Earnings: Cable Helps Lift News Corp. Profits

Fox News Channel, FX boost ad sales in Q1

News Corp. reported today that its fiscal year first-quarter earnings tripled from a year ago, reflecting a one-time gain from the sale of its NDS holdings and a strong showing from its cable TV networks.

The media conglomerate posted net income of $2.23 billion, or 94 cents per share, up from $738 million, or 28 cents per share, in the year-ago period.

While a good deal of that growth came courtesy of a $1.38 billion lift in “other” income—a catch-all that includes gains made on the sale of its 49 percent investment in the NDS business—the cable business was particularly robust in Q1.

Operating income at the cable unit soared 23 percent to $953 million, thanks to heavy spending on Fox News Channel, FX and the Fox Cable RSNs. Spurred by an 8 percent increase in ad sales and a 16 percent improvement in affiliate fees, total cable revenue was up 16 percent to $2.45 billion.

A glance at the ratings suggests that Fox News was responsible for a good deal of the cable unit’s momentum. FNC finished the July 1-Sept. 30 quarter ranked fourth among all ad-supported cable nets, averaging 1.96 million total viewers in prime time, up 5 percent from last year.

While FNC slipped 12 percent in the core news demo, averaging a nightly draw of 388,000 adults 25-to-54, it easily topped rivals MSNBC (296,000, up 20 percent) and CNN (186,000, down 15 percent). Ratings are based on Nielsen’s live-plus-seven-day ratings data blended with two weeks of live-same-day numbers.

FX did its share of the heavy lifting, finishing sixth among all cable nets in the crucial 18-to-49 demo thanks to original series such as Sons of Anarchy, Anger Management, the off-net acquisition Two and a Half Men, college football and a film library that includes titles like Iron Man, Taken and Avatar.

Now in its fifth season on FX, Sons of Anarchy regularly beats even the broadcast competition in its Tuesday 10 p.m. time slot. The most recent installment (Oct. 30) of Kurt Sutter’s outlaw drama averaged 4.59 million viewers and a 2.5 in the dollar demo, thumping CBS’s new mobster strip Vegas, which drew a 1.7 rating opposite Sons.

Growth was much less florid at the Fox broadcasting unit, as competition from NBC’s coverage of the 2012 London Summer Olympics tore a ragged chunk out of the ad sales marketplace.

Total revenue at the TV unit was up 4 percent in the quarter to $959 million, thanks to strong retransmission consent growth and some $40 million in political ad spending. Fox ad sales were impacted by the Olympics and lower prime time ratings in general.

News Corp. chief operating officer Chase Carey told analysts that the broadcast and cable nets are likely to show improved growth in the current quarter, adding that scatter at Fox is coming in at “a modest premium versus the upfront.” Cable scatter rates are slightly higher, Carey said.

“I’m not saying that this quarter is rockin’ and rollin’; I’m just saying it’s a bit better than it was last quarter,” Carey said, before reiterating that scatter dollars are continuing to come in closer and closer to air-date.

As for Fox’s disappointing ratings thus far in the 2012-13 broadcast season, Carey acknowledged that the deliveries were below his expectations. Through the first six weeks of the campaign, Fox is averaging a 2.5 in the 18-to-49 demo, putting it in a tie for third place with ABC. A year ago at this time, Fox was leading the pack with a 3.6 rating.

With a six-week average delivery of 7.18 million viewers, Fox is down 30 percent in total reach.

“I think there is no question that you are seeing an ongoing change in how people are viewing this content,” Carey said. “We need to continue to work with Nielsen and others to figure out how to measure that [non-linear] viewership. … The business has changed.”