Sky Italia and Deutschland cloud News Corp results

News Corp returned to profit with $254 million for the three months to December, compared with a $6.4 billion loss a year ago – down to major asset write-downs.

“Content is not just king, it is the emperor of all things digital,” said chairman Rupert Murdoch. “We’re on the cusp of a digital revolution from which our shareholders will profit handsomely.” In a reference to hyped technology such as Apple’s iPad and Amazon’s Kindle, Murdoch said such “ingenious and fabulous devices” would be “unloved and unsold” without creativity from companies such as his own, adding that they were powered by content – not by batteries.

The company’s Twentieth Century Fox film studio saw its profits surge from $112 million to $324 million, aided by strong DVD releases. Still to come are the box office receipts from Avatar.

The group’s television stations also turned in higher earnings and are the subject of an initiative by News Corp to get cable networks to pay more to transmit Fox programming. But MySpace continues to struggle after losing a battle for dominance to Facebook. Murdoch admitted MySpace’s is “still not where we want it” despite job cuts and a refocusing on entertainment.

And Murdoch conceded there were other areas of News Corp's business not performing as well as he would like. “Sky Italia is faced with a tough economic environment and increased competition. But we’re certainly enthusiastic about the potential of this business given the high quality of our service and the low penetration of pay television in Italy.”

“The second is our affiliate Sky Deutschland. We’ve great confidence that the new management team headed up by Brian Sullivan who helped build BSkyB into a power house, would be able to make head way in yet another big market, with very low pay-TV penetration. As proof of our confidence in this business, we just increased our stake by 5 percentage points. Despite the challenges in these markets, we remain firm in our commitment to pay-TV around the world.”

Sky Italia generated a segment operating loss of $30 million as compared to income of $10 million in the second quarter a year ago. Sky Italy continues to operate in an extremely challenging business and economic environment and subscriber growth is clearly below our expectations. However, it is important to note that this is a very profitable business, but we remain confident in the longer term growth in this under penetrated market.

For the quarter total revenue declined by 2 per cent against the prior year’s quarter. Monthly ARPU in the quarter averaged around E43 down on last year’s E45 and this reflects the lower average tier mix, reduced pay per view revenue, and price promotions.

Sky Italia’s net subscriber base declined by 63,000 compared with the previous quarter, as total quarterly gross editions of 150,000 were more than offset by churn. There are now 4.75 million subscribers.

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