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News Corp. Filmed Entertainment Quarterly Income Down

5 Aug, 2009 By: Erik Gruenwedel

Strong home DVD/Blu-ray sales of Taken, Marley & Me and Slumdog Millionaire were not enough to offset slumping TV catalog contributions as News Corp.’s filmed entertainment unit reported operating income of $203 million for the quarter ended June 30, down 8% from income of $220 million during the previous-year period.

Quarterly revenue increased 13% to $1.7 billion from $1.5 billion last year.

News Corp.’s filmed entertainment includes 20th Century Fox Home Entertainment.

Also affecting quarterly results were upfront launch costs for theatrical releases X-Men Origins: Wolverine and Night at the Museum: Battle of the Smithsonian, in addition to pre-release launch costs for Ice Age: Dawn of the Dinosaurs.

CFO David DeVoe, in a call with investors, said he expects home entertainment contributions from these titles to boost future results.

Chase Carey, president and COO of News Corp., said the $1-per-day movie rental kiosk operator Redbox “grossly undervalued” 20th Century Fox Home entertainment content and that the media giant was “actively trying to deal with it.”

He said it was too early to determine whether the 5% decline in year-to-date home entertainment revenue was a permanent trend or due to the economy.

“$1 [movie] rental, [however,] is clearly an issue for us,” Carey said.

The COO said there is a need to build digital business models that generate dual revenue streams, rather than just cannibalizing existing businesses. He said efforts by other media companies to repurpose original content to subscribers on multiple platforms for free aren’t the way to go.

“I don’t think TV Everywhere is the answer,” Carey said. “There needs to be larger broader strategy.”

News Corp. CEO Rupert Murdoch said he wasn’t concerned about future sellthrough revenue from theatrical releases Wolverine, Museum: Battle of the Smithsonian and Ice Age: Dawn of the Dinosaurs, which he said would generate “robust profits” in secondary markets in 2010 and beyond based in part on the historical performance of Fox tentpole titles.

“I think the worst may be behind us,” Murdoch said. “It’s reflecting a market that is realistic.”

For the full fiscal year ended June 30, filmed entertainment’s operating income fell to $848 million, from a record $1.25 billion in fiscal 2008. Although the full year included several theatrical, DVD, Blu-ray Disc and digital successes, contributions were below those of the prior record year, which included the worldwide theatrical and home entertainment performances of The Simpsons Movie, Live Free or Die Hard, Alvin and the Chipmunks, Fantastic Four: Rise of the Silver Surfer and Juno.

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