News Corp. profit tumbles 24% as MySpace continues to struggle
News Corp. can’t get MySpace off the books fast enough.
Losses at the struggling social network nearly erased the strong gains recorded by the media company’s television group, which saw a 23% jump in revenue in the quarter ending March 31 thanks to advertising for the National Football League playoff games and Super Bowl broadcast.
The business unit that includes MySpace reported an operating loss of $165 million because lower advertising and search revenues were only partly offset by lower expenses, the company said. News Corp. has retained Allen & Co. to sell the once-hot social network and has attracted multiple bidders, people familiar with the situation have said.
Overall, News Corp. reported third-quarter net income of $639 million, a 24% drop from $839 million a year earlier. Revenues fell 5% to $8.3 billion, from $8.7 billion a year earlier.
The biggest drag on the bottom line came from the 20th Century Fox film studio, which faced unfavorable comparisons to last year’s record box office performance of James Cameron’s “Avatar,” the highest-grossing movie of all time with $2.8 billion in global ticket sales. Despite the strong performance of “Black Swan,” which brought in $300 million worldwide, the studio reported operating income of $248 million, down 50% from $497 million a year earlier.
“As we look forward, the most significant comparison issues related to ‘Avatar’ are now behind us,” Chief Financial Officer David DeVoe said.
News Corp. results were also hurt by a $125-million charge related to a settlement involving News America Marketing, a little-known division of the company that publishes coupon inserts for newspapers. The company agreed last year to pay $500 million to settle a case alleging anticompetitive behavior. The payment caused operating income for the publishing group to fall to $36 million from $243 million a year earlier.
The Daily, the iPad news application launched in February, racked up $10 million in losses associated with its startup, even as it attracted 800,000 downloads. After a free trial period, News Corp. charges 99 cents for a weekly subscription.
“It’s real early days for the Daily. It’s only a month plus that it’s been pay-based. It actually is one of the most downloaded news apps out there,” Chief Operating Officer Chase Carey said.
The cable networks group continues to be the engine that drives News Corp., generating more than 60% of the company’s segment operating income. The group, which includes Fox News and FX Network, reported a 25% increase in operating income to $735 million. The television group, which includes the Fox broadcast network and local station group, saw an exponential improvement in its operating income to $192 million from $40 million a year earlier.
