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News Corp. Profitable Despite Sluggish Movie Biz

8 Nov, 2006 By: Erik Gruenwedel



Despite a $129 million drop in filmed entertainment revenue, News Corp. posted first quarter (ended Sept. 30) income of $843 million compared to a loss of $433 million during the same period last year.

Worldwide box office revenue of $275 million for The Devil Wears Prada and pay-per-view from Fantastic Four was offset by pre-launch DVD costs for X-Men: The Last Stand and Ice Age: The Meltdown, among others.

Revenues for film entertainment (including 20th Century Fox Home Entertainment) fell to $1.2 billion compared to $1.4 billion last year, which included strong DVD sales of Robots and Hide and Seek and cable pay-per-view revenues from Alien vs. Predator and I, Robot.

TV DVD releases of “Prison Break,” “The Simpsons” and “24” contributed to quarterly revenues.

Overall revenues totaled $5.9 billion compared to $5.6 billion last year.

News Corp. president and COO Peter Chernin, in an investor call, said the media giant remains bullish on filmed entertainment in fiscal 2007, specifically on a number of DVDs released in the second quarter, including X-Men 3 (nine million units shipped to date) and Ice Age 2, which streets Nov. 21.

He said Fox would ship more than 30 million DVD units in the second quarter based on a number of titles.

Chernin said News Corp. is focused on establishing new distribution channels for Fox studios' expansive film and TV content. He said Fox is seeking ways to monetize full episodes of TV fare on community site MySpace.com in addition to generating ad-supported, three-minute clips on affiliated sites.

The COO weighed in on next-generation optical media saying he doesn't anticipate a break in the HD DVD, Blu-ray Disc format war anytime soon. Chernin said any resolution would be market driven, the latter he said presently features a “tiny” number of hi-def players at very high prices.

“You are going to see a huge number of Blu-ray players entering the market through [Sony's] PlayStation 3,” he said. “The marketplace will become very interesting once it comes out.”

Despite a dearth of Fox content available on Apple's iTunes, Chernin said the studio is in talks with the computer maker to address the economics, content protection issues and competitive issues with the platform.

“We have good solid relationships with iTunes,” said Chernin. “We appreciate a unique and excellent distribution arrangement with them on the TV side. We are in talks with them on the movie side. We have a lot admiration for [iTunes].”

He said discussions with Apple and other digital distribution platforms would likely result in the overhaul of online rental and sell-through pricing to include daily views, multiple views, weekly and monthly.

“I like the sell-through model,” Chernin said. “I think consumers like owning content. But if there is a group of people who would prefer shorter terms at different pricing levels, I think one of the important things to have is flexibility in your business model so you can please consumers in multiple fashions.”

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