News Corp.’s Net Income Soars on DVD Sales

Despite the poor performance of its Fox television network last fall, News Corp.’s quarterly profit rose 80% on strong DVD sales and continuing strength of cable channels such as Fox News Channel.

The company reported Wednesday that its net income rose to $386 million during its fiscal second quarter, which ended Dec. 31, or 13 cents a share -- up from $215 million, or 8 cents, in the same period a year ago. Revenue was up 18% to $6.56 billion.

The company projected that operating profit for fiscal 2005 would increase by as much as 20%, up from a previous growth forecast that was in the mid- to high teens.

News Corp.’s biggest weaknesses during the quarter were the Fox television network and Sky Italia, its Italian satellite TV service. Operating losses at Sky Italia rose to $105 million, from $104 million a year earlier.

At the Fox TV network, operating losses widened by $26 million to $153 million for the quarter, as programming costs increased, prime-time ratings fell and local advertising sales at its TV stations were weak. News Corp. executives blamed the network’s continuing problem on disruption of its fall prime-time launch caused by its airing of professional baseball games.

Yet News Corp. President Peter Chernin predicted that Fox would end the season in a battle with CBS for first place in the ratings for young adults because of the continued dominance of returning shows such as “American Idol” and “24,” and the promise of new programs such as “House.”

On a brighter note, News Corp.’s film division was the quarter’s star performer. Home video sales doubled in the period to $1.2 billion from a year earlier, giving News Corp. the highest profit margins in the film business, at 20%, analysts said.

Twentieth Century Fox Television posted strong DVD sales for “The Simpsons,” “24” and “Family Guy,” along with various library titles.

A strong roster of summer releases, such as “The Day After Tomorrow,” as well as the DVD sales of catalog and TV titles and the “Star Wars” trilogy, led to a year-end payday in home video, Chernin said.

He said the margins could be sustained because of the studio’s “focus on profitability over market share,” and its success with lower-budget titles such as “Sideways,” which was recently nominated for five Academy Awards, including best picture.

Cable programming also contributed to News Corp.’s strong quarter. Operating profit at the unit, which includes the FX, Fox News and National Geographic channels, rose 46% to $227 million.

During a conference call with investors, News Corp. Chairman Rupert Murdoch said he expected to reach an agreement within nine months that would reduce Liberty Media Corp.’s 18% voting stake to a level less threatening to his family’s control. Murdoch and his family own about 30% of News Corp.

“We haven’t had any substantial talks yet,” Murdoch said.

News Corp. shares rose 5 cents to $17.67 on the New York Stock Exchange.