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Murdoch: News Not Taking On ESPN

2/02/2005 4:21 AM Eastern

News Corp. chairman Rupert Murdoch appears to have put the final kibosh on any speculation that the media giant would attempt to launch a national sports network to compete with ESPN, but he offered some more detail on plans to launch a business channel and Fox Reality Channel later this year.

Last year, Murdoch sent some tongues wagging when he said at an industry conference that he would love to launch an ESPN competitor, but he couched that desire with the need to acquire more sports programming -- particularly National Football League games -- to make any such launch viable.

In a conference call with analysts Wednesday morning regarding News Corp.’s fiscal-second-quarter results, Murdoch all but said launching an ESPN competitor is not going to happen.

“Will we be taking on ESPN? We would not do that without a pretty full NFL franchise,” he said.

News Corp. president and chief operating officer Peter Chernin chimed in immediately afterward, adding that ESPN has exclusive negotiating rights with the NFL until October.

“We don’t even have the right to bid against them until they end the formal negotiating period,” Chernin said. “So there’s really nothing to say about a sports channel.”

Chernin said plans to launch Fox Reality and a business channel are moving ahead, adding that it is unlikely that either will require a substantial investment.

News Corp. has said in the past that Fox Reality would be launched toward the end of the company’s fiscal year (which closes June 30), followed by the business channel later in the calendar year.

Chernin said he expects the launches of those two channels to have the widest distribution of any newly launched channel News Corp. has ever done, mainly due to its relationship with direct-broadcast satellite provider DirecTV Group Inc. (in which News Corp. owns a 34% controlling interest) and the strength of its existing cable channels.

“The new launches will be at higher sub rates certainly than we’ve ever launched anything, thankfully for DirecTV, and we are using whatever influence we can bring among our friends, the cable operators, to get as wide a launch as possible,” Chernin said.

“We will have many millions of subscribers additionally to DirecTV,” he added. “I would expect to see new launches certainly on reality and business to be bigger launches than we’ve seen in the cable business in the past five or 10 years, the biggest ever from us.”

Murdoch said that especially for the business channel, securing carriage in the major big-city television markets would be essential. “That is going to take a little time to negotiate,” he added.

Murdoch said News Corp. would not sacrifice the potential upside in affiliate fees received from cable and satellite operators for its existing networks to secure carriage for the new channels.

He added that any operator that threatens to drop an existing Fox network in retaliation for those higher affiliate rates would suffer the consequences.

“Take the Fox News Channel,” Murdoch said. “It would be a very, very brave cable operator who would drop it today, almost at whatever price. It’s got a devoted following of at least 10% of the population, and most of them would march on these people.”

Murdoch also left the door open to negotiating with Liberty Media Corp., which owns a 17% voting stake in News Corp., to win back some of that voting stock.

“I’m very confident that we can come to a friendly and fair resolution where we may be able to take back and cancel some of their shares in return for some cash and maybe some assets they would value more than we would value,” Murdoch said.

“We’re certainly not going to be giving up any assets which we have really big plans for, nor are we going to have our cupboards cleaned out of all of our cash,” he added. “I think there is plenty of room to talk.”

Murdoch added that no substantial talks between the companies have taken place.

Results for the fiscal second quarter were strong, with revenue up 18% to $6.6 billion and earnings up 79.5% to $386 million, or 13 cents per share, from $215 million (8 cents) in the prior year.

Growth at News Corp.’s cable operations helped to fuel that growth -- revenue rose 10.4% to $624 million, and operating income at the cable channels was up 46% to $227 million.

 

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