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Chernin ‘Cautious’ About DVD Business

6 Nov, 2008 By: Erik Gruenwedel

News Corp. president and COO Peter Chernin’s characteristic sunny support of DVD appeared in question after the media giant’s filmed-entertainment unit (20th Century Fox Studios) reported a 30% drop in first-quarter (ended Sept. 30) fiscal 2009 operating income.

The segment, which includes 20th Century Fox Home Entertainment, reported operating income of $251 million, compared to $362 million during the prior-year period.

News Corp. cited difficult year-over-year comparisons of theatrical releases Meet Dave, The X-Files: I Want to Believe and The Rocker, and DVD releases Jumper and What Happens in Vegas against FY 2008 theatrical releases The Simpsons Movie and Live Free or Die Hard, for the downturn.

Speaking to analysts in a conference call, Chernin said that in the past three or four weeks he’d seen “quite a bit of softening” in DVD sales, most notably those from other studios.

“We track pretty closely everybody else’s titles,” Chernin said. “Some of the titles (which he characterized as non-major) that have come out … have in our opinion underperformed what we expected of them.”

He said Fox had not released a major title on DVD in “five or six weeks,” and thus the downturn “hasn’t really impacted us, yet.”

Chernin said he remained confident in the studios’ retail relationships and category management at Wal-Mart as well as other big box retailers.

“We have confidence we can outperform the market, but there are cautionary signs coming out of the DVD market,” he said.

Overall, News Corp. reported a 9% decline in consolidated operating income to $953 million from more than $1 billion last year.

Notable performers included cable network programming (Fox News, Sports, etc.) and newspapers and information services (Wall Street Journal), which saw operating income gains of $90 million (due to political TV ads) and $41 million, respectively.

News Corp. net income fell 30% to $515 million (from $732 million last year) despite a 7% increase in revenue to $7.5 billion from $7 billion last year.


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