UPDATE: News Corp Keeps Guidance; Murdoch: 'Worst Is Over'
07 Mai 2009 - 12:59AM
Dow Jones News
News Corp. (NWSA), on its earnings conference call, eased
concerns by maintaining its guidance for fiscal 2009 operating
earnings and by Chief Executive Rupert Murdoch declaring "the worst
is over" for the economy.
Murdoch also gave encouraging comments about the advertising
market, reiterated his belief that the newspaper business model has
to change, and sounded a defiant note about difficulties media
companies have had in monetizing their content amid the rise of
digital media.
"Too many content creators have been passive in the face of
obvious violations of intellectual property rights," Murdoch said
on a conference call with analysts following the company's third
quarter earnings release.
On the call, Chief Financial Officer David Devoe said the media
conglomerate stands by the forecast it made in February for 30%
decline in adjusted operating income for fiscal 2009 from last
year's base of $5.13 billion.
The comments soothed fears of continued deterioration in the
company's outlook amid the global recession and came despite a 46%
decline in the company's third-quarter operating income to $755
million. In February, the company slashed its original 2009 outlook
from an operating income decline in the low to mid-teens.
Murdoch added to that optimism by saying it's "increasingly
clear that the worst is over" for the economy and that "the days of
precipitous declines are done."
Murdoch's latest comments were a sharp reversal from his recent
public comments reflecting a dour outlook for the economy. His
latest remarks echoed similar optimism expressed by other media
executives, economists and federal officials.
"We're beginning to see a number of bright spots that give us
encouragement," Murdoch said. He later added that customers are
coming back to the advertising market and spending.
"I think they realize that they've got to keep their brands in
front of people," Murdoch said, noting that advertising isn't back
to old levels. "At the very least we've hit a floor, and we seem to
be getting a bounce."
When asked whether News Corp. will begin repurchasing shares,
given the stabilizing economy, Murdoch said he was waiting for a
little more evidence that the storm has passed.
"It's early days yet," Murdoch said.
As for the news business, Murdoch reiterated his position that
the business model has to change. "Even though the present
situation I think has been greatly exaggerated by the current
recession, revenues are undoubtedly migrating to the Web, probably
not to return."
Devoe said The Wall Street Journal posted a decline in
third-quarter ad revenue of 33%, leading to a drop in the operating
results of Dow Jones & Co., publisher of this newswire as well
as the Journal.
"There's no doubt that the traditional newspaper model has to
change," Murdoch said, adding that he expects ad revenue from the
newspaper's Web site, WSJ.com, to grow by 20% in the company's
fourth quarter.
Murdoch also said the company is exploring a number of ways to
derive revenue from online news content, including online
subscription models and the use of mobile devices.
"There's a lot of ways we can make money with our content over
and above advertising," Murdoch said, noting "the violation of
rights on the Internet is rampant in our own country."
Despite that, Murdoch wouldn't completely embrace Amazon Inc.'s
(AMZN) Kindle.
"I can assure you that we will not be feeding our content rights
to the fine people who created the Kindle," he said. "We will
control the prices for our content, and we will control the
relationship with our customers."
When asked about how long it would take for News Corp. to
generate enough online revenue from its publishing businesses to
make up for lost print revenue, he said it may take a couple of
years.
"I hope it's less, but it may be a little bit more," Murdoch
said.
-By Nat Worden, Dow Jones Newswires; 201-938-5216;
nat.worden@dowjones.com