News Corp. Profit Rises on DVDs, Cable Ads

Media conglomerate News Corp. (NWS) Wednesday posted a higher quarterly profit, boosted by strong DVD sales of the film "Day After Tomorrow (search)" and advertising sales at its cable networks.

News Corp., which owns Britain's Times newspaper and the 20th Century Fox (search) film studio, said fiscal year 2005 operating profit is expected to rise by a percentage rate in the high teens to 20 percent.

The New York-based company posted a net profit of $386 million, or 13 cents a share, in the fiscal second quarter ended Dec. 31, compared with $215 million, or 8 cents a share, a year earlier.

Revenue rose 18 percent to $5.6 billion.

Results were led by growth at the company's 82-percent-owned Fox Entertainment Group (FOX), which reported its net profit for the fiscal second quarter rose to $431 million, or 44 cents a share, from $330 million, or 36 cents a share, a year earlier.

Shares of News Corp. and Fox Entertainment each rose by about 1 percent.

Sales of "The Star Wars Trilogy" and "I, Robot" boosted operating income of the movies division by 57 percent. A strong roster of summer releases paid off in the home video market in the year-end period, the company said.

"Overall, I'm surprised at how strong film was," said Peter Mirsky, an analyst at Oppenheimer & Co. "But the two key areas of concern are the Fox Broadcasting network and Sky Italia."

Gains in other divisions helped offset a lackluster quarter for the Fox Broadcasting network, as a 12 percent decline in primetime ratings led to operating losses widening by $26 million.

"I think the key question was, Can we rebound following what all of us felt was a pretty disappointing fall (TV season)? It's clearly obvious now that the answer to that question is a resounding yes," Peter Chernin, chief operating officer of News Corp., told analysts on a conference call.

Mirsky said the recent debut of the new season of hit shows "American Idol (search)" and "24" were encouraging. But weakness in Sky Italia, News Corp.'s Italian satellite television division, remained a concern.

Operating losses at Sky Italia rose to $105 million, from $104 million a year earlier. Sky added 270,000 net new subscribers, ending the calendar year with 3.1 million subscribers, slightly ahead of its own targets. The company said losses narrowed 7 percent on local currency terms.

Murdoch told analysts that Sky Italia is expected to reach operating breakeven on schedule and within five months.

Analysts said Murdoch, whose company also controls DirecTV Group in the United States, is gearing up to gain market share at the expense of profits. "It's subscriber gains at pretty much all cost," said Paul Kim, an analyst at Tradition Asiel. "Investors may not like that."

Cable networks operating income rose 46 percent, led by gains at the Fox News Channel (search), which the company said received more total viewers on a 24-hour basis than rivals CNN, MSNBC, Headline News and CNBC combined.

The company in January offered to purchase the 18 percent of Fox Entertainment Group it does not own for about $6 billion.

Separately, Liberty Media has said it is in early discussions to reduce its voting stake in News Corp.

News Corp. shares rose 19 cents to $17.81 on the New York Stock Exchange, and Fox shares rose 23 cents to $34.12.

News Corp. is the parent company of the Fox News Channel, which operates