This is a partial transcript from Your World with Neil Cavuto, October 2, 2001.

NEIL CAVUTO, HOST: Joining me now is News Corp. president and Chief Operating Officer, Peter Chernin. Peter, good to see you.

PETER CHERNIN, PRESIDENT, NEWS CORP.: Hi, Neil, how are you?

CAVUTO: The landscape right now: advertising, not great, right?

CHERNIN: You know, it is obviously a very tough advertising environment. We are seeing a lot of caution on the parts of businesses. I think there are a lot of people getting nervous going forward. And I think the story for most big media companies is what do you do to fight it.

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And I think we have a number of areas where we feel pretty good about. We have great growth in out cable businesses, great growth in our syndication businesses. You know, the thing you just said about Blockbuster means that those DVDs and videos which people are renting, those are Fox and other movie studio titles, so we are seeing great business on the DVD front. So the key for us is how to keep the costs down on the broadcasting business and how to show growth in some of the other businesses that's aren't advertising dependent.

CAVUTO: Wall Street has a tough time separating the advertising with the non advertising part as you have indicated in the past. A lot of the media stocks, since September 11, more to the point, September 17 when it began trading again, have been down markedly. News Corp. about 16 percent as we are taking a peak at some of the premier players: Disney, Viacom, AOL Time Warner all down a great deal, but you are arguing this is not simply an advertising story, right?

CHERNIN: Well, I think that most of the amount of people bringing these stocks down is advertising driven, but I think if you just look at the advertising business, it is a short way to look at these companies.

News Corp., for example, is a little bit over 40 percent of our revenues, are advertising dependent. So the bulk of this company's revenues are drawn from non advertising sources. And I think once people focus on the larger picture I think the stocks will begin to move accordingly.

CAVUTO: Now, the Chris-Craft position, you have some dinero coming from that, that offsets what is happening on the other front.

CHERNIN: I think we have a couple of key growth drivers. We have Chris-Craft in this year which we didn't have before, and I think the abilities to have these big duopolies in New York and Los Angeles, et cetera. We have a lot of syndication money that will come in for the first time this year.

We managed to ramp up and become the largest television producer, those shows are now hitting syndication, King Of The Hill, Buffy, Ally McBeal, The Practice, et cetera. And I think we are seeing pretty good results from the movie company and the video business. So, I think the number of business segments are actually doing pretty well. We are in a tough advertising market.

CAVUTO: Still, we started seeing some percolating in these issues of late. Today included a lot of the media stocks, your included, ours included, I should say, we are up on the belief here that maybe we overdid it. Do you tell the Wall Street community that this bashing of media stocks, they are not unique to the media stocks was overdone?

CHERNIN: Yes, but to be fair I think it has been such a difficult emotional time for the country, for the Wall Street community among others to try and sort of make sense of all of this. I think there were a lot of reactions and I think that things are now becoming back to balance. You did see the market coming back last week. I think you are going to begin to see some the media stocks coming back this week as people get more clear look at the picture, which, as I said is, in the case of most of these, is less then 50 percent advertising dependent.

CAVUTO: Everybody worries about layoffs, and they are concerned about down sizing at all the industries, media included. How sure are you that will not be the case here?

CHERNIN: I think we are actually right now in an aggressive cost-cutting mode. We have been out and we have been having budget meetings with every operating division of the company over the last week. We are being extremely rigid about trying to pull any costs we can out of the business and we are doing that because we would like avoid layoffs.

We want to avoid one of those blanket layoffs in this economic environment. I think there are more efficient ways to pull costs off. I don't think anybody would say never, but we as a company will avoid doing it. I think there are much more efficient ways to try and manage the costs out of your business and that is what we are going to try and do.

CAVUTO: Having said all of that, Mel Karmazin at Viacom, CBS saying he has had no problem rebooking those lost ads. Is that a sign that maybe we are just missing or not appreciating?

CHERNIN: Well, you know, I think that one of the things that is worth pointing out is that you did have one week's worth of advertising, which was lost. Those ads all had to move to this period. So the fact of the matter is these two, three, four-week periods are actually pretty firm because there is a lot of inventory from the week of September 11 that it has flowed into. So it has tightened everything up.

I do think that it is hard to be overwhelmingly optimistic about the advertising marketplace right now, and I think that candor suggests, look, we have tough times ahead of us for certainly the fourth quarter of this year. And we are not planning on seeing big upticks. We are trying to run our business, you know — an uptick is going to come — we are trying to run our business so we are well positioned. We have had lots of growth in our cable businesses, on our network, on our station.

And when the uptick comes, I think we are, I would argue, in a better position than anybody to take advantage of it.

CAVUTO: When is that uptick?

CHERNIN: If I knew, Neil, I would be doing...

CAVUTO: You would be president of News Corp.

CHERNIN: I would be doing something better. I do not think that anyone can predict. I think it is a very volatile time. I think you see, just watching your show, you see company after company trying to struggle with what is going on and I think it is very east for the first thing almost any company will cut is their advertising budget.

I do think that as time goes on they have to bring it back. If you look at the car dealers, they have got billions of dollars of inventory sitting on parking lots, and they have got to move it.

You look at the big retailers who have billions of dollars of inventory sitting in their stores. They have got to start moving that. So I do think that people will start coming back in and we will find that balance but there is a tremendous amount of uncertainty in the world. I am sure everybody you talked to this week...

CAVUTO: Absolutely. We heard that from AOL's Steve Case, saying the same applies to the Internet. The Internet is still a basket case or how would you describe it?

CHERNIN: The reports we get, they are actually in tremendously bad shape. I think if you look at the advertising marketplace right now, it generally gets worse the lower down the food chain you get. The greatest strength is at the network level, probably followed by the local station level, as you get down into cable and local cable and barter and barter, and then particularly the Internet, I think there is far more pressures on the advertising business.

CAVUTO: Meanwhile the cable side of what you are doing, particularly that news channel you own, that is doing all right.

CHERNIN: Well I think it has been one of the great growth stories for us. We had the two fastest growing cable networks in the business last year, both in Fox News, which is a phenomenal achievement. But also in FX where we added 18 million subs. And a cable marketplace that is down, you know, that has had a tough ad marketplace, I think our up front sale on Fox News were up 70 plus percent. On FX we are up 50 plus percent. So we have a lot of growth because we have had so much performance on these businesses.

CAVUTO: Peter, always a pleasure. Thank you so much. Peter Chernin, the president and Chief Operating Officer of News Corp.

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