News Corp. posted 36 percent gains in its fiscal first-quarter earnings, as an improving advertising marketplace helped fuel another strong three months at its cable networks unit.
For the period ended Sept. 30, News Corp. collected $775 million in net income, or 30 cents a share, up from the year-ago results of $571 million, or 22 cents a share. Excluding a $90 million tax benefit, the company earned 27 cents a share, beating Wall Street expectations of 24 cents a share.
Consolidated revenue increased 3 percent to $7.43 billion.
Revenue at the cable networks group, which includes Fox News Channel, FX, National Geographic Channel and 19 regional sports networks, grew 17 percent in the quarter, to $1.87 billion, on a 16 percent improvement in ad sales revenue. Operating income grew 29 percent to $659 million.
While News Corp. always credits Fox News for driving growth in the network segment, for the first time in memory chief financial officer Dave DeVoe noted that FX did a good deal of heavy lifting in the quarter. Despite seeing some declines in prime time deliveries, FX closed out the quarter as a top 10 network, averaging 696,000 viewers 18-49 and 648,000 adults 25-54.
Among all ad-supported cable nets, Fox News finished the quarter ranked fourth in prime. FNC averaged 1.84 million total viewers, a decline of 19 percent from the year-ago average (2.26 million). Its closest competitor, MSNBC, averaged 693,000 total viewers, a decline of 13 percent, while CNN plummeted 46 percent in prime, with an average delivery of 513,000.
DeVoe and Chase Carey did not provide specific insight into the recent retransmission-consent battles with Cablevision and Dish Network, although the president and chief operating officer said the addition of a second revenue stream is designed to make broadcast a more viable business model.
“Retrans is critical to driving the Fox network’s financial performance,” Carey said. “We have deals in place with four of the largest distributors…and as we continue to close [these deals], we’ll continue to take the business to increased profitability.”
Carey added that a broadcaster wholly beholden to ad sales revenue would eventually be priced out of the sports market. “Over time, you wouldn’t find any of these [top-tier] sports on any broadcast networks if that were the case,” he said. “It’d be like being asked to fight with one arm tied behind your back.”
Fox Broadcasting’s first quarter results were down versus a year ago, as increased advertising revenue from its National Football League broadcasts could not make up for costs related to program cancellations and increased promotional/marketing expenses related to the launch of its summer and fall entertainment programming. Fox has canceled one new series, pulling the plug on Lone Star after two episodes.
“The new season was a bit of a disappointment,” Carey said. “We would have liked a Game 6 of the World Series, but the strength of the NFL and the ad sales market more than offsets the shortfall in prime.”
Revenue at the TV unit, which includes the broadcast net and its local affiliates, reached $851 million, up 11 percent from $765 million in the year-ago period. Ad revenue increased 22 percent.
Carey told investors that scatter continues to price “at double-digit increases to the upfront,” adding that while the macro economic environment remains uncertain, there has been no indication that those anxieties “are impacting the ad market.” Nonetheless, News Corp. remains cautious about the coming two quarters of business.