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DVD Major Q3 Driver for News Corp.

9 May, 2007 By: Erik Gruenwedel

Strong DVD sales and stronger theatrical revenues helped News Corp. record a 82% jump to $410 million in third quarter (ended March 31) operating income in filmed entertainment, compared to $225 million during the same period last year.

The media giant cited 20th Century Fox Home Entertainment's DVD releases of Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan, The Devil Wears Prada, Little Miss Sunshine, Ice Age: The Meltdown and Eragon as significant contributors to the quarter.

In addition, robust TV DVD sales of Fox TV programs “Prison Break” and “24” led one analyst to question whether the filmed-entertainment unit could ever top the third quarter results.

Peter Chernin, president and COO of News Corp., told analysts in a conference call that film entertainment did benefit from a certain operating momentum in the quarter, notably with Night at the Museum, which has grossed more than $570 million globally.

“Certainly, we are going to ask [filmed entertainment] to keep getting it better,” said Chernin. “We had extremely strong theatrical [results] from Museum and ongoing very strong video sales from Borat. This was a very unique quarter. We continue to believe that all the indications in the movie company are still going very positively.”

Chernin said News Corp. would continue to leverage Fox entertainment assets across multiple distribution channels and bristled at one analyst's assertion the company was too cautious with electronic sellthrough.

“I don't think that is a fair characterization,” said Chernin, arguing that the recent joint venture with NBC Universal was the most aggressive move any content company had made to legitimize a new business model.

“You see us experimenting pretty much as you see everybody else experimenting,” he said.

Experimentation could also include consolidation. Speaking Tuesday at a cable industry confab in Las Vegas, Chernin didn't rule out future melding between content providers and cable companies, including No. 1 cable operator Comcast Corp.

Comcast has been very public with its desire to up video-on-demand's profile, including offering major Hollywood fare day-and-date with theatrical and DVD releases.

“You have a Comcast platform, that's an incredibly valuable platform to bolt things onto, to monetize,” said Chernin, as reported by the Associated Press. “I believe that you will see continued consolidation and I think you will see big companies continue to get bigger.”

Also, operating income for Fox Broadcasting Company increased 49%, in part to the enduring popularity of TV favorites “American Idol,” “24” and “House.” Rookie program, “Are You Smarter than a 5th Grader,” was Fox's highest rated series premiere in 13 years.

Overall, News Corp. posted net income of $871 million on revenues of $7.5 billion, compared to income of $820 million and revenues of $6.2 billion during the same period last year.

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