News Corp. reports 47% jump in third-quarter earnings

News Corp. reported a 47% jump in net income in its third quarter, buoyed by strong performances from its cable and film groups.

The media conglomerate reported net income of $937 million for the quarter ended March 31,  compared with $639 million from the same time a year ago. Revenue increased to $8.4 billion, up 2% from a year earlier.

“Once again, News Corporation showed strong operational momentum in the quarter, driven by significant growth at our Cable Network Programming and Filmed Entertainment segments," Chairman and Chief Executive Rupert Murdoch said in a statement.

The company's cable networks reported operating income of $846 million, a 15% gain over the prior year -- thanks to double-digit growth at Regional Sports Networks, FX Network and Fox News. 

The film studio showed an operating income of $272 million, an improvement of nearly 10% from the same period a year ago.  Movie results reflected strong box office and home entertainment performances of "Alvin and the Chipmunks: Chipwrecked" and "The Descendants." 

However, the British phone hacking scandal continues to drag on the company's earnings. News Corp. took a charge of $63 million in costs related to the ongoing investigation of conduct at the now-shuttered News of the World tabloid.

News Corp. has been buffeted by the continuing fall-out from the British phone hacking scandal, which erupted last summer when it was revealed that a detective working for one of News Corp.'s tabloids had hacked into voice mail messages left for a missing schoolgirl who was later found dead.

Earlier this month, a committee of British lawmakers issued a blistering report finding that Murdoch had "exhibited willful blindness" toward the illegal phone hacking at the now-shuttered News of the World and is "not a fit person" to lead a major international company such as News Corp.

News Corp.'s board subsequently issued a unanimous statement affirming the directors' confidence in Murdoch and his ability to run the company he built from a single newspaper in Adelade, Australia.

Saudi Prince Alwaleed Bin Talal Bin Abdulaziz, News Corp.'s second largest shareholder, also voiced his continued backing of Murdoch in an interview with the Guardian, but expressed concern that the situation is damaging the reputation of the company beyond its British newspapers.

"I really hope that this is behind us because really it is not helping the name of the company," he told the Guardian. "We hope that this page is folded and put behind us because really it is not something to be proud of."

Murdoch's youngest son, James Murdoch, resigned as chairman of satellite broadcaster British Sky Broadcasting in April, ahead of what was expected to be a critical report from the parliamentary committee on his handling of the ethics scandal. 

Media regulators in Britain are evaluating whether BSkyB is a "fit and proper" holder of a broadcast license, because of News Corp.'s nearly 40% stake. Some politicians have used the Culture, Media and Sport committee's critical report to call for swift action -- a call the regulators have resisted.

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 -- Dawn C. Chmielewski

Photo: News Corp. Chief Executive Rupert Murdoch at the National Summit on Education Reform in San Francisco. Credit: Noah Berger / Associated Press

the Regional Sports Networks (“RSNs”), FX Network and FOX News

News Corp. board issues statement supporting CEO Rupert Murdoch

News Corp.'s board of directors offered their unanimous support for Chairman and Chief Executive Rupert Murdoch one day after Britain's Parliament issued a report on the phone hacking scandal that concluded the mogul was "not a fit person" to run the media conglomerate.

The directors met Wednesday and issued a statement that the members remain confident in Murdoch's fitness to lead News Corp. and support his remaining in charge.

"The board based its vote of confidence on Rupert Murdoch's vision and leadership in building News Corp., his ongoing performance as chairman and CEO, and his demonstrated resolve to address the mistakes of the company identified in the Select Committee's report," the company said in a statement.

The parliamentary report, issued Tuesday, concluded that three newspaper executives from News Corp.'s News International subsidiary misled the committee during its 2009 investigation into phone hacking at the London-based News of the World tabloid, which has since been shuttered. It also found that News Corp and News International failed to properly investigate possible wrongdoing -- and exhibited "willful blindness" to the questionable conduct.

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-- Dawn C. Chmielewski

Photo of Rupert Murdoch and wife Wendi Deng Murdoch as they are driven from The Royal Courts of Justice after he gave evidence to a judicial inquiry into press ethics in Britain. Credit: Photo by Peter Macdiarmid / Getty Images.

The Morning Fix: Bad 'Luck' for Time Warner. Comcast earnings up.

After the coffee. Before finding out if all Coldplay concerts are that short.

The Skinny: I felt like an extra in "The Walking Dead" trying to get out of the Hollywood Bowl after the Coldplay concert. Good show, but at a $170 a ticket, they could have played a little longer. Wednesday's headlines include Time Warner's results, analysis of News Corp.'s problems in Britain and a fire at Tyler Perry's Atlanta production facility.

Daily Dose: If you are a New Yorker and are wondering why the Empire State Building is lighted up blue Wednesday night, it's not for the Mets. It is a tip of the hat to the Weather Channel, which is celebrating its 30th anniversary. Just don't tell me it's raining anymore.

London's calling. The Parliament report on the ethics scandal at News Corp.-owned British newspapers dealt a devastating blow to the media giant and its leader Rupert Murdoch. Not only did the report accuse News Corp. executives of misleading investigators and lawmakers, it said Murdoch was unfit to lead the company. While News Corp. acknowledged and apologized for the ethical lapses, the company also took issue with some of the political overtones of the report. Meanwhile, analysts tried to figure out if the report was the beginning of the end of News Corp. or just a blip at a small unit of the giant company. Coverage from the Los Angeles Times, New York Times, News Corp.'s Wall Street Journal and the Guardian.

Some bad luck. Time Warner released its first-quarter results early Wednesday morning. Advertising gains and high subscription fees for its cable networks resulted in better-than-anticipated numbers. However, write-downs for the canceled HBO series "Luck" and the closing of a network in India hurt the bottom line. A quick take on the numbers from Reuters.

Good start. Comcast Corp., the nation's largest cable operator and parent of NBCUniversal, released its first-quarter results and said profits were up 30%. NBC's coverage of the Super Bowl meant big advertising gains for the network. Early analysis from the Philadelphia Inquirer.

Burning questions. Investigators are trying to figure out what caused a major fire at film and TV mogul Tyler Perry's Atlanta production facility. The fire, which damaged one building on the vast complex, started late Tuesday night. More from the Atlanta Journal-Constitution.

Direct to DirecTV. Mel Gibson's next movie, "Get the Gringo," will be released directly to satellite broadcaster DirecTV at a price of $9.99. After a pay-per-view run on DirecTV, the  movie will head to the DVD shelf. Details from Bloomberg.

Long journey. "Jericho," a short-lived CBS drama about survivors of a nuclear attack that has been off the air since 2008, may be brought back to life by Netflix. Apparently reruns of the series do well on Netflix's streaming service. As TV Guide notes, a lot has to go right for Netflix in talks with CBS, the cast and producers in order to get new episodes of such an old series made. Hey, I still watch my DVDs of the great ABC series "The Job" starring Denis Leary. How about bringing that back next?

Inside the Los Angeles Times: The Academy Awards are staying in Hollywood. TV critic Mary McNamara looks at the growing popularity of the rhymes-with-witch word on television.

-- Joe Flint

Follow me on Twitter. I can be obnoxious and condescending but have a good side too. Twitter.com/JBFlint

Photo: Firefighters at Tyler Perry's studio. Credit: Curtis Compton / Associated Press

Despite Murdoch furor, BSkyB says it is a 'fit and proper' broadcaster

LONDON -- British Sky Broadcasting insisted Wednesday that it remains a "fit and proper" holder of a broadcasting license in Britain, despite a damning parliamentary report on media baron Rupert Murdoch, whose News Corp. owns a controlling stake in the company.

In an earnings report, the lucrative satellite television service said it was cooperating with British regulator Ofcom as part of the agency's evaluation of whether BSkyB remains a suitable holder of a broadcasting license.

The company said its "positive contribution to U.K. audiences, employment and the broader economy, as well as its strong record of regulatory compliance and high standards of governance" qualified it to maintain its license.

The statement came a day after an excoriating report by a parliamentary committee branded Murdoch as "not fit" to run a major international company. The report accused three senior News Corp. executives of lying to the panel during its investigation into phone hacking by the News of the World.

Murdoch shut down the tabloid last summer at the height of public outrage over phone hacking, which now appears to have been common practice at the paper. The furor also forced Murdoch to abandon his bid to buy the 61% of BSkyB that News Corp. does not already own.

The head of BSkyB sought to put some distance between his company and Murdoch's on Wednesday.

"It's important to remember that Sky and News Corp. are separate companies," Chief Executive Jeremy Darroch told reporters. "We believe that Sky's track record as a broadcaster is the most important factor in determining our fitness to hold a license. And the evidence shows that Sky serves U.K. audiences and customers well."

BSkyB reported a 5% rise in revenue over the last nine months, compared with same period a year earlier. Its adjusted operating profit during that period exceeded $1.4 billion, a 15% increase.

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News Corp. executives may be in contempt of Parliament. So what?

-- Henry Chu

Photo: Media magnate Rupert Murdoch and son James attend a horse race in Britain in March 2010. Credit: Adrian Dennis / AFP/Getty Images

Former GE Chief Jack Welch lends support to Rupert Murdoch

Former General Electric Chief Executive Jack Welch took issue with a report from the U.K. Parliament that questioned News Corp. Chairman Rupert Murdoch's fitness to lead the global media giant in the wake of an ethics scandal at its British newspapers.

“It is outlandish to suggest that Rupert Murdoch is anything less than perfectly fit to lead his organization as it moves forward," Welch said in a statement. "Over our many years of dealings, I’ve seen nothing but integrity from him. He has never been anything but straightforward and above board in all his interactions with me, and his courageous and innovative moves in business have always been a source of inspiration to me.”

Welch, of course, competed head-to-head with Murdoch when General Electric controlled NBC. Back then, their relationship was not always cordial and at times was bitter. In fact, in 1994, NBC filed a complaint at the Federal Communications Commission accusing Murdoch and News Corp. of violating rules that limit foreign ownership of television stations.

The FCC complaint was withdrawn around the same time that News Corp. agreed to carry an NBC channel on one of its Asian satellites.

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-- Joe Flint

Photo: Jack Welch in 2001. Credit: Neal Hamberg / Associated Press.

News Corp.'s woes in Britain reignite calls for scrutiny in U.S.

A Parliament report critical of News Corp., its Chairman Rupert Murdoch and his son Deputy Chief Operating Officer James Murdoch for their response to the ethics scandal at its British newspapers will give new fuel to the company's critics in the United States.

One activist group already is demanding that the Federal Communications Commission strip News Corp.'s Fox unit of the licenses it holds to operate 27 television stations in the United States.

“The House of Commons report makes clear that both Rupert and James Murdoch were complicit in New Corp.’s illegal activities," said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington. "If the Murdochs don’t meet the British standards of character test, it is hard to see how they can meet the American standard.”

Eric Boehlert of Media Matters, a nonprofit media watchdog group, compared Rupert Murdoch to Richard Nixon.

"Both practiced partisan hardball but quickly cast themselves as victims when law enforcement started to ask difficult questions," Boehlert wrote. "For Murdoch and Nixon, the rules did not apply, as breaking the law became commonplace in the pursuit of the ultimate goal -- serving enemies with payback. And like Nixon, Murdoch's reputation has suffered a fatal blow in the form of a botched cover-up."

The FCC declined to comment on the Parliament report or whether it would spark its own investigation into News Corp.'s fitness to hold broadcast licenses in the United States.

One communications attorney said a challenge to Fox's broadcast licenses would face a long, uphill climb, unless Murdoch were arrested or found guilty of violating the Foreign Corrupt Practices Act, which prohibits paying a government official for commercial gain.

"Based on what has happened today and what is known today, I don’t see any material risks to the licenses," said John Hane of Pillsbury Winthrop Shaw Pittman.

Former FCC Commissioner Michael Copps said the renewal process for broadcasters is not as tough as it should be and that he hopes the Parliament report will at least lead the FCC to take a harder look and not just rubber-stamp News Corp.'s renewal applications.

"This should be a wake-up call," Copps said. "These are the kinds of problems when too much media is held in too few hands."

The U.S. Department of Justice has been conducting its own probe into whether there is any evidence of wrongdoing by News Corp. newspapers here. If the Justice Department were to uncover illegal activities in the United States or determine that the Foreign Corrupt Practices Act was violated by News Corp., that could force the FCC to take an aggressive stance on the renewals.

A Justice Department spokeswoman declined to comment.

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-- Joe Flint

Photo: Rupert and James Murdoch in happier times. Credit: Adrian Dennis / AFP/Getty Images.

Rupert Murdoch acknowledges News Corp. errors

News Corp. Chief Executive Rupert Murdoch sought to move beyond a damaging report from Parliament accusing him of "willful blindness" in failing to properly investigate allegations of phone hacking by one one of his company's London-based tabloids.

Murdoch, in a message to News Corp.'s 50,000 employees Tuesday, said the findings by the Culture, Media and Sport committee were "difficult to read" -- but afforded "an opportunity to reflect upon the mistakes we have made.

"We have done the most difficult part, which has been to take a long, hard and honest look at our past mistakes," Murdoch wrote. "There is no easy way around this, but I am proud to say that we have been working hard to put things right."

The select committee of the House of Commons found that "News of the World" and News International, the company's British publishing division, misled the committee in a 2009 investigation into phone hacking by blaming the actions on a "rogue reporter."  The committee found that the media company continued to downplay the involvement of its employees in phone hacking and engaged in a cover-up, rather than seeking out wrongdoing.

News Corp. issued a statement Tuesday acknowledging the "hard truths" that emerged from the committee's investigation: that it had been "too slow and too defensive; and that some of our employees misled the Select Committee in 2009." 

But News Corp. took issue with some comments, which the company labeled "unjustified and highly partisan." This appeared to be a reference to an explosive line in the report that called Murdoch  "not a fit person" to lead a major international company.

Murdoch wrote that the company should have acted more quickly and aggressively to uncover wrongdoing, and he expressed regret for failing to rectify the situation sooner. 

News Corp., and Murdoch, sought to underscore the company's efforts to fix the situation. Murdoch noted that an autonomous committee set up by News Corp. has completed a review of conduct at the company's other British publications, The Times and Sunday Times and The Sun, and found no evidence of illegal conduct beyond one incident reported months ago, in which disciplinary action was taken.

News Corp. General Counsel Gerson Zweifach is also creating a system of education and a compliance structure across the company's businesses. News International, the group that controls the company's British publications, also instituted governance reforms.

"The opportunity to emerge from this difficult period a stronger, better company has never been greater," Murdoch wrote. "And I will look to each of you to help me ensure that News Corp.'s next 60 years are more vital and successful than ever."

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 -- Dawn C. Chmielewski

Photo: Rupert Murdoch, right, and his son James Murdoch in July 2011. Credit: Sang Tan /  Associated Press

Barry Diller stands by old boss Rupert Murdoch

Former News Corp. executive Barry Diller, who was the architect of the Fox network, is standing by his old boss Rupert Murdoch.

In a statement issued in response to Parliament's blistering report challenging Murdoch's fitness to lead the media giant in the wake of the ethics scandal at News Corp.'s British newspapers, Diller said Murdoch is "more fit, morally and otherwise, to lead an organization than the majority of those that do."

Diller, who was chief executive of Fox Inc. from 1985 to 1992 and a News Corp. board member, said in the nearly 10 years he worked for Murdoch that he "never once, not once, in any situation saw anything other than the most honorable behavior in every possible business situation."

Ironically, while Diller is standing by Murdoch as British lawmakers take aim at his media empire, a company Diller backs is being sued by News Corp. Diller is on the board of Aereo, a firm that seeks to transmit broadcast signals through the Internet. Diller's IAC/InterActive Corp. also led Aereo's $20.5-million round of financing.

In March, News Corp.'s Fox, along with CBS, NBC and ABC, filed a suit accusing Aereo of violating copyright laws.

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-- Joe Flint

 Photo: Barry Diller. Credit: Andrew Harrer / Bloomberg

Rupert Murdoch unfit to lead company, British lawmakers say

This post has been corrected. See the note below for details.

LONDON -- Rupert Murdoch "exhibited willful blindness" toward the illegal phone hacking that was rife at the News of the World tabloid and is "not a fit person" to head a major international company such as News Corp., a panel of British lawmakers said in a stinging report Tuesday.

Murdoch's son, James. also showed poor leadership in failing to get to the bottom of the hacking scandal, but neither he nor his father lied to Parliament about their knowledge of the extent of the problem, the report said.

However, three other senior executives at News Corp. and the now-defunct News of the World -– including Les Hinton, one of Rupert Murdoch’s closest associates -– did mislead Parliament about how widespread the practice of snooping into cellphones was, the report said.

And as a whole, News International, News Corp.'s British arm, deliberately tried to hide the problem by suppressing documents and making statements to Parliament that were not fully truthful, according to the report.

"Their instinct throughout, until it was too late, was to cover up rather than seek out wrongdoing and discipline the perpetrators," the report said.

The scathing report by Parliament's committee on the media comes a week after Rupert and James Murdoch testified here before a judicial inquiry into media ethics. The report, months in the making, is certain to add pressure on the Murdochs as their global media empire struggles to deal with the continued fallout from the hacking scandal.

In particular, the report's most controversial statement, that Rupert Murdoch is unfit to lead an international company, could imperil News Corp.'s nearly 40% stake in the television company British Sky Broadcasting. British regulatory authorities are charged with determining whether major stakeholders such as Murdoch are "fit and proper" owners of mass media in Britain.

The committee's finding on Murdoch's unfitness was not unanimous. In fact, it led to a bitter split along party lines, with four Conservative Party members refusing to endorse the report on the grounds that such a declaration was outside the scope of the panel's investigation.

The report was approved on a 6-4 vote.

Committee members stressed they were completely agreed on their finding that three of Murdoch’s senior executives essentially lied to Parliament about phone hacking, which News International insisted for years was confined to one "rogue reporter."

One of those executives, Colin Myler, is now the editor of the New York Daily News.

Though misleading Parliament is a serious offense, it is unclear what punishment can actually be applied.

The committee called it "astonishing" that Rupert and James Murdoch took so long to find out that phone hacking went far beyond a lone reporter. Police say that thousands of people may have had their phones hacked into by the News of the World in its pursuit of sensational stories.

The scandal exploded in the public consciousness last summer with the revelation that among the hacking victims was a 13-year-old girl who was kidnapped and later found slain.

[For the Record, 11:41 a.m., May 1: A previous version of this post stated that the New York Daily News was owned by Rupert Murdoch's News Corp. The New York Post is owned by the company.]

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-- Henry Chu

Photo: Media tycoon Rupert Murdoch leaves from a London courthouse last week after testifying at a British judicial inquiry on media ethics. Credit: Justin Tallis / AFP/Getty Images

Hulu owners to buy Providence Equity's stake for $200 million

Providence Equity Partners is selling its stake in online video service Hulu for about $200 million, according to people familiar with the situation.

The move, first reported by Bloomberg News, is expected to give at least two of Hulu's media company owners -- News Corp. and Walt Disney Co. -- a greater ownership stake in the rapidly growing online service. 

The 5-year-old service now has more than 2 million paid subscribers to its Hulu Plus offering, and about 38 million visitors a month to its free site, which offers catch-up episodes of such popular television shows as "Glee," "Revenge," "The Daily Show with Jon Stewart," and "Late Night with Jimmy Fallon." 

The buy-out of the private equity firm would resolve some of the tensions that have been simmering for more a year. The stakeholders have long argued about Hulu's direction, priorities and monetization strategy.  Nine months ago, the partners considered selling Hulu, but the media companies opted not to shed the venture because they did not want to lose control of the online distribution of their valuable content.

All the while, the Rhode Island-based Providence Equity made it clear that it was increasingly interested in cashing out its stake.

People close to the situation, who asked not to be identified because no sales deal has been finalized, said the media companies have a "hand-shake agreement" to pay Providence Equity about $200 million for its 10% stake.  However, these people said, the overall valuation of Hulu would be less than $2 billion. The partners instead agreed to pay Providence a premium on its investment.

The approximately $200 million payment would allow Providence Equity to double its investment. The firm contributed $100 million in 2007 to help founding companies NBCUniversal and News Corp. launch Hulu. Disney came aboard as a partner in 2009.

Hulu's ownership structure has been complicated by NBCUniversal's equity stake.  Although the media company helped launch Hulu, NBCUniversal's new controlling owner -- Comcast Corp. -- agreed to give up NBCUniversal's seats on the Hulu board and any voice in the management of Hulu as part of a 2011 settlement with federal government. The Department of Justice and Federal Communications Commission, government agencies that reviewed Comcast's takeover of NBCUniversal, were concerned that Comcast might use its interest in Hulu to stymie the development of an online video service that competes with Comcast's core business of providing bundles of television channels to consumers. 

The two managing partners -- News Corp. and Disney -- have not determined whether to use cash on hand to buy out Providence, thereby increasing their stakes in Hulu, or bring in more private money, according to one person close to the situation.

The agreement being worked out also would allow the vesting of some shares held by Hulu's chief executive, Jason Kilar, and other ranking members of management. However, one person close to Hulu said that Kilar is expected to stay on, at least in the short term, to run the company.

Both Hulu and Providence Equity declined to comment.

In an interesting twist, the news comes in the same week that Providence announced it would invest $200 million in Peter Chernin's entertainment company, The Chernin Group.  Chernin was one of the architects of Hulu, when he was president of News Corp., and he brokered the deal to include Providence Equity in the ownership structure. In addition, Chernin was named a senior advisor to Providence Equity.

Chernin, through a spokeswoman, declined comment.

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Photo: Hulu Chief Executive Jason Kilar at the company's Santa Monica headquarters in July 2010.  Credit:  Gary Friedman / Los Angeles Times