News Corp. among 10 stocks to watch
By MSN Money staff
Rupert Murdoch, chairman and chief executive of the company he describes as the world’s pre-eminent content creator, is convinced that information wants to be expensive.
Murdoch is erecting pay walls between consumers and content created by News Corp. (NWSA, news, msgs). Readers already pay for online access to The Wall Street Journal, and can expect soon to begin paying for online versions of the company’s other newspapers in the United States, the United Kingdom and Australia. Plus, Murdoch is in discussions with device makers and other media companies over implementation of subscription fees.
“Content is not just king, it is the emperor of all things electronic,” Murdoch said in February as he talked up fiscal-second-quarter results that were buoyed by the company’s cable news and film businesses. “We are on the cusp of a digital dynasty in which our company and our shareholders will profit greatly.”
News Corp. appears on a daily list created using StockScouter, an MSN Money tool that identifies stocks with strong growth prospects in the near term. All stocks with Scouter ratings of 8, 9 or 10 are considered for the list, which is then shortened to exclude stocks with a trading volume below 50,000 shares a day. The remaining stocks are ranked on the basis of market capitalization, sector membership and whether they are growth or value stocks.
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The company’s results for its second quarter, ended Dec. 31, featured improved ad revenues at TV stations, healthy affiliate fees for its cable networks and strong performance from its movie releases, one of which, “Avatar,” is the highest grossing movie of all time.
The period also featured a contract-renewal fight with Time Warner Cable (TWC, news, msgs): News Corp. demanded payment of $1 per subscriber and threatened to pull Fox programming if the cable network didn’t pay up. Terms of the settlement were not revealed, but Murdoch said the deal “fundamentally changed” the television business by adding another revenue stream to advertising.
Cable operations are a bright spot for News Corp., with operating profit up 35% in 2009, thanks to continued growth of Fox News and better-than-expected advertising trends. The segment contributed more than half of News Corp.’s profit despite generating just 20% of the New York company’s revenue.
“(Cable network) FX and certain regional sports networks are entering a renewed cycle for fee increases that may be underappreciated,” wrote UBS analyst Michael Morris.
Morris is less sanguine about the company’s print operations. “While we see a cyclical recovery for (the television and newspaper) businesses in an improved economy, we believe secular challenges remain, particularly for the company’s print businesses,” he said after the company’s results were released for the three months ended Dec. 31.
Plenty of analysts and pundits are betting that Murdoch’s assumption that people will pay for online content represents a massive misreading of the Internet, where, conventional wisdom has it, information wants to be free.
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