News Corp. Q2 Up as a result of Improved US Broadcasting & Cable Sectors

2 Feb

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News Corp. Q2 Up as a result of Improved US Broadcasting & Cable Sectors

News Corporation reported second quarter total segment operating income(1) of $1.29 billion compared with $712 million of total segment operating income reported a year ago. The prior year’s second quarter results included a $500 million litigation settlement charge at the Company’s integrated marketing services business, which is part of the Publishing segment. Excluding this charge, second quarter segment operating profit increased 6% over the prior year. This growth reflects significant profit increases at the Cable Network Programming and Television segments, partially offset by decreases at the Filmed Entertainment and Other segments.

“I am confident that the significant positive momentum from these businesses will not only continue to drive News Corporation’s growth for the remainder of the fiscal year, but also strengthen the Company for growth in the years to come.”

Commenting on the results, Chairman and Chief Executive Officer Rupert Murdoch said: “News Corporation’s second quarter results demonstrate the mounting vigor of our global channels business. In the U.S. market, our cable channels are still expanding and adding subscribers, while increasing their revenues and profits at a double-digit pace on the strength of affiliate fee increases and buoyant advertising markets. I am also pleased with the continued recovery of our U.S. broadcasting business, including our local TV stations and the Fox Broadcasting Company, which posted its best quarterly profit in two and a half years.

“Momentum at our international businesses is equally brisk, with international channel revenues in the quarter up 20% on particular strength in Latin America and our STAR channels in India. And at SKY Italia, operating results indicate that the business is back on track, achieving its highest quarterly net subscriber additions in the last two years.

“I am confident that the significant positive momentum from these businesses will not only continue to drive News Corporation’s growth for the remainder of the fiscal year, but also strengthen the Company for growth in the years to come.”

Cable Network Programming reported second quarter segment operating income of $735 million, a 22% or $131 million increase over the second quarter a year ago, driven by a 12% increase in revenue despite the adverse impact of a distribution contract renewal dispute at the domestic cable channels. Operating income contributions from the domestic channels increased 16%, and the Company’s international cable channels grew earnings 37%.

Advertising revenue at the domestic cable channels grew 12% in the second quarter of fiscal 2011 over the prior year period due to volume and pricing strength. The international cable channels’ advertising revenue grew 27% over the prior year, primarily due to improving ad markets and stronger viewership trends, led by our STAR channels. Affiliate revenue growth of 10% at the domestic cable channels and 17% at the international cable channels for the second quarter primarily reflect higher rates and subscribers, with international increases led by Fox International Channels growth in Latin America and Asia.

Filmed Entertainment reported second quarter segment operating income of $189 million, compared with $324 million reported in the same period a year ago. The decline primarily reflects the difficult comparison to the prior year’s strong results, which were led by the worldwide home entertainment success of Ice Age: Dawn of the Dinosaurs. Current year second quarter film results include the successful theatrical performances of Black Swan (winner of the Golden Globe for Best Actress and nominated for five Academy Awards including Best Picture) and The Chronicles of Narnia: The Voyage of the Dawn Treader (with more than $370 million of worldwide box office receipts to date), as well as launch costs for the worldwide releases of Unstoppable and Gulliver’s Travels. This quarter also includes the worldwide home entertainment performance of Predators and the continued worldwide home entertainment and pay-TV performance of Avatar.

Television reported second quarter segment operating income of $151 million, an increase of $122 million versus the same period a year ago, led by a $121 million increase in revenues at Fox Television Stations (FTS) and FOX Broadcasting Company.

FTS’ second quarter contributions increased more than 50% from the same period a year ago, driven by a 20% rise in revenue. This growth reflects a stronger overall local advertising market, particularly in the automotive and financial sectors, as well as increased levels of political advertising.

FOX Broadcasting Company’s second quarter results improved 24%, as increased advertising revenue from National Football League games and general entertainment programming more than offset lower advertising revenue from this year’s Major League Baseball post season due to lower ratings and one less game than the prior year.

SKY Italia reported a second quarter segment operating loss of $12 million, which is an improvement of $18 million versus the $30 million operating loss reported a year ago. Local currency revenue increased slightly, driven by higher advertising and subscription revenues compared with the prior year quarter. Overall costs decreased as lower programming costs were partially offset by increased subscriber acquisition costs due to higher subscriber activations. SKY Italia’s 4.87 million quarter-end subscriber base reflects the net addition of approximately 71,000 subscribers during the quarter, representing the highest level of net additions in two years.

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How are SCRI Broadcast / Pro Video (B/PVM) Reports different than other research reports in the industry?

SCRI is an independent broadcast pro video research firm (established in 1984) and is not affiliated with any potentially vested interest trade association such as the IABM or NAB, as are some other research providers in this industry.

Nor does SCRI rely on manufacturer provided information as do some research firms in this industry, thereby eliminating any potential bias from any single manufacturer, or bias from not including all manufacturers.

SCRI takes a micro product & vertical market specific view of the broadcast & pro video market space rather than more broad based approach as do some other research reports in the industry.

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