News Corp. Posts Loss on Publishing Write-Down

Fox Cable unit helps offset restructuring charges

News Corp. on Wednesday reported a significant fourth-quarter loss, as restructuring charges and costs related to the ongoing investigation of the U.K. phone-hacking scandal took a bite out of the company’s operating income.

In the three-month period that ended on June 30, News Corp. posted a net loss of $1.55 billion, or -64 cents a share, compared to a net profit of $683 million, or 26 cents a share, in the year-ago period.

The results included $2.9 billion pre-tax impairment and restructuring charge, primarily related to the company’s publishing businesses.

News Corp. took a $57 million charge for costs associated with the investigation into the phone-hacking and bribery scandals at its now-defunct London tabloid The News of the World. For the entire fiscal year, the company took a $224 million hit.

As is generally the case, the Fox Cable unit shone brightest. A strong showing at FX, Fox News Channel and National Geographic Channels helped generate $792 million in operating income, up 26 percent from $631 million in the prior-year period. Affiliate revenue at the cable unit grew 16 percent, while ad sales revenue was up 5 percent.

For the period spanning July 1, 2011 to June 30, 2012, the cable unit generated $3.3 billion in operating income, up $535 million, or 19 percent. Affiliate revenue for the fiscal year improved 12 percent, while ad sales were up 9 percent.

The Fox Broadcasting unit reported quarterly segment operating income of $213 million, a decline of 9 percent versus $233 million in Q4 2011. Fox was particularly hampered by disappointing ratings at its American Idol flagship, which negatively impacted the broadcaster’s ad sales performance.

Per Nielsen live-plus-same-day data, season 11 of Idol averaged 17.3 million total viewers and a 5.1 in the all-important adults 18-to-49 demo. And while those deliveries made Idol the No. 2 TV series, trailing only NBC’s Sunday Night Football in the dollar demo (8.0), last season was down 25 percent in total viewers and 32 percent among the 18-to-49 set.

Idol’s underperformance spurred Fox to clean house, pushing aside two-season vets Steven Tyler and Jennifer Lopez in exchange for Mariah Carey. The singer will earn a reported $17 million for her first season as an Idol judge.

Fox closed out the 2011-12 campaign ranked No. 1 among all broadcast networks. That said, its average 3.2 demo rating in prime marked a 9 percent decline from the previous year. With a median age of 46 years, Fox draws the youngest audience of the Big Four.

The network boasted two of the season’s most successful series launches, as The X Factor averaged 12.6 million viewers and a 4.3 in the demo, while New Girl averaged 8.22 million viewers and a 4.2 rating, per live-plus-seven-day ratings.

News Corp. president, chief operating officer and deputy chairman Chase Carey told investors that Fox is presently booking scatter inventory at a low-double digit percentage premium versus its upfront rates. He added that the cable market is perhaps a bit more robust than broadcast.

“It’s a reasonably good market; not great, not off the charts,” Carey said, adding that the ad market is somewhat reassuring, given anxieties over European financial destabilization and the general election.

When the final gun sounded in the 2012-13 upfront, Fox booked an estimated $2.2 billion in advance commitments, on 8 percent CPM increases. Dollar volume was up 11 percent versus the previous bazaar.

Carey said the Fox ad sales team “achieved what we set out to achieve,” adding that the network booked 80 percent of its available prime time inventory in the upfront.

All told, TV accounts for nearly three-quarters (74 percent, to be exact) of News Corp.’s overall operating income ($4 billion of $5.38 billion). 

Meanwhile, the company confirmed that it is “on course” with the planned separation of its publishing and entertainment holdings into two distinct, publicly-traded companies. Carey said News Corp. plans to file the initial regulatory papers “around the end of the calendar year, with operating details to follow.”

While James Murdoch filled in for his father, chairman Rupert Murdoch, the embattled deputy COO of News Corp. did not speak for much of the call. As chairman of Sky Italia, the younger Murdoch did answer an analyst’s query related to the overseas pay-TV service.