News Corp. Profit Likely Rose on Cable TV, Sky Italia (Update1)

By Gillian Wee

Aug. 8 (Bloomberg) -- News Corp., the Rupert Murdoch company that is buying Dow Jones & Co., may post higher fourth-quarter profit on increased revenue from cable network programming and its Italian satellite-television service.

News Corp. probably earned $842.6 million, or 27 cents a share, according to the average estimate of 11 analysts compiled by Bloomberg, compared with $718 million, or 23 cents, a year earlier excluding a gain from the sale of Sky Radio Ltd. operations. Sales at New York-based News Corp. may have gained 8 percent to $7.32 billion, according to analysts.

Higher advertising sales and affiliate fees may have increased profit 29 percent at the cable network, which includes the Fox News channel, said Spencer Wang, an analyst at Bear Stearns Cos. Earnings probably more than doubled at Sky Italia as it attracted more users.

``They're firing on all cylinders on the cable network front,'' said Richard Dorfman, managing director at Richard Alan Inc., an investment company in New York. ``As long as Fox News is doing well, it'll have a positive impact on earnings.''

Class A shares of News Corp. rose 34 cents, or 1.7 percent, to $20.96 at 10:39 a.m. in New York Stock Exchange composite trading. They had declined 4 percent this year before today.

Seventeen analysts recommend buying News Corp. stock, according to data compiled by Bloomberg. Five suggest holding the shares while none say sell.

News Corp., also the owner of the 20th Century Fox film studio and the MySpace social-networking site, plans to release earnings for the quarter ended June 30 at 4 p.m. New York time today. Company spokesman Andrew Butcher declined to comment.

Cable Network

Murdoch, 76, agreed to buy Wall Street Journal publisher Dow Jones for $5.2 billion last week, ending the Bancroft family's 105 years of stewardship. The transaction, to be completed in the fourth quarter this calendar year, will add to News Corp.'s more than 110 newspapers, film and TV studios and Fox News.

Profit at the cable network probably rose to $250.2 million, and revenue may have climbed 13 percent because of higher fees Cablevision Systems Corp. and DirecTV started paying earlier this year to air Fox News, Bear Stearns's Wang wrote in a July 10 note. The New York-based analyst rates the stock ``peer perform.''

Fox News's 10-year contracts with cable providers ended last October, giving the network a chance to increase ad prices. Fox News, created in 1996, overtook Time Warner's CNN as the most- watched cable news network in 2002 and now draws a prime-time audience twice as large as CNN's.

Sky Italia

News Corp. said in July it will start airing the Fox Business Network on Oct. 15 and that it had secured distribution agreements with Time Warner Cable Inc., DirecTV, Charter Communications Inc. and Comcast Corp. Those deals will help the business news channel reach 30 million subscribers.

Sky Italia may have added 100,000 subscribers during the fourth quarter, resulting in 4.27 million subscribers at the end of the fiscal year, Wang said. Profit probably rose to $170.4 million after costs to market and broadcast soccer's World Cup dragged down earnings a year earlier, according to Wang. Sales may have increased 12 percent to $842 million.

The television unit, News Corp.'s largest by sales and profit, may have posted an 8 percent rise in sales on higher revenue at the Fox network. Profit was probably little changed at $406.6 million, Wang said.

Film

Sales and profit at News Corp.'s movie division probably dropped as the quarter's releases, ``Fantastic Four: Rise of the Silver Surfer'' and ``Live Free or Die Hard,'' didn't match the ticket sales of last year's ``Ice Age: The Meltdown'' and the third installment of ``X-Men,'' said Anthony Noto, a Goldman Sachs Group Inc. analyst in New York. Noto, who doesn't have a rating on the company, projects film unit sales of $1.7 billion and profit of $191 million, according to a July 30 report.

Profit from books may have risen to $14 million from a loss of $6 million a year earlier, on sales of $274 million, a 7 percent increase, Noto said.

Newspapers probably had a profit of $185 million, about 9 percent higher, on a sales increase of 3.2 percent, Noto said. Profit at News Corp.'s magazines and inserts may have gained 13 percent to $74 million, as revenue rose 10 percent to $284 million from the year before, he said.

Losses probably narrowed at the group that includes Fox Interactive Media to $32 million from $82 million as MySpace attracted 35 percent more users and page views grew 55 percent during the quarter, Noto said. The unit probably will beat its projection of $500 million in revenue for the 2007 fiscal year, he said.

To contact the reporter on this story: Gillian Wee in New York at gwee3@bloomberg.net .

Last Updated: August 8, 2007 10:39 EDT

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