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If you are a fan of the television show “American Idol”, buying the stock of Fox Television’s parent News Corp (NASDAQ:NWS) is a great way to capitalize on the ratings phenomena.

It is the number one watched show in the coveted 18-49 age group for the third year in a row. 33 million viewers have tuned into “American Idol” each week for the sixth season of the show. In the present era of infinite media choices, capturing an audience of over 30 million viewers on a weekly basis is the equivalent of climbing Mt Kilimanjaro in high heels.

According to Advertising Age, commercials on “American Idol” go for as much as $620,000 for a 30 second spot. "Desperate Housewives" comes in a far away second at a cost of $394, 000.

Fox Television also includes the hit shows “24”, “Prison Break,” “House” and “The Simpson’s”. The Fox news channel with its conservative bias is so popular that News Corp will be able to charge more for renewals from cable providers at contract time. The movie division had a stellar year in 2006 with the accidental hit movie “Borat” so the comparisons with 2007 will be tough.

With CNBC star reporter Mario Bartiromo in the media doghouse because of her friendship with a source, the stars have aligned just perfectly for the start of Fox’s new business channel. Neal Cavuto is senior vice president of business news. He currently hosts a one hour financial program on Fox news entitled, “Your World with Neal Cavuto”. He is not the “money honey” (the nickname for Maria Bartiromo) but he is a solid reporter. I, for one, am ready to switch channels.

MyNetworkTV, the newest member of Fox television, is one problem spot. It has trouble attracting an audience for its six day a week English language telenovelas like "Fashion House" starring Bo Derek and Morgan Fairchild. Frankly, I only tuned in to see how Bo Derek looked 30 years after the movie “10”.

The potential of Fox Interactive Media, which includes Myspace excites me the most. Google (NASDAQ:GOOG) has agreed to pay $900 million dollars over several years for the right to be the sole search provider on Myspace. The previously much criticized purchase price of $568 million for Myspace is looking very cheap right now. Rupert Murdoch is one of the few old media titans that have been able to monetize the new media.

On the earnings conference call in February, Peter Chernin, President and COO of News Corp, has predicted that revenues from Myspace will triple and that it will make a profit in 2008. Sales were up over 70% from a year ago. There is also talk of a Myspace deal with eBay (NASDAQ:EBAY).

News Corp is part of a consortium (along with Yahoo (NASDAQ:YHOO), AOL (NYSE:TWX), NBC (NYSE:GE), and Microsoft (NASDAQ:MSFT)) that is creating a competitor to Youtube that I refer to as NoTube. Even though as much as 60% of traffic to Youtube comes from News Corp’s Myspace, I think it is late to build a competitor. The general rule on the internet is he who is first gets to take home all the marbles.

Divorces, especially corporate ones, can be difficult and messy. But somehow wily Murdoch was also able to extricate himself from John Malone of Liberty Media without a bitter and lengthy court battle. News Corp swapped its controlling interest in DirecTV for Malone’s 16% stake in News Corp.

This was advantageous to News Corp for several reasons. The market hates uncertainty and now they do not have to worry about Malone possibly exerting control over News Corp. The potential for a showdown at the Fox corral between the two billionaires unnerved some. Busy News Corp executives no longer need to waste time pacifying Malone. Even without Direct TV, News Corp still has participation in the satellite business in Europe but will no longer be competing in the very competitive American market.

At a price of about $25, News Corp trades at a significant premium to its competitors. Its Price/ Earnings ratio is 27 compared to the mid teens for its competitors CBS, Viacom, Time Warner, and Disney. Media properties are usually valued on a cash flow basis. By that measure, News Corp also sells at a premium.

I think that the premium is justified for two reasons. Most importantly, Fox Interactive Media will be ramping up its contribution to profits.

As if one was shopping at Tiffany’s, an investor has to pay a premium for top quality. Fox News Corp CEO Rupert Murdoch and his lieutenants have their finger on the pulse of the media consumer better than any of their counterparts. Remember “American Idol” used interactive voting at least 3 years before Youtube popularized it.

News Corp is an alchemist that literally makes gold out of junk. When it makes a mistake like the OJ Simpson debacle, Rupert Murdoch acts quickly and decisively. That is the advantage of being the rare family media corporation which is still controlled by the founding family.
One of the concerns that I have is a lack of a plan for succession. Mr. Murdoch is, after all, seventy six years old. Lachlan Murdoch, Rupert’s son and chosen successor, recently left the company in a huff. The split was so divisive that Manhattan was not big enough for two Murdochs. Lachlan hightailed back to Australia.

While you are voting for Sanjaya or LaKisha, buy News Corp stock. Your profits will double your listening pleasure.

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