Fox Broadcasting parent News Corp. said today that its fiscal first-quarter earnings fell 30% as a drop in profit from its local television operations more than offset a boost in earnings from cable network programming. The company, factoring in the U.S. economic downturn’s effect on local advertising revenue, also cut its profit forecast for fiscal 2009.
For the quarter ended Sept. 30, operating income from News Corp.’s television group, which includes the network and TV stations, plunged 70% to $54 million as the division’s revenue dropped 15% to $974 million. Television advertising suffered from local advertising cutbacks as well as more competition from NBC’s August broadcast of the Summer Olympics, while year-earlier results were bolstered by eight television stations News Corp. sold in July.
The company said results at the Fox broadcast network were in line with the prior year as improved results from Major League Baseball’s All Star game and lower prime time programming and sports costs were offset by the absence of the Emmy Awards telecast on Fox a year ago.
News Corp. said operating profit for the year ending June 30, 2009, would fall as much as 15%, compared with the company’s August estimate of an increase of as much as 6%. That shift was largely a result of an advertising market for both TV stations and newspapers that News Corp. Chief Financial Officer David DeVoe said would continue to slump through mid-2009. Also on today’s analysts call, DeVoe said advertising reductions in the automotive, telecommunications and movie industries have especially reduced revenue at affiliate stations on the east and west coasts and in Texas.
“Our businesses across the board are being challenged by weakening ad markets,” said News Corp. Chairman Rupert Murdoch on the call. Murdoch later added that while “it’s a pretty grim picture for all local television stations across the country,” national advertising has been less affected, as scatter advertising rates are equal to upfront rates.
The broadcasting unit’s drop in income outweighed a 31% surge in operating profit from cable network programming. Fox News Channel’s advertising rates and affiliate fees rose after the network’s prime-time ratings beat its nearest competitor by about 60% while the Big Ten Network’s startup costs were reduced as more multichannel service operators agreed to carry the channel.
Overall, News Corp.’s net income was $515 million, or 20 cents a share, down from $732 million, or 23 cents, a year earlier, despite revenue rising 6.3% to $7.51 billion. In addition to TV broadcasting, News Corp.’s filmed entertainment and book publishing divisions suffered earnings setbacks.
The company’s filmed entertainment’s operating profit fell 31% to $251 million as revenue at the division dropped 20%. Theatrical releases such as “Meet Dave” and “The X-Files: I Want to Believe” failed to keep pace with year-earlier titles such as “The Simpsons Movie” and “Live Free or Die Hard.”
Additionally, home entertainment sales also fell from a year earlier on what News Corp. President Peter Chernin called “quite a big softening in the DVD business.”
CBS Corp. said last month that third-quarter operating income from its television operations dropped 15% while General Electric said last month that its NBC Universal unit’s earnings rose 10%, largely on more advertising for the Summer Olympics. ABC parent Walt Disney releases its fiscal fourth-quarter earnings Thursday.
(Editor: Baumann. Corrected 2 p.m. to remove reference to broadcast network in first paragraph and headline.)