Fox News brightens News Corp's path in downturn

NEW YORK Wed Apr 8, 2009 4:43pm EDT

People leave the News Corporation building in New York, June 26, 2007. REUTERS/Keith Bedford

People leave the News Corporation building in New York, June 26, 2007.

Credit: Reuters/Keith Bedford

NEW YORK (Reuters) - When the Financial Times asked Rupert Murdoch in 2006 if a Democratic power shift in the United States would cap growth at his Fox News Channel, the media tycoon could have been forgiven for boasting.

"That's BS," he answered. "If the government changes to a totally Democratic Washington, all those who don't like it, 48 percent of the country, will be turning on Fox News."

Whatever the numbers, Murdoch was right.

Three months after Democratic Presidential contender Barack Obama took the White House, Fox News is beating its rival cable news networks, General Electric Co's (GE.N) MSNBC and Time Warner Inc's (TWX.N) CNN, in the ratings game.

Fox's stars are its commentators, loved by conservatives and despised by liberals. They stay for hard news programs that eschew opinion. The resulting ratings triumphs the channel is logging give News Corp investors reasons to stay in the game, even as the media company struggles.

The channel had an average of 2.25 million primetime viewers, seven days a week, in the first quarter of 2009, according to Nielsen data. That is up 24 percent from last year. In all-day viewing, Fox News rose 26 percent. CNN's share fell during that time. MSNBC rose, but still lags behind Fox in total numbers of viewers.

More recent Nielsen numbers show the strong performance continuing into April, offering hope to investors in Fox's parent company News Corp (NWSA.O).

The market has hammered the conglomerate's shares harder than its rivals; they fell 62 percent in the past 12 months.

News Corp cannot pin all its hopes to Fox. Ad revenue is down at its local TV stations and owning a stable of papers, including the New York Post, does not help matters.

Still, Fox News is part of News Corp's cable division, one of the company's strongest performing units. It is the third- largest segment by revenue and its largest in operating income, based on first-quarter results.

In the fiscal second quarter that ended in December, cable unit operating income rose 27 percent to $428 million on nearly $1.4 billion in revenue. News Corp does not say how much of that is because of the Fox News Channel, but it is easily the most high-profile part of that unit.

Fox News's message is clear to advertisers, who are moving more of their TV budgets to cable. Most cable networks are seeing the benefits of that, but ratings plays an important role in who reaps those benefits the most.

"Having a good story in this marketplace is really, really important," said Mike Law, who buys ad time on Fox and other TV networks for his clients at Carat North America. "When we go to the client, it makes our jobs a little easier."

COME FOR OPINION, STAY FOR NEWS

Fox News draws audiences that are split between Democrats and Republicans, with Republicans holding a slight edge, according to a report by the Pew Research Center for the People & the Press released last August.

Many conservative viewers, are attracted to the pugnacious and blunt opinions dished out by like-minded and fire-breathing celebrities such as Bill O'Reilly and Sean Hannity.

"Those people who are not totally on board with the new administration's policies may find an opportunity to watch people who have the same feelings about how to handle the economy and the war," said Brad Adgate, senior vice president and researcher at ad buyer Horizon Media.

Glenn Beck, a self-described libertarian, is driving that audience higher with his 5pm show, which started broadcasting earlier this year after he left CNN. Placing hard news shows between commentary programs can keep people in their seats.

"For us, it is tremendously effective that Glenn Beck brings in all of these folks ... and at 6:00, we hold that audience," said Bret Baier, host of his own news show and a former Fox News chief White House correspondent.

"We are a straight news program following the commentary hour, which ... we think is kind of a good mix," he said.

As more working-class Americans, whom Murdoch for years has targeted for his news and entertainment, worry about some of the most profound changes affecting their lives in decades, they seek a channel that offers explanations.

That goes double for conservatives, said Tom Rosenstiel, director of the Project for Excellence in Journalism.

"You're not only out of power, but there's a great deal of anxiety about the economy, whether we're headed toward a deep recession or a depression," said Rosenstiel.

Beck said people want to hear straight talk from someone as frustrated as they are.

"They are starving for someone to be real," he added.

(Reporting by Robert MacMillan; Editing by Andre Grenon)

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