Phone-hacking scandal still pinching Rupert Murdoch’s News Corp.
The numbers: Pretty good. Sales rose 13.5% to $9.54 billion from the same quarter of the prior year. Net income more than tripled to $2.85 billion, driven by gains on its acquisition of an additional ownership stake in its Sky Deutschland cable channel and the sale of its stake in SKY Network New Zealand. Shares rose.
The takeaway: The cable business continues to carry the company. Affiliate revenue—that’s the money News Corp. collects from fees it charges the cable companies that carry its channels—rose 11% in the US, thanks to higher rates for all its networks. Operating income at News Corp.’s cable unit rose 17% to $993 million. Print continues to be painful. Operating income in that unit—which contains CEO Rupert Murdoch’s trophy brands such as the Wall Street Journal—shrank 35% from the previous year, to $85 million.
What’s interesting: The impact of News Corp.’s messy phone-hacking scandal in the UK—which started at its News of the World tabloid—continues to be felt. First and foremost the scandal so-weakened Murdoch that he finally agreed to split off his cherished newspaper properties into a separate company—along with other slow-moving publishing businesses—from the more-profitable entertainment divisions in mid-2013. But it’s still also costing a load of cash. The earnings release says: “The current year quarterly results also included $42 million of costs related to the ongoing investigations initiated upon the closure of The News of the World, as compared to $63 million of comparable costs included in the prior year quarterly results, as well as $25 million of costs related to the proposed separation of the Company’s entertainment and publishing businesses.”
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