Before MNTV's launch, company president-COO Peter Chernin said the network "can be profitable from day one." But Cohen termed its ratings "extremely disappointing," and projected a $30 million loss.
Yet News Corp. is committed to transforming the network's fortunes. Chernin recently suggested that he will become personally involved, and named Greg Meidel as president. He also announced a deal to carry a martial-arts competition series--a strong signal that MNTV's all-telenovela programming is on its way out.
"Stopping the bleeding ... is a key focus area for upper management," Cohen wrote.
Cohen also said Merrill Lynch believes the Fox network will deliver poor results in the near-term, due to ratings challenges, although that state is likely to improve as "American Idol" shows its continued strength.
Last week, Chernin said the MNTV and Fox issues are leading to "probably our biggest concern as a company." The MNTV hurdles have hurt the company's 10 local stations that carry the network, he said.
Still, the strength of the film unit--with impressive performances from "Night at the Museum" and other pictures, such as "Borat"--is likely to offset the television unit's struggles, Cohen wrote. And News Corp.'s cable networks, which include FX and Speed channel, should "continue to outperform the industry" with scatter pricing up in the high single-digits above the upfront," she wrote. Another long-term boon: MySpace.com.
News Corp. stock has soared 46% in the last year and closed at nearly $24 a share yesterday. Cohen reiterated a "buy" rating and issued a $27-per-share projection.