• by David Goetzl , February 5, 2008

Despite signs that a recession may be looming, top News Corp. executives said Monday that the company hasn't been impacted so far--and is well-prepared to weather any persistent economic downturn. CEO Rupert Murdoch characterized current conditions as "ever-challenging, and (for) how long, no one knows," but said company operations should continue to perform well--principally due to strong affiliate fees for cable channels, international expansion and online growth.

Also, the company's exposure to the uncertain U.S. ad market is relatively modest, with less than 25% of revenues coming there. Similarly, Murdoch said the fleet of domestic cable channels now derive a greater share of revenues from affiliate payments--which come from long-term, locked-in contracts--than ad revenues that are more sensitive to the economy.

He also cited strong overseas results as a bulwark against U.S. economic hurdles, notably a robust economy in Australia that's fueling the company's newspaper dominance there. And he added improving results in online operations to the list of defenses. Fox Interactive Media posted an 87% revenue jump and $58 million in growth in operating profit in the just-completed quarter--and has a long-term contract with Google to operate search functions on MySpace.

Also, COO Peter Chernin said the Fox network has "not seen any weakness" due to economic jitters--as it benefits from the strong scatter market, and is apparently not in a situation where it has to give cash back to advertisers due to a makegoods overload. And he said Fox would not "abandon the upfront," indicating that pledge includes not only the spring selling period, both the annual gala presentation as well.

Murdoch joined Chernin on a conference call to discuss results for the quarter, where revenues jumped 10% to $8.6 billion and operating income increased 27% to $1.4 billion.

While at least one media company--NBC Universal--has acknowledged suffering from the Hollywood writers' strike, News Corp. said there was "material impact" in the quarter, although that period ended a month ago. Chernin had previously said that in the short-term, strike-induced lower programming costs could help the bottom line.

The cable group proved to be redoubtable, with a 34% revenue increase to $1.2 billion (fueled by Fox News Channel growth in affiliate fees and ad intake), and operating income up 22% to $337 million. The increases came even as News Cop. suffered $50 million in losses as it has launched the Fox Business Network and the Big Ten Channel.

Even as News Corp. indicated the Fox broadcast network--which had huge viewership Sunday for the Super Bowl--is humming, the broader "television" segment was the only one at the company to post a revenue decline. Still, operating income more than doubled with programming costs down. Under a new contract, Fox carried fewer baseball playoff games that come with a hefty rights fee, and it cut costs by $30 million at the struggling MyNetworkTV as the network dropped an all-telenovela format. (News Corp. does not break out results by network.)

At the "television" segment, the principal culprit for the revenue drop appears to be a decline among the local stations, which had strong political dollars in the quarter the year before. The MyNetworkTV stations also saw ad dollars continue to drop with ratings challenges. (News Corp. has an agreement to sell eight Fox stations for $1.1 billion.)

In general, Chernin said losses continue at MyNetworkTV, although they declined due to the reduction in expenses. But he said the company is "not satisfied," yet reaffirmed a commitment to the two-year-old network.

In the online sphere, Murdoch said News Corp. is "definitely not going to make a bid for Yahoo" as Microsoft has launched a hostile takeover attempt and Google has shown signs of helping Yahoo ward it off.