Murdoch: News Corp. Acting to Prevent Another Scandal - Multichannel

Murdoch: News Corp. Acting to Prevent Another Scandal

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As News Corp. announced its fourth-quarter and full-year earnings, CEO Rupert Murdoch acknowledged the scandal that has embroiled his company.

"While it has been a good quarter from a financial point of view, our company has faced challenges in recent weeks relating to our London tabloid, News of the World," Murdoch said in a statement. "We are acting decisively in the matter and will do whatever is necessary to prevent something like this from ever occurring again."
The company's fourth-quarter earnings were down because of losses related to Myspace. With those losses taken into account, profits exceeded analyst's expectations. The company's cable networks and broadcast businesses did particularly well.
The company also said that it expected a low-to-mid teens increase in earnings in 2012. That forecast was based on current economic conditions continuing, without a significant upturn or downturn.

The scandal involved cell phone hacking by employees at News of the World. News Corp. has shut down the paper and several of its senior executives have resigned and others have been arrested. The affair has also tarnished the reputation of James Murdoch, seen as a potential heir to run the company his father built.
News Corp. was also forced to forgo its bid to acquire the stake in British Sky Broadcasting it doesn't already own. It has also stalled plans to add Murdoch's daughter Elisabeth to the company's board.
Rupert Murdoch participated in the company's earnings call with analysts. He was asked if the News of the World situation would affect James Murdoch being named CEO in the near future.
"Well, I hope that the job won't be open in the near future," said Murdoch. He said that if he went under a bus immediately, the job would probably go to COO Chase Carey. "But Chase and I have full confidence in James," he added.

Despite the scandal, Murdoch said "the board and I believe I should continue in my current role as chairman and CEO."
Murdoch said he was "personally determined to put things right when it comes to News of the World. We are all committed to doing the right thing. We have taken decisive actions to hold people accountable and we will continue to do whatever is necessary to prevent something like this from ever occurring again."
Fourth-quarter net income was $683 million, or 26 cents a share, down from $875 million, or 33 cents a share a year ago. For the full year, net income was $2.74 billion, or $1.04 a share, up from $2.54 billion, or 97 cents a share. The results include a $254 million loss resulting for the sale of Myspace. Myspace had operating losses of $230 million during the year.

"I'm pleased that once again News Corporation exhibited operational momentum in both the final quarter of fiscal 2011 and for the full year driven by significant increases at our market-leading cable network programming and television segments," said Murdoch.

Operating income for News Corp.'s cable network programming segment rose to $631 million from $563 million a year ago.

The company said growth was driven by a 15% increase in revenue, which was partially offset by higher programming expenses, and the write-down of other assets and costs from cancelled shows on FX. Domestic ad sales rose 23% in the quarter, led by pricing and ratings growth at FX.

On the conference call, Carey said that one of the company's goals was to drive its channels business to its full potential. "We're not even close. Both Fox and Fox News will take subscription fees to a whole new level in the next year and a half. FX is setting ratings records quarter after quarter and we now have new leadership to build the untapped potential of National Geographic," he said, pointing to Fox Soccer and Nat Geo Wild as additional sources of growth.
One analyst asked about the Fox Business Network, and Murdoch said it is now at cash breakeven. "The ratings are in fact improving and at certain times of the day we're head-to-head with CNBC, we're beating them. We do need more distribution," he said.
The company's television unit recorded operating income of $233 million, almost double from $113 million. The company said the growth reflected a stronger national advertising market and increased retransmission consent revenues. Programming costs were lower because the company no longer the serial 24. Revenue was up by 7%.
CFO David DeVoe said the national advertising market continues to be buoyant. "We are quite pleased with the low double-digit CPM increases we obtained in this year's upfront," he said.
DeVoe noted that the fourth-quarter results reflected reduced spending by import auto makers as a result of the earthquake in Japan and lower political spending.
Carey said another key company goal was to "intelligently take advantage of expanding digital platforms that continue to reshape our business."
He said that authentication is a key to maximize and protect the value of the company's content, noting that the company recently put an eight-day delay on free, unauthenticated digital access to Fox Broadcasting content.
Carey acknowledged that Fox might lose some viewers in the short term while waiting for authentication to gain traction. He said "there's been a lot of talk, not as much action, and I think in some ways it's getting overly beaten up by some of the distributors out there."
Nevertheless, he authentication "is an important investment in our long-term health and . . . we are going to be focused on how do you build the right business models and long-term asset value and not how do you squeeze a quick buck out of this for a quarter or two."
During the rest of 2011, News Corp. will be launching many digital extensions to its brands and franchises, according to Carey.
"We'll do business with new emerging digital platforms like Netflix, where we established clear rules about what is library product," he said. "We'll also engage with other competing digital companies. However, our priority is to make sure we are thoughtful and do not allow a quick buck to jeopardize the longer term value of our products."

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