start to fiscal 2008, and we look forward to building upon the record results we delivered during fiscal 2007," Murdoch said.

Executives brushed off any threat that the WGA writer's strike would have on the company's performance, mainly due to Fox's slate of upcoming reality shows, which require little writing, and animation programs that are already in the can.

"My guess during the fiscal 2008, a strike is probably a positive for the company," Peter Chernin, president and chief operating officer, told analysts Wednesday. "We save more money in terms of deals and story costs and the lack of making pilots than we lose in potential advertising."

"We believe it will cause a significant growth in market share on Fox Broadcasting Networks. We've got American Idol coming, wider array of reality and most of our animated programs are a year ahead," he said. "A strike eight months or longer, would begin to affect all parts of the business. I sure hope it doesn't go that long."

The company refused to offer new guidance for the upcoming fiscal year.

"We'll have a look at the guidance again at the end of the year," Murdoch said. "Right now, all the economic indicators are that next year could be rough. We're not going to give guidance until we get closer to it."