News Corp’s Carey: MySpace’s Ongoing Losses ‘Not Acceptable Or Sustainable’

New MySpace Logo - Variation

Continued MySpace (NSDQ: NWS) declines pulled down News Corp.’s digital media group earnings again in its first quarter, meaning operating losses in the company’s Other segment grew by $30 million from last year, to $156 million.

Lower contributions from digital were “principally stemming from lower search and advertising revenues at Myspace”, News Corp reported. Earnings in the Other segment – which also contains Fox Mobile, IGN and the outdoor business – fell from last year’s $400 million to $298 million.

President Chase Carey doggedly told analysts: “We’ve been clear that MySpace is a problem; we need to redefine and rebuild this business.

“We’ve made adjustments in the cost structure and, most importantly in the last few weeks, we have relaunched MySpace with a focus on social entertainment.

“We feel really good about this relaunched product and it’s been generally well received by the opinion makers in the business.

“We also recognise the challenges. Current losses are not acceptable or sustainable. Our current management team did not create these losses but accept them. I give them credit for pouring their heart and sweat anto this problem.”

News Corp has now off-loaded Fox Audience Network, which was initially set up to sell ads for News Corp. sites, including MySpace, to the Rubicon Project. What next, if these and management’s other efforts don’t work? Sounds like MySpace is on a short leash now…

This is something we judge in quarters, not in years,” Carey said. “Our goal is to get to a place that has got a revenue on top line that is going in the right direction and a clear path to profitability.

“We’ve got still got great reach that gives us the foundation to bring an audience to that product. But our traffic numbers are not going in the right direction – we have to stabilise that.”

MySpace’s performance didn’t stop News Corp quarterly net income rising 35 percent overall to $809 million, on three percent higher income of $7.4 billion – hitting analysts’ expectations and attributed by Rupert Murdoch to subscriber growth, an advertising recovery and cost cuts at newspapers.

— The cable TV division led the way, with 28 higher operating income (23 percent up in the U.S., 48 percent up overseas).

— Movie division operating income fell 28 percent after the popularity of last year’s latest Ice Age title. Carey mentioned the company’s lack of breakout films post-Avatar but tried to balance it by saying it also hasn’t had any big flops.

— Improved Fox TV stations performance rocketed television operating income up 176 percent to $105 million, with local advertising returning.

— Even operating income from publishing, comprising newspapers and books, jumped 50 percent to $178 million, as advertising returned and print and distribution costs were slimmed.

News Corp today notified the European Commission of its wish to buy the 61 percent of successful UK pay-TV business BSkyB (NYSE: BSY) which it doesn’t already own. The UK government must also clear the deal, should Sky shareholders accept.

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