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Cable Strong For 21st Century While Broadcast Weakens

Twenty-First Century Fox reported a smaller loss in the fourth quarter after completing its separation from the print assets of News Corp.

The media company lost $371 million, or 16 cents a share after losses from discontinued operations were figured in its fourth fiscal quarter, compared to a loss of $1.6 billion, or 64 cents a share, a year ago. Counting only continuing operations, net income rose to $977 million, or 42 cents a share, from $596 million, or 25 cents a share.

The operating results reflected a strong quarter for the company’s cable business, while results were down in broadcasting because of American Idol's plunging ratings.

Revenue rose 16% to $7.21 billion.

Looking forward, the company said it expected earnings before interest, taxes and depreciation to grow by high single to low double digits in 2014, despite spending $200 million launching sports networks in the U.S. and Asia, as well as the new entertainment channel FXX. The company says it expects the new networks to turn profitable in 2016. 

"With the separation complete 21st Century Fox launches as a distinct public company with its own identity, its own strategy and its own growth and capital plan. Although a significant amount of time and effort was spent over the past 12 months on this separation, we never lost focus on the operation of our businesses," CEO Rupert Murdoch said in a statement. "The Company not only delivered strong earnings and revenue growth led by our channels businesses, we also positioned ourselves for future success with strategic investments in our global channels businesses."

Fox's cable network programming group reported a 25% increase in operating income to $1.08 billion. Domestic channels operating income was up 18% led by contribution from the regional sports networks, Fox News Channel and National Geographic Channels, the company said.

Cable revenues were up 16%, with domestic affiliate revenues up 9%. Domestic advertising revenues were up 4%, reflecting growth at the regional sports networks and FX Networks.

Operating income dropped 9% to $213 million at Fox's Television segment. Retransmission revenue doubled and programming costs were lower, but those were offset by a 7% decline in national and local advertising resulting mainly from lower ratings for American Idol.

American Idol was a drag on Fox's fourth quarter broadcast business, conceded Chase Carey, News Corp. COO, but he was optimistic the network could right the storied show.

"There's no question Idol affected our broadcast business," he told investors in News Corp.'s quarterly earnings conference call.

David Hill, News Corp.'s senior executive VP, has been tapped to oversee American Idol and The X Factor while Fox searches for a replacement for reality chief Mike Darnell.

"He's shown a unique touch in a number of places," said Carey.

Carey said not to count out Idol quite yet.

"We think there is an opportunity to reenergize [it]," he said. "It's still a profitable show. It's still a top 5 show."

Fox CFO John Nallen said the company expected its television segment to post strong earnings growth in fiscal 2014. It will be spending more than $150 million in increased programming and marketing investment to build ratings leadership he said.

"Growth at this segment will be underpinned by continuing increases in retransmission consent revenues," he said. "While we will also benefit from the broadcast of Super Bowl XLVIII, this benefit will be largely offset by reduced political revenues at the TV stations from the record level we had in 2013."

Carey added that the advertising outlook "anticipates that the results from the recent broadcast and cable upfront along with incremental viewership expected for the Super Bowl and new domestic and international cable channels, will provide continued advertising growth in the year ahead."

He said that Fox Broadcasting expects pricing to increase in the mid to high-single-digits, led by sports broadcasts. “We project low-single-digit growth in the local ad markets,” he said. He added that the scatter market is strong, with double-digit premiums to upfront pricing.

"Pricing trends in our domestic cable channels are expected to be up in the high-single-digits," he said.

Michael Malone contributed to this story.