Media earnings show state of the industry
Several large media companies reported earnings on Wednesday, highlighting where they were or weren’t making money.
For News Corp., the parent company of The Wall Street Journal, income came from one-time gains and a small increase in revenue. Here’s the WSJ story:
News Corp.’s earnings more-than doubled in the three months to December because of one-time gains related to acquisitions and strength in the cable networks division.
Net profit totaled $2.4 billion, or $1.01 a share, compared with $1.1 billion, or 42 cents a share, a year earlier. Much of the increase was related to the acquisition of the 50% stakes in Fox Sports Australia and Fox Star Sports Asia that News Corp. didn’t already own.
In the publishing division, which includes newspapers such as The Wall Street Journal, the Australian and the Times of London, book publishing and marketing inserts, revenue was roughly flat at $2.1 billion.
The results reflect lower advertising revenue at the Australian publications offset by higher contributions from the U.K. division. The publishing group’s operating income rose to $234 million from $218 million.
News Corp. took a $56 million charge in the quarter related to the costs of continuing investigations into phone hacking at its U.K. newspaper unit. The company took $87 million in such charges in the prior quarter and $224 million of them in fiscal 2012.
At Time Warner, net income was boosted by TV advertisements and fees, which helped offset less exciting results from the print business. Here’s the story from the New York Times.
The cable television business helped propel Time Warner to a 51-percent increase in net income and offset weakness in magazine publishing and movies in the three months that ended Dec. 31.
The media company said Wednesday that an increase in advertising revenue and subscription fees paid by cable and satellite companies to carry channels like TNT and TBS helped lift net income in the fourth quarter to $1.17 billion, or $1.21 a share, up from $773 million, or 76 cents a share, in the same three-month period last year. Revenues remained flat at $8.2 billion.
The results underscore the widening gap between the fast-growing cable television business and the more challenged magazine publishing industry and, to a lesser degree, the movie businesses.
At the same time, Time Inc., the nation’s largest magazine publisher, readied for layoffs of 6 percent of its global work force, cutbacks that it announced last week. Time Warner estimated the reductions would cost an estimated $60 million in restructuring charges, which will be reported in the first quarter of 2013.
Revenue at the company’s television networks, which include TNT, TBS, and CNN, rose 5 percent to $3.67 billion in the quarter. Subscription and advertising revenues at Time Warner’s suite of cable channels grew 7 percent and 3 percent, respectively, in the quarter, compared with last year. An increase in the number of National Basketball Association games on Turner channels, as well as coverage of the presidential election on CNN, led to higher ratings.
Then there’s IAC, the parent of Newsweek Daily Beast, and their drop in profit. Here’s the WSJ story:
IAC/InterActiveCorp.’s fourth-quarter earnings fell 16% as the Internet firm continued to book heavy operating losses from its media division, which includes Newsweek Daily Beast.
IAC, led by media mogul Barry Diller, has pursued a series of acquisitions in recent quarters in a bid to bolster its core online dating and search divisions. The company’s brands include dating sites like Match.com and OKCupid, as well as Ask.com, About.com and Collegehumor.com.
It also owns Newsweek Daily Beast. The iconic magazine published its final print edition in late December, completing its transformation into a digital-only outlet.
It seems that media companies are still having a hard time making online publications yield enough revenues. And that TV is still king in terms of profit margins. So, what will they do? Apparently, sell.
Richard Branson is set to gain $316 million in the sale of Virgin Media, according to Bloomberg.
The deal values Britain’s second-biggest pay-TV company at $47.87 a share, the companies said in a statement. That represents a 24 percent premium to Virgin Media’s closing price on Feb. 4, before the company said it was considering a deal. Including debt, Virgin Media is valued at $23.3 billion.
The acquisition, the largest media transaction since 2007, puts Liberty Global in a dead heat with Comcast Corp. as the world’s biggest cable company, and opens a new battleground with billionaire Murdoch, whose News Corp. controls British Sky Broadcasting Group Plc. Malone is using Liberty Global to grow in markets outside the U.S. and already runs pay-TV providers in Germany, Belgium and Switzerland.
Others, like Netflix, in the lucrative TV space are creating new content and rivaling their TV-based competitors. Here’s the WSJ blog post on their latest creation.
Netflix turned plenty of heads over the weekend with the debut of House of Cards, a political drama series bankrolled by the company at a cost of $100 million. Exclusive to the streaming service and put online all at once — a 13-episode dump of the entire first season — the unconventional release of the show got plenty of attention.
For Netflix, which earns all its revenue from $8/month subscription fees, the more big hit shows you can only find on its service means more subscribers — the only way the company can grow. In that sense, it’s in a similar position to premium cable TV channels like HBO, which need to convince cable customers to take an extra hit on their monthly bill just to have access to the shows they can’t get anywhere else.
With everyone vying for customers’ attention, I expect media companies will continue to try to find new ways to earn advertising revenue and a larger share of their targets’ time.