News Corp is fighting to disprove fresh charges that a video software and content security provider it has controlled, NDS, illegally helped to undermine Rupert Murdoch’s business rivals. News Corp COO Chase Carey said tonight that a BBC1 show that revived the allegations in a report on Monday “presented manipulated and mischaracterized emails to produce unfair and baseless accusations.” NDS chief Abe Peled demanded a retraction saying that the investigation that ran on the program Panorama showed “flagrant disregard to the BBC’s broadcasting code, misleading viewers and inciting widespread misreporting.” The allegations come at a sensitive time: They feed into the investigations into phone hacking and bribery at News Corp’s UK tabloids. Also, this month Cisco agreed to pay $4B for NDS. News Corp currently owns 49% of the firm.
News Corp COO Chase Carey threw down the gauntlet to Idol‘s producers today, telling investors that the show’s ratings are “disappointing” and that the franchise “can and should provide fresh energy.” The show is “a glass half full,” he told the Deutsche Bank Media & Telecom Conference. It’s still big, but grappling with new competitors including NBC’s The Voice and Fox’s The X Factor. But Carey doesn’t seem to think that lets Idol off the hook: News Corp has factored into its financial guidance the fact that “the ratings aren’t where we hoped for them to be.”
For the most part, Carey was characteristically upbeat about News Corp’s prospects, especially in cable networks. He likes the fact that about half of Fox News’ pay TV distribution carriage contracts are due to be renewed in 2012 — an election year. Although he wouldn’t say how much additional revenue he expects to see in those deals, ”there’s a lot of growth left,” he says. He adds that “one of the great things” about the unit is that its costs are
Freelancer Cari Lynn is contributing to Deadline’s coverage.
Add the News Corp COO to the list of Big Media execs who believe that they were simply misunderstood in the debate that led Congress to put aside the Hollywood supported anti-piracy bills. “Clearly this got turned upside down, the whole issue,” he said at a conference sponsored by All Things D. Despite the claims of opponents, including those in the tech industry, the proposals empowering the government to block overseas Web pirates “isn’t about censorship…If they did it in the U.S., they’d be shut down. So they moved it offshore. You should still be able to shut them down.” He seemed to take a subtle dig at the MPAA for not making the industry’s case more effectively as opponents turned the issue into a populist crusade. ”If you look at what went on, you’d say that was not a process to replicate,” Carey says. The creative community didn’t ”anticipate the viral aspect and message getting twisted.”
You wouldn’t know that the Hulu auction was a failure based on the way News Corp COO Chase Carey describes the owners’ plans. They decided to hang on to the digital video service because its value to them “dwarfed some of the values that were being put on it” by bidders including Dish Network and Google. Keeping Hulu reflects “a judgment that this digital space is incredibly important and is going to be, over the next five years and beyond, the most important field we have to navigate.” As a result, he told the UBS Annual Global Media and Communications Conference, “we’ll do what’s necessary to make it grow.” But that doesn’t necessarily mean adding movies to the package to make it more competitive with Netflix. ”Me-toos aren’t a great place to be in this business,” Carey says. “We want to look at it with a fresh eye.”
Investors strangely seemed uninterested in the News Of The World hacking scandal. But one of the consequences — News Corp’s decision to abandon its effort to buy BSkyB — was a concern. Carey says that it’s “one of the things we have to figure out” because he says the company gets ”a fraction of credit” it believes it deserves for its 39% stake in the UK media company. News Corp must ”do a better job communicating value.” Still, he didn’t leave investors empty-handed: Carey says that News Corp’s recently launched round of share repurchases is “certainly not a one-time thing. It’s an important part of our capital allocation,” he said, adding that News Corp shares are ”woefully undervalued.”
UPDATE, 2:35 PM: The comment about James came from News Corp president Chase Carey, filling in for Rupert Murdoch, who wasn’t on the quarterly conference call with analysts and reporters. Despite growing concerns about James’ role in the News Of The World hacking scandal, the deputy COO “has done a good job and we are not contemplating any changes,” Carey said. He added, in response to a question, that the company is taking “seriously” the strong opposition that several shareholders expressed at the recent annual meeting to many members of the News Corp board — which includes three members of the Murdoch family. “The board will, and is, discussing those votes,” he says. “The board continues to evolve. …. That being said, we’re proud of the board.”
In other matters, Carey says that “we’re not buying the (Los Angeles) Dodgers,” but didn’t elaborate. Sports costs are not a big concern for the company for now because “outside of Los Angeles, most of our contracts are long term,” he says. He’s also unfazed by the NBA strike, saying that “it’s not a significant financial event for us” although “we’d like to see them settle it.” Carey denied that Fox is offering make-goods ads for lower-than-expected initial ratings for The X Factor: ”We have the No. 1 show and make real money from it,” he says. “It came out a bit below where we targeted … but is building momentum.” Not much detail about the collapse of the auction for Hulu. Carey says that it ”has been a positive for us in terms of creating value” despite its “complicated ownership structure.” Carey also didn’t provide much insight into the new programming deal with DirecTV, although he says it’s “fair for both of us.”
News Corp COO Chase Carey: “Nothing We’ve Seen” To Support Allegations That 9/11 Family Phones Were Hacked
News Corp COO Chase Carey bobbed and weaved today when audience members at the Goldman Sachs Commmunicopia Conference asked questions that touched on the company’s hacking and police bribery scandals. “The media noise has been surreal around it,” he says. “The truth will come out. The issues will work their way out.” He did note that there’s “nothing we’ve seen” to support the allegation — which the Justice Department is investigating — that News of the World may have hacked phones of families of 9/11 victims. Carey wouldn’t rule out the possibility that News Corp might renew its effort to buy the 61% of BSkyB that it doesn’t already own. “We’ll continue to be a shareholder. … We have a lot of flexibility if and when something arises.” He added that he’s “not going to get into speculating” about whether UK officials might force News Corp to give up its current shares in the satellite power. As for the newspaper publishing business — which a lot of investors would like to see News Corp dump – Carey says the company should “take a fresh look at it.” But that could involve expanding operations such as Dow Jones and The Wall Street Journal. “There are things beyond (putting them on iPads) that we can do.”
UPDATE: Rupert Murdoch Says He Has “Full Confidence” In James As A Possible CEO Despite His Role In Hacking Scandal
UPDATE 3:10 PM: Rupert Murdoch gave his son James — and the News Corp board — a vote of confidence today in the CEO’s first Q&A with analysts and reporters since early July, when the News Of The World hacking scandal turned his company upside down. Murdoch says that he and COO Chase Carey “have full confidence” in James to be a potential CEO of News Corp — even though three former company executives say James misled members of Parliament last month in his testimony about the scandal. Rupert joked that he hopes his job “won’t be open in the near future.” He added that “in the end it’s a matter for the board” to decide. And he says he does not plan to make any changes at the board, which is filled with directors who have close ties to his family. “It’s a very strong board — very often very critical,” Murdoch said. He specifically backed Viet Dihn, who’s classified as an independent director and is overseeing the company’s scandal investigation even though he’s also a godfather to one of Rupert’s grandchildren. Dihn “is a completely independent director,” Murdoch says. He sidestepped a question about how he now would alert himself to ethical problems at News Corp saying that “in retrospect we should have continued investigating” reports about hacking at NOTW that surfaced years ago. Reciting what sounded like well-rehearsed talking points, Murdoch said: ”Were there a dozen guilty people or two dozen? We are cooperating totally with police in their investigation and expect it to go on for some time.” Meanwhile Murdoch says he still wants to hold on to his newspaper assets in the UK and U.S. “I’m shocked and appalled at what happened at one small corner,” he says. “Everything else is fine.”
PREVIOUS, 1:08 PM: Rupert Murdoch says that he and the News Corp board believe that “I should continue” to be chairman and CEO. But he added that COO “Chase Carey and I run this company as a team.” Murdoch said in a conference call with analysts and reporters that “I’ve run this company for more than 50 years” and reporting tactics including the phone hacking discovered at News Of The World “have no place at News Corp.” He says that the board and the company have independently hired outside lawyers and a corporate governance expert to sort through the issues raised by the scandal. “There can be no doubt about our commitment to ethics and integrity,” Murdoch said.
UPDATE, 3:40 PM: Although the drama in today’s analyst call involved the News Of The World hacking scandal, News Corp execs made a few interesting points about the company’s less sensational business activities. COO Chase Carey says that the Hulu auction is “progressing largely according to plan.” But he left open the possibility that it won’t result in a sale, rhetorically asking “does it make sense to pursue that path or for us to stay in an ownership position?” He and Rupert Murdoch also said that they support the Fox Business Network, claiming it was just an oversight that they didn’t mention it when listing cable channels that are poised to grow. “The ratings are in fact improving,” Murdoch said, adding that “we need more distribution, it’s true.” Still he says Fox Business is breaking even on a cash flow basis. Carey also says that FX has the potential to become a bigger revenue generator. All told, Murdoch says that News Corp operations were “exceptional” in the last quarter providing the company with the “most robust balance sheet in our history.”
PREVIOUS, 1:19 PM: The media giant says that it did well in its fiscal fourth quarter — as long as you don’t count the $245M earnings hit from the MySpace sale. The company had net profits of $683M, down 22% from the period last year, on revenues of $8.96B, up 10.5%. Net earnings came in at 26 cents a share — but if you factor out MySpace they hit 35 cents. Analysts expected 30 cents.
What a bitter defeat for Rupert Murdoch. His News Corp this morning just finally made clear it has withdrawn its bid for full control of British Sky Broadcasting. The news comes as British lawmakers were about to demand that Murdoch give up his goal of taking complete control over the lucrative U.K. broadcaster in a $14 billion bid for the 61% of the pay-TV operator that News Corp doesn’t already own outright. News Corp wanted to get its hands on all the UK satellite giant’s swelling £5.7 billion ($9 billion) revenues. It would have cemented Rupert’s position as the most powerful media baron in Britain and this as the biggest deal of his storied career. So the decision to withdraw his bid can be seen as his biggest business debacle as BSkyB was the last and most important piece of his ambitious plan to control satellite TV across the globe. Here’s the official News Corp statement, which trots out Murdoch’s No. 2 Chase Carey for the first time, presumably because he’s the only News Corp top exec left unblemished by the phone-hacking scandal and its subsequent cover-up and fall-out:
News Corporation (“News Corp”) announces that it no longer intends to make an offer for the entire issued and to be issued share capital of British Sky Broadcasting Group PLC (“BSkyB”) not already owned by it. Chase Carey, Deputy Chairman, President and Chief Operating Officer, News Corporation, commented: “We believed that the proposed acquisition of BSkyB by News Corporation would benefit both companies but it has become clear that it is too difficult to progress in this climate. News Corporation remains a committed long-term shareholder in BSkyB. We are proud of the success it has achieved and our contribution to it.”
The scandal sank a deal worth more than all of Murdoch’s papers combined. It was to have been approved at the start of last weekend but then was delayed until the Fall and then until 2012 because of the outcry. In an about-face today, British Prime Minister David Cameron put his party’s weight behind an opposition Labour Party motion up for a vote declaring that News Corp’s bid for full control of BSkyB would not be in the national interest. Meanwhile, Britain’s House of Commons was preparing to endorse a resolution urging Murdoch to withdraw his bid for BSkyB. Cameron told the body today that the scandal raised “serious questions” about the mogul’s fitness to run the country’s largest pay TV company. A government inquiry, he said, would consider “the way in which [News Corp] management failures may have allowed this to happen.” Leaders of all three major political parties are supporting the resolution, which would not be binding. But UK observers said it loomed as a powerful expression of the tide running against Murdoch’s newspapers.
The message for the television industry at this year’s National Cable Show was clear: It’s all about broadband now. Programmers agreed that they have to focus on consumers who want to watch video on their smartphones and tablet computers. Meanwhile, cable operators know that they can make a lot of cash by enticing new customers to buy broadband now that the TV service business is mature. The big question is whether the Big Media companies can move fast enough to head off competitors such as Apple, Google, and Netflix. But we’ll let the moguls have the last word:
Viacom CEO Philippe Dauman
- “For the content owners there’s never been a better time.”
- “Netflix is primarily a service that provides library programming. … Netflix got involved in one show (House Of Cards) that was a pay television kind of project, but that isn’t their fundamental business.”
- “If we are ad supported, (then) we need to have a measurement system in place so the mobile device in the home can sell ads. … (Nielsen) is not measuring it now. That’s one of the obstacles [for TV Everywhere].”
- “Consumers are changing. … People don’t want to watch the 17th repeat of the same show.”
- “In a world of a lot of choices, Snookie still rules.”
News Corp COO Chase Carey
- “We have to do a better job of exciting consumers.”
Time Warner CEO Jeff Bewkes
- “Let’s all cheer up. This isn’t the music industry. It’s the cable industry. … It’s morning in the cable industry.”
- “We’re all sitting here at this convention at the cusp of putting all of [our programming] on demand. … We need to get [shows] on every device.”
- “Put the TV on all the Internet devices and don’t charge people to do it and allow them to [access] they way they’re accustomed to.”
Comcast CEO Brian Roberts
- “We are demonsrating a whole new level of (Internet) speed. … It’s where the future of broadband is headed.”
- “We need to make the television feel as relevant as all of these other products [such as smartphones and iPad tablet computers].”
Time Warner Cable CEO Glenn Britt
- “There’s no such thing as a TV anymore. There’s a video display device.”
- “I see Netflix as another programmer. But clearly if there is something that makes consumers not want to buy the big package (of programming) that we’re selling then that’s a threat to all of us.”
- “There clearly is a growing underclass of consumers that can’t afford [cable TV] and they want it. It would behoove all of us to have smaller packages… The economics make it difficult, but it would serve us well to worry about that group.”
Cox Communications President Pat Esser
- “You have to keep going back to the consumer and asking what they value. … Consumers wil reward you for doing that. And in some cases you won’t control all of it.”
UPDATE, 3:15 PM: Add NewsCorp COO Chase Carey to the list of executives of studio owners who characterize Premium VOD as merely a test that shouldn’t hurt theater owners. In a quarterly earnings conference call with analysts and reporters, Carey said that Fox and other studios are beginning to offer 8-week-old movies to cable and satellite VOD because they had little choice: Services such as Netflix and Redbox are renting DVDs for as little as $1 a night ”and that doesn’t work,” Carey says. “We have to build appropriate values and windows into our business.” Fox is “in the very early stages (of the P-VOD trials) with one small film.” He doesn’t want it to affect exhibition chains because they “set the pace for the film industry.” Still, he hedged when asked whether Fox would let exhibition companies see how well P-VOD movies perform — something that the National Association of Theater Owners says it wants. Carey says he “doesn’t know what request has been made,” although he adds that it’s “important for everyone to understand what’s going on.”
UPDATE: The Walt Disney Co was the last major studio and network to report quarterly earnings, and its fiscal 3rd quarter profit rose 40% on the strong box office grosses from Pixar’s Toy Story 3, Marvel’s Iron Man 2, and Tim Burton’s Alice In Wonderland 3D. As promised, here is an earnings roundup showing that Big Media is alive and well and even flourishing not just this quarter but in many cases for next quarter or even the entire year. Yet the trickle down effect has been slow or nonexistent for Hollywood. After rounds of layoffs during the economic crisis, the moguls are still slow to put people back to work. And the movie and TV community still is underemployed. But what everyone can count on is that Big Media’s good news for the benefit of Wall Street will turn into bad news to the detriment of talent, behind-the-camera, post-production, and below-the-line unions when it’s time to negotiate:
August 5th: Viacom Inc Reports Sharply Higher Earnings For Q2
Credit the rebounding economy and recovering advertising market. Net earnings rose to $420 million, or 69 cents a share, up 52% from $277 million, or 46 cents a share, a year ago. Executive Chairman Sumner Redstone gushed, ”With six months under our belt in this calendar year, day after day our confidence continues to grow as the emerging economy recovery builds. Now of course we’re not all the way back, but the light is brighter than it’s been for some time… Consumers are returning to the marketplace, marketers are beginning to spend again to grow revenues and capture share and Viacom is now and will continue to benefit.” Revenue at Viacom’s media networks group rose 6% to $2.1 billion.
Viacom CEO Philippe Dauman said ad revenue growth has been improving quarter by quarter. “Once we get into October and into the December quarter, we will benefit from this upfront where we have greater volume than last year at higher pricing. Dauman singled out Jersey Shore as a show where ”we have advertisers scrambling to get on it. We have advertisers who want to be wall to wall in particular episode. We’re turning them away.” Viacom’s movie business was down 10% to 41.25 billion, led by a 43% drop in home entertainment revenue. Also, Paramount Pictures has primarily been distributing others’ films like Iron Man 2 and Shrek Forever After in 2010 and self-financing its own pics. It is deliberately pursuing a strategy of a smaller slate of films in 2010-2011. Still, the film unit booked income of $69 million, reversing an $8 million loss in the same quarter a year ago. Viacom continued to post equity losses from its EPIX joint venture but said it should approach break-even by the end of the year.
August 4th: News Corp Posts Improved 4th Quarterly Results
News Corp posted a profit of $875 million, or 33 cents a share, for its fiscal 4Q ended June 30th easily beating analysts expectations. That compared with a loss of $203 million, or 8 cents a share, a year ago, when News Corp took an impairment charge. Revenue grew 6% to $8.11 billion, as companies spent more to advertise on the company’s television stations, TV channels and newspapers. That beat the average forecast of analysts of $8.05 billion. COO Chase Carey explained that brisk sales of advertising at Fox Broadcasting and the company’s cable television networks made the difference, while ad rates at the Fox network are up by a double-digit percentage from this spring. Ad rates are even better at the cable channels, which already represent more than 50% of the company’s profits. Local television station advertising revenues improved 29% in the quarter and 8% for the year compared to the same periods a year ago, reflecting strength in the automobile and telecom sectors.