MySpace losses lead way down for News Corp. [Updated]
News Corp. had a brutal quarter ending June 30, as the company swung from $1.1 billion in net income a year earlier to a net loss of $203 million.
The biggest contributor was the conglomerate's Fox Interactive Media division, whose biggest asset is the troubled MySpace. Admitting that the once red-hot social networking site is no longer worth what it used to be, News Corp. took a $403-million impairment charge in the quarter, which it attributed primarily to Fox Interactive Media. It also had $228 million in costs related to restructuring, aka layoffs, for which it again placed most of the blame on MySpace.
Though News Corp. doesn't break down MySpace results specifically, it's the biggest contributor to the conglomerate's "other" category, which saw its adjusting operating loss grow to $137 million from $59 million last year.
Revenue for the conglomerate was $7.67 billion in the quarter, down 11% from last year.
The company's best-performing division this year continues to be cable, with Fox News leading the way thanks mainly to higher affiliate fees from the cable and satellite systems that carry it. Operating income at Fox News Channel alone was up 50% during the quarter, News Corp. said. For the full cable unit, which also includes FX, the Big Ten network, and international channels, operating income was up 39% from last year to $434 million.
The 20th Century Fox film and television studio saw operating income decline 8% to $203 million, primarily due to lower DVD sales for older television shows. News Corp. also had to cover initial marketing costs for several strongly performing summer movies, including "X-Men Origins: Wolverine," "Night at the Museum: Battle of the Smithsonian," and "Ice Age: Dawn of the Dinosaurs," all of which will generate most of their revenue in the current quarter and the next one.
Network television continues to be a tough business for News Corp., as the division's operating income fell 66% to $95 million. Local television fared worst, as the conglomerate's stations saw operating income fall 67%. The Fox network also dropped by an unspecified amount, however, as advertising revenue declined and programming costs increased.
Print media wasn't too pretty either, however. News Corp.'s newspapers division reported a 63% drop in adjusted operating income to $96 million. That reflected significantly lower advertising revenue in the U.K., Australia, and from the U.S.-based Dow Jones group, which includes the Wall Street Journal.
For News Corp.'s full fiscal year, which also ended June 30, revenue fell 8% to $30.4 billion and the company swung from a $5.39-billion net profit to a $3.38-billion net loss.
[Updated at 3:20 p.m.: On a conference call with analysts and media, News Corp. CEO Rupert Murdoch and Chase Carey, the company's newly installed president and chief operating officer, addressed three of the hottest topics in the media business:
- Murdoch stated bluntly that he intends to build pay walls around all of his news websites, including FoxNews.com and sites attached to newspapers in the U.S., Britain and Australia. "The Wall Street Journal is the world's most successful news site," he said of the only major News Corp. paper that already charges an online subscription fee. "We intend to use our profitable experience there throughout News Corp. to increase revenues from all our content."
- Asked about the fast-growing $1 per night DVD rental kiosk company Redbox, Carey had criticisms similar to those voiced by other Hollywood executives such as Time Warner CEO Jeff Bewkes: "Having our [movies] rented at $1 in the rental window is grossly undervaluing our products," Carey said. "We are actively determining how to deal with it."
- Carey wasn't too enthused about TV Everywhere, Bewkes' initiative to make consumers use a password to prove they subscribe to a cable or satellite service before watching cable TV programming online.
"TV Everywhere has benefits, but it's probably more defensive than offensive," he said. "We need to likewise create offensive ways to create incremental value for our products."
News Corp., of course, joined with NBC Universal to create Hulu, which streams many broadcast and some cable television shows for free on the Web.]
Update (7:30 PM): This post has been updated to fix an in correct number for the decline in operating income for News Corp.'s television group. The post previously, incorrectly, said 51%.