Rupe goes on a roll

News bags $1 bil but studio stalls

By STEVEN ZEITCHIK

Murdoch

Chernin

Movies dimmed an otherwise bountiful holiday for Rupert Murdoch as reduced profit on the studio side negated success in News Corp.'s TV and cable biz.

Conglom's overall net income rose from $386 million to $1.07 billion for its fiscal second quarter, but studio profit dropped 27% over the holiday period, falling to $299 million from $408 million a year earlier.

A chunk of company's net income came from the sale of an educational publishing unit that netted nearly $381 million, and operating income actually fell to $920 million from $954 million, largely on the film decline.

While "Walk the Line" has grossed more than $110 million domestically, studio was dinged by "In Her Shoes," which grossed only $32 million domestic.

And homevid holiday hits like "Fantastic Four" and "Mr. & Mrs. Smith" couldn't rescue the division, in part, company said, because last year was exceptionally strong, with DVD-friendly pics like "DodgeBall" and the "Star Wars" trilogy.

Still, chief operating officer Peter Chernin said, "We continue to feel really good about the movie biz." And Fox's profit margins continue to be high for a studio; at an investor meeting Wednesday, Viacom execs cited them with envy.

Company saw improvement in profit, or a shrinking loss, in all other businesses except newspapers.

On the TV side, profits climbed 20% to $183 million, while cable nets saw a jump of 15% to $262 million. Company said it still aims to launch a cable biz network to compete with CNBC before the end of the year.

And its DirecTV satcaster biz --which on Thursday was reported to be in talks with rival EchoStar on a collaborative wireless Internet service -- slashed losses by more than half, to $53 million.

But News Corp. seemed to don an especially thick pair of rose-colored glasses when execs described their reaction to the loss of programming caused by the collapse of the WB and UPN.

"We think this is a big positive for us," Chernin said, because the combination into one channel "freed up" youth demo and ad dollars.

Overall, revenues at News Corp. grew from $6.56 billion to $6.66 billion in the quarter. Company also predicted a growth in operating profit of 12% for 2006.

Part of that gain would presumably come from new acquisition MySpace. Company cited eye-popping stat that 200,000 new users sign up for the site every day, but conglom has yet to decode how to turn the rapt attention of so many young people into cash. "Our mandate is clear: to monetize this vast audience," Murdoch acknowledged.

Murdoch also said company was closely following reports that sexual predators allegedly met victims on the site and was responding by "writing to every school" and not allowing users below a certain age.

Topper also addressed rumors Thursday that News Corp. could be a player to buy Spanish net Univision.

And despite Carl Icahn's push to break up Time Warner, Murdoch said his company was a good size, for both synergy and cash reasons.

"We think it's a good structure," he said. "I don't see the benefit (of a breakup) from a marketing point of view. And I see real destruction in a company such as ours."