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News 'Foresees’ Business Net

11/07/2004 7:00 PM Eastern

News Corp. chairman Rupert Murdoch last week pledged to launch a business-news channel in the “foreseeable future,” but said CNNfn’s December demise isn’t the reason why.

During a fiscal first-quarter conference call, Murdoch told reporters he couldn’t pin down exactly when the new channel would debut, although he did say it will use Fox News Channel’s infrastructure and share overhead costs. He said News Corp. could create a financial-news outlet “quickly.”

Murdoch’s comments reconfirmed what he’s publicly stated before. The issue of the Fox financial-news network resurfaced last Wednesday, when next month’s shutdown of CNNfn came up during the first-quarter call.

Murdoch explained why the timetable for the 24-hour financial channel was hazy.

CNBC FACTOR

“Distribution will be a factor,” Murdoch said. “CNNfn was never a factor in our thinking at all. CNBC is. We expect to go ahead with that in the foreseeable future.

“I can’t give you a date, because it depends on negotiations that are only just beginning for distribution.”

Last week, several MSOs said they hadn’t been approached yet about Fox’s would-be rival to CNBC.

During the conference call, News Corp. president Peter Chernin also provided an update on another network that the media giant is moving from the drawing board to a debut, the Fox Reality Channel.

“We’re on plan to launch the reality channel in the first half of the calendar year,” Chernin said. “Right now, it looks like we’ll be able to launch that somewhere between 10 and 15 million subs, which will be a pretty substantial launch.”

He didn’t discuss where that distribution will come from, or if it will include carriage on 12 million-subscriber DirecTV Inc., the service in which News Corp. now has a controlling interest.

CNNfn’s 30 million subscribers will be up for grabs when it folds in December, and Fox could go after those slots for its new networks.

DIRECTV RENEWAL?

Chernin said Fox Entertainment Group was “close” to completing a carriage-deal renewal with DirecTV for its cable networks, including FX. But at another point, he made it sound like the deal was done.

When asked which side held the leverage in those talks, Chernin said: “I would say they were certainly well-discussed negotiations, but I’m not sure either side won. I think there was a fair deal for both sides. I think Fox got the fair and appropriate value for our channels, and I think DirecTV certainly negotiated this at arm’s length and paid marketplace pricing.”

Sports Business Journal reported last month that News Corp. was asking DirecTV for compensation for retransmission-consent for its Fox TV stations as part of the renewal for its cable networks. Asked about that, Chernin went mum.

“I have nothing to say about it,” he said. “We will announce our deal when we’re ready to announce it and we’ll talk about what our strategies are.”

Chernin did, though, go on to talk about News Corp.’s philosophy about retransmission consent in general.

“What I would say is look, we expect to be adequately compensated for retransmission,” he said. “And we think the value of our broadcast stations, the strong Fox stations — not only Fox, obviously primetime, but also our news product, our sports product and also the growing strength of our UPN stations — we expect to be adequately compensated by all of the constituents that we deal with.”

He said DirecTV’s renewal with Fox didn’t include Fox News Channel, as the network’s contract still hadn’t expired.

As an aside, Murdoch noted that on election night, Fox News Channel generated $5 million in revenue — more than during its first eight months of existence.

“It sounds good, but there wasn’t much revenue the first eight months,” he said, sparking laughter.

FX, FNC BOOST RESULTS

Fox News Channel and FX were both cited during the conference call as drivers for Fox Entertainment Group and News Corp. results for the fiscal first quarter ended (Sept. 30).

Fox Entertainment reported revenue of $2.9 billion, a 5% increase over the prior year, and operating income before depreciation and amortization of $744 million, up 9% from a year ago.

Fox Entertainment said that strong ratings and ad growth for Fox News and FX, as well as higher affiliate revenue for its regional sports networks, drove a 44% increase in operating income before depreciation and amortization at its cable-network programming division.

According to Fox Entertainment, Fox News had operating income growth of 58% in the first quarter due to strong revenue growth, mostly from increased advertising.

Fox’s other cable channels — including its regional sports services, FX and Speed Channel — saw operating profit increase 45% for the quarter, Fox Entertainment reported. At FX, increased ad revenue was driven by the ratings’ success of the original hit shows Nip/Tuck and Rescue Me.

Overall, parent News Corp. posted first-quarter revenue of $5.2 billion, a 12% increase over the prior year, with operating income up 12% to $805 million.

On a final note, during the conference call, Murdoch briefly remarked on the implications of media deregulation: “There’s so much media in this country, no one can possibly complain about concentration.”

 

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