A $909 million write-down for sports-rights contracts and continuing softness in the advertising market helped to widen News Corp.'s second-quarter deficit.
The media conglomerate reported a loss of $606 million for the quarter, compared with a $23 million loss in the same period last year. Revenue was up in the period to $4.12 billion from $3.85 billion last year, in part because of strong performance by its cable networks.
Overall, its cable-programming cash flow was up 30 percent, fueled mainly by Fox News Channel, which reported a 31 percent revenue rise and a cash-flow increase of 39 percent in the period. Speedvision — recently relaunched as the Speed Channel — contributed about $12 million in cash flow for the quarter.
Fox's regional sports networks also showed revenue gains, partly offset by higher programming costs. But the gains in cable were not enough to offset News' write-down on the broadcast sports side.
News said it would write down the value of its sports rights contracts — held by its Fox Television unit — for the National Football League, Major League Baseball and the National Association for Stock Car Racing by $387 million, $225 million and $297 million, respectively.
In a conference call with analysts, News chief financial officer David DeVoe said that the severe advertising downturn was a main factor in the write-downs. With respect to NFL telecasts, it will take at least until 2004 before the company achieves the same level of revenue as last year, he added.
However, since the boom year of 1999, sports revenues have declined across the board.
News chairman Rupert Murdoch lamented the decline in the advertising market — he called it the worst since World War II — but said it's beginning to show signs of improvement.
Although the Sept. 11 tragedies affected the ad market as a whole — News said the attacks cost it $100 million in the fiscal first quarter — Murdoch said the market began showing signs of a recovery in December.
"Pacings are running slightly ahead of last year," Murdoch said on the call. "In the March quarter, we're looking at our first positive quarter in one-and-a-half years."
VIACOM EYES REBOUND
Murdoch wasn't the only cable executive to see light at the end of the tunnel. In a separate conference call with analysts, Viacom Inc. president and chief operating officer Mel Karmazin said he also saw signs of a rebound.
Cable networks continued to be a top performer for Viacom, with revenue at the networks up 4 percent and cash flow up 19 percent. On the whole, Viacom revenue was flat at $23 billion and cash flow was up 2 percent to $5 billion.
Viacom's advertising sales were down about 2 percent for the year, compared with 5 percent to 7 percent declines at its peers, Karmazin said. Pricing for cable and broadcast in the first quarter is either at upfront levels or slightly above, he said.