Murdoch Says Huge TV Profits Are History

by David Goetzl, Nov 14, 2007, 7:30 AM

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News Corp. CEO Rupert Murdoch all but declared on Tuesday that the sky's-the-limit profits from traditional broadcast TV are over.

Calling broadcast television a "highly challenged industry in America," he said that big events such as the Super Bowl can still prosper, but ho-hum-rated series that fill prime time are at risk for generating declining interest among audiences and advertisers alike.

"I think we have to be a little sensible about this--and realize that free-to-air television faces a lot of challenges, just from the sheer fragmentation of the audience," Murdoch told shareholders in Australia, citing many homes with hundreds of channels. And that comes, he said, despite broadcasters "probably [offering] the best programs (with) the most excitement about them."

There are, of course, many industry executives who would disagree with Murdoch's assessment, arguing that advertisers will always covet the wide, fast-reach broadcast TV brings--even with a lesser audience.

Murdoch was careful to say that the Fox network is still performing well; News Corp. also operates the money-losing MyNetworkTV. At the local broadcast level, Fox is selling nine stations, looking to reduce its exposure to slower growth there.

Given the economic uncertainty, Murdoch offered up a business model that could help stem any negative tide--one that's sure to pique the interest of "Hollywood" writers on strike: Make quality programs that will yield significant profits when sold later on DVDs. Hollywood writers have sought a greater share of DVD revenues in the negotiations that led to their walkout.

"The essential thing is we make them very, very high quality so that they can be sold around the world and find an audience, and then be brought back to America--or to anywhere in the world, for that matter --and be sold as DVDs," he said. "We're finding that several programs, which you would think (based) on their ratings couldn't be making money ... are in fact very profitable (via DVD sales)."

An example: Fox canceled animated comedy "Family Guy," only to bring it back after DVD sales surged.

News Corp. is well-positioned for any downturn in broadcast TV, with its fleet of cable channels--including the new Fox Business Network, which Murdoch said would add 5 million more homes to its distribution (to 35 million) soon--and Internet properties.

He said only 23% of its U.S. revenues are tied to the ad market.

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