News Corp Reports $203 Million Loss On MySpace Writedown

09/05/2009 05:12 am ET | Updated May 25, 2011

LOS ANGELES — News Corp said Wednesday it lost $203 million in the latest quarter due to a huge writedown at MySpace, but Rupert Murdoch said his global media conglomerate is seeing signs of life in moribund advertising markets.

Results for the quarter to June 30 narrowly beat analyst expectations and shares rose 2 cents in after-hours trade to $10.60 after closing down a penny at $10.58 in the regular session.

Despite the loss, the sprawling New York-based media company that owns The Wall Street Journal, the Fox broadcast network, Sky Italia and newspapers in Britain and Australia said the economy was slowly turning around and predicted revenue growth in the current fiscal year.

"Advertising markets, while weak and particularly hurt by the slump in cars and finance, have shown some good signs of life," Murdoch said on a conference call. "I think the worst may be behind us but there are no clear signs yet of a fast economic recovery."

The fiscal fourth quarter loss of 8 cents per share compares with profit of $1.1 billion, or 43 cents per share, in the same quarter a year ago. The results included a $450 million impairment charge and $180 million for restructuring charges at Fox Interactive Media, which houses MySpace.

MySpace recently laid off 700 workers and broke the lease on bigger office space in west Los Angeles that it no longer needed.

News Corp. bought MySpace for $580 million in 2005, but reflecting the social networking site's stalled growth, the company recently shuffled its leadership team, ousting co-founder Chris DeWolfe in favor of Owen Van Natta, a former executive at rival Facebook, which has surged past MySpace in overall users.

Fox Interactive Media revenue fell 15 percent to $192 million, dragged down by a 22 percent decline in advertising revenue, including less ad revenue at MySpace.

The quarterly earnings conference call also marked the first time that News Corp.'s new president and chief operating officer, Chase Carey, addressed investors since being re-hired by the company July 1.

Carey spent 15 years at News Corp., including as co-COO, before he took the helm at DirecTV Group Inc. in 2003.

"We are in an industry that seems to be in a state of shock from the combination of the economic crisis and the digital revolution," Carey said. "On the broadcasting side, we have an ad-supported business model that does not work."

Murdoch indicated Carey would have a couple major tasks: fixing the Fox broadcast network and making sure the company's newspapers make money online.

The Wall Street Journal is one of the few newspapers that successfully charges subscribers for its Internet version and Murdoch said its other papers, such as The Times of London, could begin to do so this fiscal year.

"I believe that if we are successful, we will be followed by other media," Murdoch said.

Advertising revenue was down across a range of properties in the quarter, including a 10 percent drop at News Corp.'s cable networks division, which contains the Fox News Channel, although cable network revenue grew 8 percent to $1.50 billion.

The broadcast television segment's operating profits sank 66 percent to $95 million, with revenue down 19 percent to $1.08 billion. Local TV station ad revenues fell 27 percent in the quarter from a year ago.

Revenue from the 20th Century Fox movie studio grew 13 percent to $1.72 billion helped by home video revenue from "Taken" and Fox Searchlight's "Slumdog Millionaire."

Newspaper and information services revenue sank 24 percent to $1.40 billion, dragged down by lower display and classified ads.

Adjusted operating income for the company overall fell 30 percent to $948 million, or 19 cents per share, just beating analyst forecasts of 18 cents per share. Revenue fell 11 percent to $7.67 billion, a hair higher than expected revenue of $7.63 billion.

For the year, adjusted operating income fell 33 percent to $3.56 billion, slightly worse than the 30 percent drop the company forecast. Annual revenue fell 8 percent to $30.42 billion from $33.00 billion.

The company predicted that revenue would grow 4 percent in fiscal 2010 despite flat advertising revenue and that adjusted operating profit would grow by a high single-digit percentage from the fiscal year that ended in June.

Analyst Jason Helfstein of Oppenheimer & Co. said the results largely matched expectations.

"The quarter came out ahead of reduced expectations on an operating basis as a result of cost-cutting," he said, adding that the future guidance was "basically in line" with forecasts.