The publishing industry has been in turmoil during the last few years, with newspapers and magazines suffering as readers and advertisers desert them for the Internet.
But two companies have negotiated the dangerous currents well: News Corp. (NWSA) and Time Warner (TWX). They’ve been able to sustain the strength of old media properties and dive into new media, including the Internet and cable TV.
As a result, their financial performance has flourished, making their stocks a proposition to consider.
The owner of Fox Broadcasting, The Wall Street Journal and the Twentieth Century Fox film studio reported that its profit more than doubled to $642 billion in the quarter ended Dec. 31 from $254 million a year earlier.
Higher television subscriber fees and advertising sales powered the results. Cable TV networks account for more than 50 percent of News Corp.’s operating profit, and those franchises are golden. They include Fox News — the top channel in its category by a landslide — and regional sports networks spread throughout the country.
The company’s Fox TV network could bring additional revenue, because its must-see programming such as “American Idol” and NFL football may allow Fox to charge transmission fees to cable and satellite providers.
“There's an increased focus by management to try to get the business more profitable,” Nomura Securities analyst Michael Nathanson tells Ad Age.
The owner of Time magazine, Home Box Office (HBO), and Warner Bros. registered profit of $769 million in the fourth quarter, up 22 percent from a year earlier. Revenue increased 8.3 percent to $7.81 billion, topping analysts’ estimates. As a result, the company raised its quarterly dividend by 11 percent.
Time Warner’s potent stable of cable networks, which also includes TBS, TNT, and CNN, makes up about 70 percent of the company’s cash flow. Given the high barrier to entry for a new cable network, this should remain a solid base of business for Time Warner.
"We see improving cable sector trends … stable margins, dramatically improving user interface and on-demand content, pricing power in broadband, telecom share gains and bullish transition to IP video,” Deutsche Bank analysts write.
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