News Corporation (NYSE: NWS, NWSA; ASX: NWS, NWSLV) today reported third
quarter net income of $2.7 billion ($0.91 per share) as compared with
$871 million ($0.27 per share on a diluted combined basis1)
reported in the third quarter a year ago. The year-on-year growth
reflects an increase in Other, net of $1.6 billion primarily reflecting
a $1.7 billion tax-free gain on the asset and stock exchange with
Liberty Media Corporation. Additionally, increases in consolidated
operating income partially offset by lower equity earnings contributed
to the improved results.
Consolidated operating income for the third quarter of $1.4 billion was
up 16% versus the $1.2 billion reported a year ago, primarily driven by
double-digit percentage increases at the Television, Cable Network
Programming, Newspapers and Information Services and Other segments.
Third quarter net earnings from affiliates were $109 million versus $255
million reported in the same period a year ago. The $146 million
decrease was primarily driven by lower contributions from BSkyB due to
the write-down of its ITV investment and by a decrease in contributions
from The DIRECTV Group as a result of the Company’s
exchange with Liberty Media Corporation in February 2008.
Commenting on the results, Chairman and Chief Executive Officer Rupert
Murdoch said:
“Our 16% revenue and operating income growth
this past quarter is a great illustration of how the diversity of our
asset base is translating into sustained financial success. We delivered
growth from advertising based businesses, such as our television
stations and broadcast network, and we delivered growth from
subscription based businesses, such as our domestic cable channels. We
delivered growth from established businesses, such as our newspapers and
we delivered growth from our developing assets, such as our
international cable channels and Fox Interactive Media. Our ability to
generate returns from a multitude of sources puts us in a great position
to maintain our financial momentum even in times of economic uncertainty.”
REVIEW OF OPERATING RESULTS
FILMED ENTERTAINMENT
The Filmed Entertainment segment reported third quarter operating income
of $261 million as compared with the record third quarter results of
$410 million reported in the same period a year ago. The current year
results were led primarily by a string of successful theatrical
releases, as well as by strong contributions from film and television
home entertainment releases.
Third quarter film results were driven by the continued theatrical
success of Alvin and the Chipmunks, which has delivered over $350
million in worldwide box office to date, and Academy Award winner Juno,
which has now generated over $225 million in worldwide box office.
Additionally, the current quarter also included continued home
entertainment contributions from theatrical hits The Simpsons Movie,
Live Free or Die Hard and Fantastic Four: Rise of the Silver
Surfer, as well as pay-TV contributions from Night at the Museum and
Eragon. The third quarter also reflected the initial releasing costs
and results for several new successful theatrical releases, including Horton
Hears a Who! and Jumper, with more than $275 million and $219
million, respectively, in worldwide box office to date.
Twentieth Century Fox Television reported slightly lower contributions
versus the third quarter a year ago, primarily reflecting the timing and
delivery of new episodes partially offset by higher contributions from
home entertainment, primarily from Family Guy.
TELEVISION
The Television segment reported third quarter operating income of $419
million, an increase of $146 million versus the same period a year ago.
The 53% growth was led by higher contributions from the FOX Broadcasting
Company, Fox Television Stations and STAR and improved results at
MyNetworkTV.
At the FOX Broadcasting Company, third quarter operating income nearly
doubled versus a year ago primarily reflecting lower prime-time
programming costs and advertising revenue growth. The increased
advertising revenues were driven by higher pricing for sports and
prime-time programming, as well as by strong ratings for the National
Football League post-season. These results were partially offset by
costs associated with the broadcast of Super Bowl XLII.
Fox Television Stations’ third quarter
operating income increased 12% from the same period a year ago as the
broadcast of Super Bowl XLII on FOX drove advertising revenue growth and
contributed to record market share during the quarter. Additionally,
political spending for the presidential primaries contributed to the
year-on-year growth.
STAR’s third quarter operating income
increased versus the same period a year ago as 15% revenue growth was
driven by higher subscription revenues, primarily from India. The
revenue growth was partially offset by increased programming costs for
new program launches.
CABLE NETWORK PROGRAMMING
Cable Network Programming reported third quarter operating income of
$330 million, a 17% increase over the third quarter a year ago,
reflecting increased contributions from Fox News Channel, the Regional
Sports Networks, FX and the Fox International Channels, partially offset
by launch costs associated with the Fox Business Network and the Big Ten
Network. Quarterly results also reflect the inclusion of National
Geographic Channels which were not consolidated in the same period a
year ago.
Fox News Channel (FNC) reported operating income growth of 11% compared
to the third quarter a year ago as affiliate revenues increased from
higher rates and additional subscribers and advertising revenues
expanded primarily from increased pricing. Partially offsetting the
revenue growth was higher programming costs from coverage of the
presidential primaries. For the quarter, FNC’s
viewership was more than 40% greater than its nearest competitor in
primetime and on a 24-hour basis, reflecting FNC broadcasting the top
five shows in cable news.
At our other cable channels, operating income increased 20% as compared
with the third quarter a year ago as increased contributions from the
Regional Sports Networks (RSNs), FX and Fox International Channels were
partially offset by launch costs for the Fox Business Network and the
Big Ten Network. Higher affiliate revenues from increased rates and
additional subscribers contributed to the growth at the RSNs and FX,
which also increased its advertising revenues versus the same period a
year ago. The increased contributions from the Fox International
Channels were driven by continued advertising and affiliate growth in
Latin America and Europe.
DIRECT BROADCAST SATELLITE TELEVISION
SKY Italia reported third quarter operating income of $97 million, an
improvement of 7% versus a year ago, on local currency revenue growth of
6%. This improvement reflects subscriber additions, with more than
342,000 net subscribers added over the past 12 months, bringing SKY
Italia’s subscriber base to 4.5 million at
quarter end, as well as the impact from foreign currency fluctuations.
The subscriber revenue growth was partially offset by reduced mobile
revenues, increased programming spending associated primarily with the
larger subscriber base and the launch of new channels, as well as
planned higher promotional costs for new subscriber offerings.
MAGAZINES AND INSERTS
The Magazines and Inserts segment reported third quarter operating
income of $93 million, a decrease of 9% versus the $102 million reported
in the quarter a year ago. The decline was primarily driven by lower
rates and a decline in page volume for free-standing inserts.
NEWSPAPERS AND INFORMATION SERVICES
The Newspapers and Information Services segment, previously referred to
as Newspapers, reported third quarter operating income of $216 million,
an increase of $60 million versus the same period a year ago. The 38%
increase primarily reflects advertising revenue growth in Australia,
reduced transition costs to our new U.K. printing presses and the
inclusion of the results of Dow Jones & Company, which was acquired in
December 2007.
The U.K. newspaper group reported an increase in operating income in
local currency terms as compared with the third quarter a year ago
primarily as a result of reduced depreciation on the printing presses
that were decommissioned during the quarter as the Company transitioned
to new color printing operations. During the quarter, advertising and
circulation revenues were in-line with the prior year.
The Australian newspaper group reported third quarter operating income
growth versus a year ago in local currency terms primarily from
increased display advertising revenues. The increase in display
advertising was led by strength in the retail and real estate sectors.
BOOK PUBLISHING
HarperCollins reported third quarter operating income of $29 million,
in-line with the same period a year ago. The current quarter included
strong sales of Naughty Neighbor by Janet Evanovich, Stop
Whining, Start Living by Dr. Laura Schlessinger, Lady Killer by
Lisa Scottoline, Fancy Nancy, Bonjour Butterfly by Jane O’Connor
and The Chronicles of Narnia: Prince Caspian by C.S. Lewis.
During the quarter, HarperCollins had 54 books on The New York Times
bestseller list, including 4 titles that reached the #1 spot.
OTHER
The Other segment reported an operating loss of $7 million, a $97
million improvement versus the third quarter a year ago, primarily from
the absence of losses associated with the 2007 Cricket World Cup which
were included in the third quarter in the prior year. Current quarter
results also include higher contributions from Fox Interactive Media and
NDS, partially offset by startup losses at our Eastern European
broadcasting initiatives. At Fox Interactive Media strong revenue growth
from increased search and advertising revenues was partially offset by
increased costs associated with domestic and international expansion,
new features and costs associated with the startup of new ventures.
OTHER ITEMS
In February 2008, News Corporation completed its previously announced
share exchange agreement with Liberty Media Corporation. Under the terms
of the agreement, approved by the Company’s
Class B common stockholders on April 3, 2007, Liberty exchanged its
entire approximately 16 percent interest in the Company’s
common stock (325 million Class A and 188 million Class B shares) for
the Company’s entire stake in The DIRECTV
Group, three Regional Sports Networks and approximately $625 million in
cash.
In January 2008, News Corporation acquired a 14.58 percent stake in
Premiere AG, the leading German pay-TV operator for 287 million Euro in
cash. In February 2008, the Company increased its total stake to nearly
20 percent and following the quarter it purchased additional shares,
raising its total stake to approximately 23 percent.
Foreign Exchange Rates
Average foreign exchange rates used in the year-to-date results are as
follows:
