News Corp. Takes $909 Mil. Write-Down

By: Seth Sutel, AP Business Writer

(AP) Acknowledging that it paid too much for its sports broadcasting rights, Rupert Murdoch’s media conglomerate News Corp. took a $909 million charge in its latest quarter to write down the value of its TV contracts for U.S. baseball, football, and NASCAR racing.

“You would have to say we’ve overpaid,” President and Chief Operating Officer Peter Chernin told reporters on a conference call. News Corp. also reported lower core earnings and reduced its forecast for 2002, blaming the poor advertising climate.

News Corp. blamed the write-down on a “severe downturn” in sports-related advertising in the second half of 2001, the lack of any advertising rebound before Sept. 11, and a reduced forecast for projected revenues from the contracts, which still have several years left to run on News Corp.’s Fox broadcasting subsidiary.

News Corp. originally paid $4.5 billion for its National Football League rights; $2.4 billion for its Major League Baseball contract, and $1.9 billion for its NASCAR broadcast rights, Chernin said.

The sports charges, as well as separate charges relating to a write-down of BSkyB’s holding in Germany’s troubled media company Kirch Group and other one-time losses, left News Corp. with a net loss of $606 million in its second fiscal quarter ending Dec. 31, compared to a loss of $23 million in the same quarter of 2000.

The charges were partially offset by a gain from the sale in News Corp.’s 49.5% interest in Fox Family Worldwide to Walt Disney Co.

Without one-time gains and losses, earnings declined 25% to $203 million from $270 on a comparable basis a year ago as a worldwide advertising slump hit News Corp.’s Fox network and television stations.

Per-share earnings without special items came in at 17 cents per U.S.-listed share, a penny ahead of the forecasts of analysts surveyed by Thomson Financial/First Call, and well below the 26 cents per share reported in the same period a year ago. The results were announced after the close of regular trading on the New York Stock Exchange, where News Corp.’s shares finished down 53 cents at $27.35.

Reported revenues rose 7% to $4.12 billion versus $3.85 billion in the same period a year ago. But if the results from the television stations acquired from Chris-Craft are included in both periods, the increase in revenues was 3%.

Company executives declined to specify which contracts they may have overpaid the most for, but Murdoch said on the call that the “prices being paid to sporting bodies have gone beyond an economic level.”

However, Chernin said on a separate call with analysts that “sports still remains a critical part of this network’s success. Football put the Fox Broadcasting Co. on the map.”

Additionally, News Corp. lowered its earnings estimates for 2002, citing the poor advertising climate. News Corp. now expects mid-single digit growth in its operating income, down from a previous estimate of high single-digit to low double-digit percentage growth.

News Corp.’s operating results were lower across the board, except for a modest gain in its book publishing division HarperCollins and a 36% jump in earnings from cable networks, where its Fox News Channel continued to grow rapidly, posting a 31% jump in revenues.

Television broadcasting marked the weakest spot for News Corp., where operating income tumbled by nearly half to $113 million from $211 million on a comparable basis from a year ago.

Murdoch said the company still saw no clear signs of an economic recovery, but he said there were “some hints of a modest upswing” in the U.S. advertising market.

Also, touching on a recent controversy over accounting methods, News Corp. said it would keep using the accounting firm Arthur Andersen LLP as its auditor, but no longer hire the firm to do consulting services. Andersen has come under scrutiny for its handling of Enron Corp.’s books.

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