Profits Decline at News Corp., Fox Entertainment Group

Fox Entertainment Group Inc.’s profit dropped 10% for its fiscal second quarter despite strong TV results, as the company was hurt by the disappointing performance of the films “Anna and the King,” “Light It Up” and “Fight Club.”

Net income for the three months ended Dec. 31 was $94 million, or 13 cents a share, on revenue of $2.4 billion. That was down from earnings of $105 million, or 17 cents a share, on $2.6 billion in revenue for the like period a year earlier.

Fox is controlled by Rupert Murdoch’s News Corp.

Overall, News Corp.’s fiscal second-quarter profit dropped 26% to $252 million on the lower film results and on losses at British Sky Broadcasting, which is 40%-owned by the Australia-based media conglomerate. Revenue was $3.86 billion, down from $4.06 billion.

The results were released at the close of U.S. markets Wednesday. Investors had continued to bid up News Corp. shares during the session; its American depositary receipts rose $2.94 to close at $58 a share in New York Stock Exchange trading. Fox shares also rose, finishing $1.69 higher at $30, also on the NYSE. Stocks for News Corp. and other media companies have risen during the last month, partly in response to the blockbuster deal for America Online Inc. to acquire Time Warner Inc.

Fox said its strongest performers were its TV stations. Despite lower ratings, profit for the Fox network improved as it benefited from a hot advertising market and a better financial arrangement with affiliates. Also helping the comparison is that in the year-earlier period, Fox suffered losses with its World Series telecast. Overall, operating income for the Fox TV operation came to $192 million, up from $132 million for the year-ago period.

“Operationally, we’re firing on all cylinders” except at the film studio, News Corp. Chief Financial Officer David Devoe said.

In films, operating income for the quarter dropped to $32 million on revenue of $1.1 billion from $164 million on revenue of $1.5 billion. Part of the drop is a reflection of the fact that Fox a year earlier was still reaping money from the huge success of “Titanic” and “There’s Something About Mary,” released through the company’s 20th Century Fox studio.

But Fox singled out the Jodie Foster film “Anna and the King” and the teen drama “Light It Up” as having lost money.

In a conference call with reporters Wednesday, Peter Chernin, News Corp. president and chief operating officer, acknowledged that the violent Brad Pitt film “Fight Club”--despite a strong performance overseas--also was a disappointment because expectations for it had been so high. “It looks like we’ll be somewhere between a modest loss and break-even,” Chernin said. “Look, we had higher expectations when we went into the movie.”

Fox’s cash flow--earnings before interest, taxes, depreciation and amortization--fell to $319 million from $330 million. Media analysts commonly give significant weight to cash-flow figures because many such companies carry heavy debt loads.