• by Wayne Friedman , November 9, 2006

Fox is sitting pretty. Stronger fiscal first-quarter earnings at News Corp. have come from improved advertising results from the Fox network, its cable channels, TV stations, and satellite assets.

News Corp. said it earned $843 million, or 27 cents a share--which outperformed analysts' earning estimates of 20 cents a share. A year earlier, it lost $433 million, or 13 cents a share. Peter Chernin, president/COO of News Corp. says: "Our broadcast scatter has been moving at low- to mid-single-digits [percentage increases] against upfront pricing." That said, Fox doesn't have much to sell. "We sold so much inventory in the upfront, we have less than we can sell."

Against a soft cable TV advertising market, Fox cable networks have also done well. "Scatter advertising was up in the single-digit percent [cost-per-thousand viewer (CPM)] range in our first quarter for our cable networks," says Chernin. Cable network revenue jumped to $889 million from $775 million.

Fox TV stations benefited from heavy political advertising recently--more so than at any time in their history: "It'll be record political spending. We are only sorry the election didn't go along for another of couple weeks." Revenue at the Fox network and the company's television stations rose from $1.05 billion to $1.1 billion.

While financial data improved, TV ratings' performance at the Fox network and MyNetworkTV have been soft--an area of network concern.

In regard to the Fox network, Chernin admits: "It has not been a stellar fall launch for us." But he adds that this has been a repeat performance for the network in previous seasons. "We have been through this so often. But we come roaring back in the first quarter, and [for the last two years] win the season. We are not panicked. [Still], we are not pleased or satisfied with our new dramas."

The launch of MyNetworkTV, Chernin says, was a little softer than News Corp. expected. "We are keeping a close eye on it," he says.

Although Fox is in the process of launching a business news cable channel, Chernin insists that it won't be tied to renewal cable-operator deals for the highly popular Fox News. "We want to maximize the rate Fox News gets alone. We believe we have a lot greater leverage." What's the magic number for a Fox business launch? "Being above 30 million [subscriber] level."

The main problem now for Fox News is retaining its on-air personnel. "It's the equivalent of having the 1927 Yankees. We want to hold onto our stellar talent."

DirecTV revenue rose to $622 million from $498 million. News Corp. owns 39% of the company. Chernin says the run-up in the share price of DirecTV didn't preclude News Corp. from doing a deal with John Malone and Liberty Media, which has been in discussions for some time. "We are moving forward on the talks. We don't feel pressure to do a deal," he adds.

On the downside, revenue from the company's film and television studios slipped to $1.21 billion from $1.42 billion--from lower syndication, home entertainment, and theatrical revenue, versus its fiscal first quarter of a year ago.