• by Wayne Friedman , May 8, 2008

In the face of a possible recessionary economy, News Corp.'s quarterly earnings followed the same path of Walt Disney Co., CBS and Viacom before it--offering up very strong financial results.

Third-quarter net profit rocketed up threefold from higher advertising sales at the Fox TV network and Fox News Channel, as well as a one-time gain from its stock swap with Liberty Media.

News Corp., the owner of 20th Century Fox and MySpace, said profit rose to $2.7 billion, from $871 million. Revenue growth was also strong--16% to $8.75 billion.

Television operating income soared 53% to $419 million because of lower prime-time programming costs, due in part to the writers' strike. At the same time, the division saw major advertising growth on the Fox broadcast network, including strong results from ad sales from its Super Bowl broadcast. The company also noted improved results for its mini-network MyNetworkTV.

Cable networks' operating income climbed 17% to $330 million--despite higher start-up costs for Fox Business Network and the Big Ten Network.

Concerning the upcoming upfront advertising market, News Corp. President/COO Peter Chernin says there is lots of positioning among sellers and buyers. "We have had the strongest scatter market of any network," he said. "We continue to see strong scatter on both our [broadcast] and cable [networks]."

One downside--Fox's Film Entertainment division dropped to $261 million from $410 million in the third-quarter 2007. Its best-performing theatrical properties were "Alvin and the Chipmunks," which grabbed $350 million in box-office revenues worldwide, and "Juno," which earned $225 million.

News Corp. admitted that its digital business, under its Fox Interactive Media group, is a bit off the mark--but it isn't worried, given the inherent strong fundamentals in the business.

"We will fall short of our 80% revenue projection growth. But our shortfall will be slight--only off 10% [from our project growth]," predicts Chernin. News Corp. had been targeting near-term $1 billion in advertising sales for its digital properties, led by MySpace, its social-networking site.

"[Now] we get there in a little over three years," says Chernin. "We are actually earning more money per user--42% over last year." He also notes that MySpace brings in 52% of all social-networking advertising dollars.

Part of the problem, Chernin notes, is that it's still difficult to place a value on a "friend" for advertisers--a key barometer for social-networking sites. "It remains a work in progress," he adds, although the company is working on new metrics.

Concerning a possible economic recession, Rupert Murdoch, Chairman and Chief Executive of News Corp., says: "There is no doubt consumer advertising is stressed [in the U.S.] But we are increasing our share, such as with our TV stations." Specifically, Murdoch notes, for individual territories, Australia is "booming" and the United Kingdom is "steady."

"We are seeing more volatility in the world, but there is great strength among our networks," says Chernin. The advertising revenue growth for News Corp cable networks has climbed 26%.

For its print properties, newspapers reported operating income of $216 million, an increase of $60 million; magazines were off 9% to $93 million. Its book publishing division, HarperCollins, reported operating income of $29 million--about the same as a year ago.