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MUMBAI:
The news is not good from global media major News Corp. The
Rupert Murodch owned group has reported results that must
be making the septuagenarian media innovator frown. The group
has turned up a loss of $6.4 billion in Q2 courtesy a $8.4
billion writedown. Its net income in the year ago period was
at $832 million.
Adjusting for the writedown, the
company reported a 42 per cent decline in operating income at $818 million as compared to $1.4 billion reported a year ago. The operating loss was $7.6 billion if the writedown is included.
The company brought the hefty impairment charge related to goodwill and identifiable intangible assets at its television, newspapers and other segments to its books in Q2. .
Commenting
on the results, News Corp chairman and CEO Murdoch said: "Our
results for the quarter are a direct reflection of the grim
economic climate. While we anticipated a weakening, the downturn
is more severe and likely longer lasting than previously thought."
He
also hinted at a major cost-cutting drive and job cuts ahead, "We
have been taking actions to preserve a solid level of operational
profitability and a strong balance sheet without sacrificing
future growth. We are implementing rigorous cost-cutting across
all operations and reducing head count where appropriate,"
he said.
Meanwhile
he remained hopeful of better times. "We believe our
businesses are well positioned to withstand a lengthy downturn
and to emerge stronger as the current economic situation improves."
Television:
The
TV segment reported adjusted operating income of $18 million,
a decline of $227 million versus the same period a year ago,
driven by decreased operating results at the Star, Fox Television
Stations, Fox Broadcast Network and MyNetworkTV.
Star's
second quarter operating income decreased versus the same
quarter a year ago due to advertising revenue declines, primarily
in India, and the costs of the recent launch of regional channels
in India. The decreases in advertising revenues were partially
offset by higher syndication and subscription revenues.
Fox
Television Stations' Q2 adjusted operating income declined
44 per cent from the same period a year ago, reflecting a
overall weakening of the local advertising markets despite
increased political advertising revenues. Local television
station advertising markets declined an estimated 19 per cent
in the quarter, as compared to a year ago. In addition, the
year ago period included a full quarter of contributions from
eight stations that were sold in July 2008.
At
the Fox Broadcasting Company, the results declined due to
higher programming costs driven by an increase in license
fees for returning series, as well as higher sports costs.
The decrease in operating results also reflects lower advertising
revenue from fewer games and lower ratings in Major League
Baseball's post-season.
Following
the end of the quarter, the network strengthened its schedule
with the return of American Idol and 24.
Filmed
Entertainment:
The
filmed entertainment segment reported operating income of
$112 million as compared to $403 million year ago. Company
claims that the decline primarily reflects the comparison
to the prior year's strong results, which included contributions
from the home entertainment releases of The Simpsons Movie,
Live Free or Die Hard and Fantastic Four: Rise of
the Silver Surfer, as well as the pay-TV availability
of Night at the Museum and Borat: Cultural Learnings
of America for Make Benefit Glorious Nation of Kazakhstan.
Q2
film results include launch costs for release of The Day
the Earth Stood Still and Max Payne, and the domestic
theatrical release of Marley and Me. It also included
the theatrical release of Slumdog Millionaire. However,
Twentieth Century Fox Television reported lower contributions
than a year ago as higher contributions from domestic syndication
of How I Met Your Mother and Boston Legal were
more than offset by lower home entertainment contributions.
Cable
Network Programming
Cable
network programming reported 27 per cent rise in operating
income to $428 million, an increase of $91 million over the
second quarter a year ago. It includes contributions from
Fox News Channel, the Big Ten Network and the Fox International
Channels, partially offset by costs associated with the continued
development of the Fox Business Network.
The
Fox News Channel (FNC) increased its operating income 32 per
cent versus the second quarter a year ago, primarily from
increased affiliate revenues on higher rates and advertising
revenue growth from higher pricing. During the quarter, FNC
achieved its highest rated quarter ever in prime time with
coverage of the US national and local elections. At the company's
other cable channels, operating profit increased 25 per cent
as compared to last year. The increased contribution from
the Fox International Channels was driven by continued advertising
and affiliate growth in Latin America and Europe. The Big
Ten Network achieved its first quarter of profitability having
gained distribution on all major pay-TV platforms in the Big
Ten markets. Slightly offsetting these improvements were decreased
contributions from the regional sports networks as increased
affiliate revenue was offset by the absence of contributions
from the three regional networks that were divested in February
2008.
Direct
Broadcast Satellite Television:
Sky
Italia reported second quarter operating income of $10 million,
as against $62 million reported a year ago.
Magazines
and Inserts:
The
Magazines and Inserts segment reported second quarter operating
income of $86 million, in line with the prior year. Higher
revenue from both increased rates for in-store marketing products
and higher custom publishing revenue in the free-standing
inserts business was offset by higher paper costs.
Newspapers
and Information Services:
The
newspapers and information services segment reported adjusted
operating income of $179 million, down $17 million from past
year's $196 million. The reason was that the lower depreciation
expense and the inclusion of Dow Jones & Company adjusted
operating income contributions of $59 million in the quarter
were more than offset by lower advertising revenues in the
UK and Australia.
The
UK newspaper group reported operating income in local currency
terms in line with that from a year ago, as the absence of
accelerated depreciation on the decommissioned printing presses
was offset by 10 per cent lower advertising revenues. While,
the Australian newspaper group reported 18 per cent lower
second quarter operating income in local currency terms versus
the second quarter of fiscal 2008 primarily due to lower classified
advertising revenues resulting from declines in the employment
and auto sectors and higher costs associated with pension
expenses and headcount reductions.
Overall
advertising revenues were down 4 per cent as compared to a
year ago. Circulation revenues were in line with the second
quarter of the prior year.
Book
Publishing
HarperCollins
operating income decreased $44 million versus the same period
a year ago due to lower sales driven by the weakening retail
market as well as a difficult comparison to a year ago that
included strong sales of 'The Daring Book for Girls' by Andrea
J Buchanan and Miriam Peskowitz, 'The Dangerous Book for Boys'
by Conn and Hal Iggulden and 'Deceptively Delicious' by Jessica
Seinfeld. In addition, segment profits for the quarter were
down due to charges related to the bankruptcy of a major UK
distributor.
Second
quarter results included solid sales of The Hour I First
Believed by Wally Lamb, A Lion Among Men by Gregory Maguire,
'If You Give a Cat a Cupcake' by Laura Numeroff and 'Multiple
Blessings' by Jon and Kate Gosselin and Beth Carson. During
the quarter, HarperCollins had 50 books on The New York Times
bestseller list, including six books that reached the #1 spot.
Other:
The
Other segment reported a second quarter adjusted operating
loss of $38 million, a $61 million decline from the operating
results of a year ago, primarily due to lower contributions
from Fox Interactive Media (FIM) and NDS. The decline in FIM
operating results was driven by increased costs associated
with the growth in unique users, international expansion,
the launch of MySpace music and new features, as well as lower
subscription revenue at IGN. The decline at NDS was driven
by lower conditional access revenue as compared to the same
period a year ago.
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