Movies keep Rupe in the loop

News Corp. draws big from B.O., vid

By STEVEN ZEITCHIK

News Corp. yearns to become an Internet heavyweight, but it still wants to punch like an Old Media fighter.

That challenge was magnified Thursday as company announced earnings. Results showed that even as conglom is making a bold Web play, it's also drawing big coin from box office and DVD sales.

Profit from 20th Century and homevideo jumped nearly 25% in first quarter of fiscal 2006 to $368 million, driven by "Fantastic Four" and "Transporter 2" at theaters and "Robots" and "Hide and Seek" on DVD.

Period also saw the acquisition of several big Internet players, including chat portal MySpace, game community IGN and college-sports site Scout.com, and Murdoch says he has big plans for all of them. We've "transformed ourselves into a new kind of media company," he said, during a conference call. We want to "become a digital powerhouse in our own right."

Company made big purchases over the summer in hope of snaring millions of younger eyeballs. Murdoch touted how buys have already helped conglom rise in rankings for online visitors.

Execs are seeking agility and young tech-savvy customers on the one hand and drawing traditional studio and entertainment coin on the other.

"We'd be naive not to recognize that media as we know it is fast-evolving," chief operating officer Peter Chernin said. "It would be equally naive to assume that growth of established assets is coming to an end."

Overall, first quarter was robust.

Revenue at News Corp was up 10% to $5.7 billion. In addition to pics, ad coin at Fox News division and at net, where the fall season began much earlier than last year, also goosed revenue.

Company did post a net loss in the quarter of $433 million, but number was skewed by a $1 billion non-cash charge associated with FCC TV licenses. Charge is common to the industry.

TV profit also shrunk, by 30%, to $160 million, in part, company said, because of increased marketing costs for the earlier fall season. Loss at satellite division was sliced in half to $61 million.

News Corp. stock has been stagnant of late, a point of consternation for Murdoch. "We continue to be disappointed that this progress is not being recognized by the market," he said.

As News Corp. aggressively pursues the Net, Murdoch said the conglom has eyed AOL, now one of the hottest properties on the market, but hasn't held formal negotiations with Time Warner.

"We've not made any offer to them of any sort for any participation. We have looked at whether there would be ways to work with them," Murdoch said in response to a question. He indicated that the status of rivals Google and Microsoft, who are also circling AOL, "has to be resolved" before News Corp. would enter the fray. "I don't think anything will come of it. It may, but I don't see it," he said.

Yahoo! formally dropped out of the bidding for an AOL deal on Thursday.

And despite rising industry heat for video-on-demand and wireless TV, Chernin said conglom wasn't rushing into deals. "We're going to take our time and look at it pretty carefully," he said.

Fox is the only broadcast net that hasn't yet concluded an on-demand or wireless pact. Chernin said negotiations were in progress.

Murdoch was definitive about wanting to resolve drama with Liberty Media prexy and News Corp. shareholder John Malone that resulted in the activation of a poison-pill provision last year. But he was vague about ways of doing that. "I don't know when we'll reach a deal," he said.

Company does expect to buy back $3 billion in stock in the next 12 months but said it doesn't have other plans for a buyback.

Analysts scrutinized the company's Sky Italia biz, where sub rates were not increasing at the rate some had hoped.

For 2006, company predicted profit to be up about 12%; it said that number will reflect one-time costs of paying compensation to execs from acquired companies.

Chernin also said DVD softness wasn't a concern. "Regardless of what you read, the home entertainment market continues to expand," he said.

Earnings were released after the market closed. News Corp. stock closed up 11¢ Thursday at $14.67. It climbed further in after-hours trading.

(Jill Goldsmith contributed to this report.)