News Corp sees economy hurting advertising

By Kenneth Li

NEW YORK (Reuters) - Rupert Murdoch said on Wednesday stress in the U.S. economy is squeezing advertising budgets, adding that News Corp's NWSa.N Fox Interactive Media would miss an ambitious $1 billion annual revenue goal by 10 percent.

But FIM, which oversees the MySpace online social network, is a "very healthy" business and expects "well over" $1 billion in revenue in fiscal 2009, Murdoch said on News Corp's fiscal third-quarter earnings conference call.

"There's no doubt the consumer economy is stressed. You're seeing it affected in advertising, more short-term planning and booking," said the News Corp chairman and chief executive.

The media conglomerate said fiscal third-quarter profit tripled on higher advertising sales at the Fox TV network and Fox News Channel, as well as a $1.7 billion one-time gain from its stock swap with Liberty Media (LINTA.O).

News Corp, which also owns the 20th Century Fox film studio, said its net profit rose to $2.7 billion, or 91 cents per share, in the quarter ended March 31, from $871 million, or 27 cents per share, in the year-ago period.

Revenue rose 16 percent to $8.75 billion, compared with the average Wall Street forecast of $8.6 billion. Profit excluding special items was 30 cents per share, apparently missing the Street's 31 cents forecast, but it was not immediately clear if the two numbers are directly comparable.

Pali Research analyst Richard Greenfield said News Corp continued to log strong operating income growth from its television division compared to peers.

"You've now got three straight quarters of industry-leading growth," Greenfield said. "When will investors give them credit for their growth?"

Operating income at News Corp's television division, which includes the FOX TV network and TV stations, rose 53 percent from lower prime-time programming costs and higher advertising sales from its broadcast of the Super Bowl.

Fox News Channel contributed to the company's cable network operating profit growth of 17 percent.

Overall operating income in the quarter grew 16 percent to $1.4 billion, News Corp said, affirming that full-year operating income would rise at a mid-teens percentage rate.

EUROPE SLOWS, AUSTRALIA BOOMS

Murdoch said News Corp's Australian business (NWS.AX) was booming, and that its U.K. business, which includes pay-TV firm BSkyB (BSY.L), was "very healthy."

"In Europe, whether that will follow the American path or not, I don't know. Certainly, I'm told business is slowing down on the continent," he said.

News Corp's forecast that Fox Interactive Media would only make about $900 million in revenue for fiscal 2008, which ends in June, was somewhat anticipated, as its latest, twice-reduced estimate was for revenue to reach nearly $1 billion.