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News Corporation (NASDAQ:NWS)

F2Q08 Earnings Call

February 4, 2008 4:30 pm ET

Executives

Gary Ginsberg - Executive Vice President, Global Marketing and Corporate Affairs

David F. DeVoe - Chief Financial Officer, Senior Executive Vice President, Director

Rupert Murdoch - Chairman of the Board and Chief Executive Officer

Peter Chernin - President, Chief Operating Officer and Director

Analysts

Jessica Reif Cohen - Merrill Lynch

Michael Nathanson - Sanford C. Bernstein

Doug Mitchelson - Deutsche Bank

Rich Greenfield - Pali Capital

Jolanta Masojada - Credit Suisse

Spencer Wang - Bear Stearns

Anthony DiClemente - Lehman Brothers

David Bank - RBC Capital Markets

Michael Morris - UBS

Adam Alexander - JB Were

Ingrid Chung - Goldman Sachs

Alex Pollak - Macquarie Research

Jason Bazinet - Citigroup

Kit Spring - Stifel Nicolaus

Benjamin Swinburne - Morgan Stanley

Tuna Amobi - Standard & Poor’s

Alan Gould - Natexis Bleichroeder

Media

Gillian Wee - Bloomberg News

Jane Schultze - The Australian

Peter Ryan - Australian Broadcasting Network

Kenneth Lee - Reuters

Joshua Chaffin - The Financial Times

Merissa Marr - The Wall Street Journal

Shera Ovita - Dow Jones

George Silino - The Hollywood Reporter

Stacey Kramer - paidContent

Jesse Hogan - The Age Newspaper

Seth Sutell - Associated Press

Operator

Ladies and gentlemen, thank you very much for standing by. We do appreciate your patience today while the conference assembled and good afternoon. Welcome to News Corp announcing their second quarter 2008 earnings release. (Operator Instructions) With that being said, let’s get right to this second quarter agenda. Here with our opening remarks and to introduce the executive team is Executive Vice President Mr. Gary Ginsberg. Happy New Year, sir, and please go ahead.

Gary Ginsberg

Thank you, Brent. Happy New Year to you. It’s nice to have you back on our call. Thank you very much to all of you on the call and welcome to our second quarter fiscal 2008 earnings conference call. Joining me today are Rupert Murdoch, Chairman and Chief Executive Officer of News Corp.; Peter Chernin, President and Chief Operating Officer; and Dave DeVoe, our Chief Financial Officer.

As is our custom, Dave will begin the call with a brief summary of the results, focusing on items not immediately obvious from the reading of the earnings release. Rupert will then give some general commentary on the quarter followed Peter, who will talk about the durability of some of our key growth drivers. And then, as Brent told you, we’ll take your questions.

Today’s call is of course governed by the Safe Harbor provisions. On this call, we will make statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors, including those described in any of the public filings with the SEC that could cause actual results to materially differ from those in the forward-looking statements.

Finally, please note that certain financial measures we will use in this call, such as EPS and net income, are expressed in a non-GAAP basis and have been adjusted to exclude other net in the second quarter of fiscal ’07. The GAAP to non-GAAP reconciliation is posted on our website on our investor relations earnings release page.

And with all that, I’ll turn the call over to Dave.

David F. DeVoe

Gary, thank you and good afternoon, everyone. As you’ve seen in today’s earnings release, we are continuing the strong growth trends we reported in the first quarter. For the second quarter of fiscal ’08, we are again reporting record results. Revenues up 10%, operating profit up 24%, earnings per share adjusted for BSkyB’s ITV write-down, and the [Fox] gain up 12%. Nearly all of our operating segments reported double-digit earnings increases.

The results were led by excellent performances at our television cable SKY Italia and Fox Interactive businesses and was achieved despite absorbing approximately $100 million in incremental losses related to growth initiatives such as Fox Business Channel, Big 10 Channel, start-up television operations in Turkey, Poland, and Serbia.

Now, given that you all have the details contained within our earnings release, I’d like to provide additional context on the recent performance of just a few of our businesses.

Our film segment’s operating income was $403 million in the quarter. This is a great result, even though down from a year ago. I want to remind you that the year-ago results were the highest ever for the film segment, reflecting the DVD and theatrical successes of such blockbuster releases as Ice Age 2, X-Men 3, Borat, and Night at the Museum. So despite this difficult financial comparison, we had a very solid result this year, reflecting strong home entertainment releases, including The Simpsons Movie and the most recent Die Hard film. We had the pay TV availability of previous hits, including Night at the Museum, Borat, and Little Miss Sunshine. And additionally, we expect good results for the rest of the year as the yet-to-come from the theatrical release in the quarter of Alvin and the Chipmunks and Juno.

At our television segment, second quarter operating profit more than doubled above the year-ago levels despite station earnings, which were down compared to last year, primarily from a 90% reduction in political advertising. The strong growth in the television segment largely reflects substantial improvement at My Network TV -- this is from lower programming cost -- and very strong profit growth at the Fox Broadcasting Network from increased ratings and ad pricing for both our entertainment and sports programming, reduced post-season baseball programming -- as most of you know, we no longer air the divisional play-offs -- and from lower program cancellations and marketing cost.

It should be noted that the writers’ strike did not have any material impact on the quarter’s results and we also expect political revenues to improve as we head towards the November election.

Moving on to the cable networks, again here we had very strong growth at this segment -- a 23% improvement in operating profit to $337 million. This is an especially strong result when you consider the inclusion of total start-up losses of roughly $50 million for the Big 10 and Fox Business channel launches. The largest year-over-year gains were from the Fox News channel and this reflects new affiliate deals and higher advertising sales.

The RSNs as well reflects affiliate rate increases and subscriber increases. The international channels from advertising and affiliate increases, led by our Latin American and European channels.

The segment result also includes the consolidation of National Geographic channels which were not consolidated a year ago.

At SKY Italia, again another strong financial performance. With local currency revenues up 12%, operating income of $62 million, this is a $74 million improvement from the last year and this marks the first time we achieved second quarter operating profit at SKY Italia. The financial improvements are driven largely by net subscriber additions of 400,000 over the last 12 months. This results in 4.43 million subscribers at the end of the quarter. SKY acquired 189,000 net new subscribers in the quarter. This is down slightly from year-ago levels. And year-to-date, SKY has added 233,000 net new subscribers and this is 16% ahead of the net new additions in the same six-month period a year ago.

SKY’s churn in the quarter was below last year’s level and is on track to achieve an annual churn rate of around 10%. Our ARPU for the quarter was EUR45. This consistent with a year ago, and SAC of approximately EUR270 in the quarter was roughly in line with last year.

You can see, given these healthy metrics, it’s quite clear that SKY is on track for delivering another strong year of earnings growth.

At our newspapers and information service segment, they also reported a strong quarter with operating income of $196 million and this is up 15% over the second quarter from a year ago. This segment was previously referred to as newspapers. This now includes all of the Dow Jones businesses. However, the second quarter included only two weeks of Dow Jones operations, reflecting its mid-December close and therefore there is virtually no operating income contribution in the quarter.

At our Australian newspapers, they reported a 14% increase in operating profit with advertising revenues up 7% in local currency terms, and this is driven by ad growth across most key categories and by higher classified advertising and employment advertising.

The Australian marketplace continues to prosper. Our newspaper properties are benefiting from the solid economic conditions there and we look forward to continued growth in our papers in the next quarter.

In the United Kingdom, underlying advertising circulation revenue trends, they are relatively flat compared with a year ago although our earnings are down, primarily reflecting the final quarter of accelerated depreciation on our printing plant that we will retire in the third quarter. The project is nearing completion and we should start to see some of the savings associated with a more efficient operations in our fourth fiscal quarter.

At our other segment, we generated an operating profit of $23 million. This is a $22 million increase from the second quarter a year ago. This improvement, it’s primarily due to the strong growth at Fox Interactive Media and it’s offset in part by start-up losses related to our Eastern European TV initiatives.

FIM’s total revenue in the quarter of $233 million was up 87% from the same quarter a year ago. This is primarily due to search and advertising revenue growth at MySpace. Of the total FIM revenue, $62 million was from our search deal with Google. Ad revenues of FIM increased 43% versus last year and 31% from the first quarter. Operating profit for FIM was $47 million, as compared to a loss of $11 million in the same quarter a year ago. So the growth -- profit growth, rather, reflects the revenue increases and lower management retention amortization, and it’s offset by our continued investment in the cost base and expansion of this high growth business.

Finally, just a couple more points -- you may have noticed that we just raised the annual dividends on our News Corporation class B shares by $0.02 to $0.12 a share. This equalizes the dividend on the class B shares to that of the class A shares, which is consistent with the requirements of our reincorporation to the United States back in late 2004.

And finally, let me address our guidance for fiscal 2008. Three months ago we reiterated an expectation of operating income growth for fiscal 2008 to be in the low teens. This guidance excluded the gain expected from the sale of property in the United Kingdom as well as any results from the Dow Jones acquisition.

Based on our actual results to date and on the assumptions inherent in our projections, we are raising our guidance as we now expect our operating profit growth for fiscal 2008 will be in the mid-teens range. Note that this guidance is like-to-like as it continues to exclude the land sale gain and Dow Jones results.

With that, I would like to turn the call over to Rupert.

Rupert Murdoch

Thank you, Dave. Good afternoon, everyone. Today’s headline [is like] this: News Corporation just posted the highest operating income quarter in the company’s 54-year history, a result all the more remarkable given we incurred significant start-up costs launching new business during the quarter, and completing the final phase in our expenditures, putting in a new huge United Kingdom printing presses. So we are very satisfied and pleased with our financial and operating strength, though of course, we are never content.

But we are comfortable enough with our momentum to raise our guidance for the year, as Dave just indicated. And I feel even more comfortable about our longer term growth prospects after spending the past seven weeks working intensively with our newest acquisition, the Dow Jones Company.

We always suspected from afar that Dow Jones, properly leveraged as part of a larger global media company, had boundless potential and if possible, I’m even more excited about its prospects now than in the [preceding] month leading to our takeover.

Forty-nine days is not enough time to get a perfect picture of a company but I am happy to share with you a few early observations.

First, I am tremendously impressed with the quality and potential of the assets we’ve acquired at Dow Jones. While we are still in the early days of our stewardship, we are already deep into finding ways to expand and strengthen the company’s flagship paper, The Wall Street Journal.

We are launching a luxury lifestyle magazine in September that will initially reach more than 800,000 people, and we are looking at ways to broaden the paper’s readership and advertising by augmenting its editorial content to feature more political, international, cultural, and general national news.

As good as the paper already is, and it’s one of the best in the world, we still think there is opportunity to make it better, to make it more urgent, more accessible, more relevant to a wider audience.

We’ve already initiated several changes in its look, beginning with today’s redesign of the front page and more changes in the works. We think these changes will enable us to attract more readers and more advertisers at more attractive pricing, allowing us to outperform the general newspaper industry.

As much as we know, we can improve the paper’s financials. We see the greatest growth opportunity is really in our ability to strengthen Dow Jones’ online assets. It’s there where we are spending our most concentrated time and where we think we can achieve exponential growth with several new initiatives.

Like the paper itself, we expect to add more free content to the online journal. This month, we made of its opinion articles available for free, stories from personal finance, politics, and the business of life, as well as the Journal’s blogs and videos, will be made available to non-subscribers.

But the bulk of the Journal’s core business coverage will remain behind the subscription wall and the exclusive intelligence service for serious business people and investors. This will allow us to broaden our global reach while increasing subscription revenue to make the online Journal the most profitable subscription based financial site on the Internet today.

The Journal has also started working closely with Fox Properties to share video, news, and business content. We’ve begun exploring printing and delivery of synergies to the Journal and New York Post operations and between News International and Wall Street Journal in Europe. And of course, [we knew there would be] efficiencies between Dow Jones and News Corp to realize the tens of millions of dollars in savings we always anticipated.

So as I said, I’m more bullish than ever. There’s greater opportunity to innovate and to grow and significantly bolster the future of one of the world’s most venerable institutions. It’s an exciting and energizing mission and we are only beginning.

Now I know the big question on all of our minds, besides how Eli Manning was able to elude that sack and hit Tyree to set up the big Giants game-winning touchdown, is the resilience of the United States economy.

Actually, before I talk about the economy, let me just say a word about last night -- the most watched Super Bowl in history, the most watched TV show in 25 years, and the second-most watched show in history -- a night when the Fox Network and television stations generated more than $250 million in gross revenue, the biggest day in our company’s history. And to top it off, a game for the ages, a night that couldn’t have gone better for us.

Clearly though, we’re facing potential challenges in our economic environment, ever challenging and for how long, no one knows. What is certain, however, is how better positioned we are than any other media company to weather whatever comes. Just look at the last quarter. Despite some softening in the overall economy, we posted extraordinary numbers, a powerful sign that our businesses are durable and positioned for the longer term.

The reasons are three-fold; first, we put major effort over the past 10 years into rapidly developing our subscription businesses, including building out our cable channels, whose mix of revenue is now far more heavily skewed to affiliate revenue than advertising.

Second, we’ve expanded internationally, including into such potential high growth markets as Eastern Europe, Turkey, and Indonesia.

And third, we’ve invested smartly in the media where we think the greatest growth potential lies, including social networking and other online extensions of our mature businesses.

The result -- today we are structurally a more sound company with significantly lower exposure to the vagaries of the advertising markets. In fact, today, less than a quarter of our revenues are dependent on the American television advertising business. And given our geographic and product diversification during this same period, we are no longer as dependent on the strength of any one market or medium.

For instance, previous subscription driven businesses that didn’t even meaningfully exist in the last recession, SKY in Italy, and the Fox International channels are now major growth drivers for the company.

SKY in Italy is rapidly becoming the profit and cash generator we envisaged when launching this business back in early fiscal 2004 and with pay TV penetration at only 20% in Italy, the subscription driven contributions from this business are still in their infancy.

The Fox International cable channel business is also in rapid expansion mode, with organic growth and the consolidation of new businesses generating an incremental $74 million in operating income in just the last six months.

Another key to our unique positioning, Fox Interactive Media, is experiencing accelerate operational and financial momentum, demonstrated by its 87% revenue growth and $58 million profit improvement in the most recent quarter compared to a year ago. These results add confidence to our $1 billion revenue and 20% margin targets for this business this year. So we are very pleased with the progress we are making at FIM, which should have much more growth ahead.

So overall, the company is in great shape. Our growth drivers our durable, our structure is sound, our management is stable and superior, and our future bright.

And with that, I’m happy to turn this over to Peter who will spend a few minutes on the performance of some of our entertainment businesses.

Peter Chernin

Thank you, Rupert and good afternoon, everyone. You’ve heard about our results and our resiliency -- thank you, Rupert and good afternoon, everyone. I’m sorry. I think the mic was off. You’ve heard about our results and our resiliency. Now I’d like to take a few minutes to offer some perspective on a few of our biggest growth drivers.

Let’s start with the Fox Broadcasting Company. With last night’s historic results, the Super Bowl extended Fox’s lead for the season among adults 18 to 49 to nine-tenths of a rating point over our nearest competitor. And I’d like to point out that’s the largest lead at this point of the season for anyone in 10 years, since the 1997-98 broadcast season, and probably the largest percentage lead in a far longer period.

Even without the Super Bowl, we would still win this season handily. We are the only network up year-on-year. We were up 9% in our ratings even before the Super Bowl, and this will mark our fourth consecutive year as the number one network among adults 18 to 49.

Now I think this speaks to the strength and diversity of our programming -- sports, scripted series, and reality. We have -- we are in the middle of what I think is probably the best sports lineup in broadcasting history. Already this year we have had the World Series, the Bowl Championship Series, the Super Bowl, and coming up we have the 50th running of the Daytona 500 and the final Major League Baseball All-Star Game to be played in Yankee Stadium.

We’ve also had a great season with established scripted hits. House is now the second-highest rated scripted show among adults 18 to 49 on television, growing its ratings year-on-year. The same can be said for Bones and Family Guy, which are also both up year over year.

And our reality fare has also performed extremely well. We launched a new series, The Moment of Truth, two weeks ago. It was the highest rated premier on any network in almost a year among adults 18 to 49 and of course, American Idol remains by far the most valuable show on television. It returned for its seventh season last month with ratings more than 60% greater than any other series on television, except our own moment of truth.

The strength and depth of our reality programming, along with a full slate of our animated series and several upcoming scripted series premieres, gives us an arsenal of programming that will allow us to stay strong and dominant throughout the spring and summer.

Now, I know that there are concerns about the health of the ad market but we here at Fox have not seen any weakness to date. Pricing remains very strong for both entertainment and sports. We have low cancellations on all of our upcoming commitments. Given the strength of our ratings, we are not in a make-good position, so we are able to capitalize on the current strong scatter market. In fact, our advertising revenues of the network last quarter were up double-digits year-on-year.

And regardless of what happens to the ad market in the months ahead, our consistent ratings success will allow us to capture a lion’s share of the available ad dollars.

Now, our network is not the only place where advertising continues to be strong. We also had double-digit ad growth across our cable group, led by Fox News Channel and continued expansion in our international cable channels.

And ad growth is only part of our cable success -- affiliate revenues were also up double-digits. Now, clearly a chunk of that came from our Fox News renegotiations but we also had double-digit growth at our RSNs, Speed Channel, Fox Movie Channel, and Fox Soccer.

At the same time, we continue to expand our reach internationally. This past quarter alone, we launched nine new channels, including two each in Italy, Portugal, and Turkey. So we have plenty of momentum on both the affiliate and advertising side which will allow us to deliver strong growth throughout the remainder of ’08, even as we absorb spending on our two newest channels, the Big 10 Network and Fox Business Network.

Turning to FIM, we are starting to see real progress on the advertising front as advertisers are beginning to understand and see the value of social networking. Now, I know there were some concerns following our first quarter when we admitted we got off to a slow start, but we have unquestionably gained our momentum, both operationally and financially. No place is this more evident than the response we’ve gotten to our advertising targeting initiative.

We launched our enthusiast targeting initiative during September, dividing our audience into 10 core segments, from movies to autos to fashion to finance, et cetera. And each segment represented somewhere in the 3 million to 5 million people range.

Interestingly, some of our most popular segments thus far have included fashion, consumer electronics, videogames, and financial services. These are segments where advertisers historically have shied away from MySpace and where they are now embracing the opportunity to reach a targeted audience for their products.

We’ve now grown those original 10 enthusiast segments to more than 750 targeted segments. For example, we moved from a general sports segment to targeted things for things like the New York Giants or soccer or archery, et cetera, and each segment has at least 10,000 people.

Thus far, over 100 advertisers have begun using this feature and the results have been overwhelmingly positive. Some campaigns have achieved as much as a 300% click-thru lift with no campaign seeing less than a 20% improvement.

ECPMs are up close to 50% and advertisers using this targeting are spending twice as much as those not yet participating. We expect to expand the 750 target segments to over 1,000 segments by July, further offering advertisers a wide array of choices for their brands.

But it is not just our targeting initiatives which have helped us regain our footing. We are very excited about our involvement with Open Social as well as our own effort to open the MySpace platform to external developers. And it demonstrates how we embrace the widget ecosystem and supports our belief in establishing standards that foster innovation.

Given our scale, we provide the largest and most attractive platform for developers and we think we’ll be a home for innovation in social network applications, and it positions us to reap the rewards from new concepts that our user-base desires.

We are also excited about the ad opportunity from our self-serve initiative. This will launch in beta this quarter and focuses on display ads for small businesses that they can create themselves, a market which is typically under-served. Currently, we believe we have around 10 million small businesses that have MySpace profiles and we think this provides a unique advertising opportunity for us.

So clearly we’ve regained our momentum at MySpace and we are fully on track to hit our targets at FIM.

Finally, let me talk briefly about the success of our film business. I think a lot of people felt that we weren’t going to be able to maintain our momentum in film but we just delivered the fourth highest quarter in the history of our film segment.

Now, I know some concern exists over the future of DVDs, but we’re not seeing this business fall off a cliff by any means. In 2007, as an industry, sell-through spending in the market was down only about 2.7% and spending on new releases was actually up. As a company, once again we outperformed the market and did better than that.

If you deliver quality films that audiences enjoy in the theater, you should still see strong sales on DVD and that’s certainly what happened to us Simpsons, which I think was the best converting title among all studios in the fourth quarter, and Die Hard, and again what we are expecting from our upcoming theatrical hits Alvin and the Chipmunks and Juno later this year.

And speaking of Alvin and Juno, I think they are representative of how we run our studio -- maximizing returns on individual projects rather than chasing market share. Alvin was made for a fraction of the cost of a typical CG animated film and yet it’s passed more than $200 million domestically and more than $200 million internationally.

Even stronger from a margin perspective is Juno, which we produced for under $10 million in budget and has now generated more than $110 million in box office, actually making it the highest grossing Fox Searchlight film ever. We expect this strong theatrical run to continue, given its slate of Academy Award nominations, including the nomination for Best Picture. Both of these films will be extremely profitable for us as they complete their theatrical runs and enter the DVD window later this fiscal year.

We also expect an up-tick in 2008 from the sale of Blu-Ray DVDs, now that Warner Brothers has announced its exclusive support of the format. Consumer spending on Blu-Ray DVDs should grow to over $1 billion in 2008 and with higher margins for us.

Additionally, we’ve recently announced two steps that will allow us to expand the digital exploitation of our movies. First, we started adding digital copies on our DVD discs, allowing consumers to move a digital copy of the film straight from the DVD to their PC and portable devices. And second, last month we announced a new video-on-demand deal with Apple’s iTunes.

So while we are keen on protecting our lucrative DVD business, we are also mindful that consumers are changing their habits and we need to provide them with access to our product in whatever manner they desire.

So overall, with the network, cable, FIM, and our studio all performing strongly and fueling our ongoing growth, we continue to have positive momentum across the company.

And with that, Rupert, Dave, and I would be happy to answer any questions you may have. Thank you.

Question-and-Answer Session

Operator

(Operator Instructions) Jessica Reif Cohen, Merrill Lynch.

Jessica Reif Cohen - Merrill Lynch

Thank you. How about one initial topic, on the Internet, a two-parter -- could you discuss any interest that you may have in Yahoo! and any structure that may include? And on Google’s call, they cited poor monetization from social networking. What are you or you and them together doing to improve monetization?

Rupert Murdoch

I’ll just start and Peter can follow, to say we are definitely not going to make a bid for Yahoo!, and Peter might like to elaborate on that but we’re not -- we’re not really interested at this stage.

Peter Chernin

I don’t think there’s anything to elaborate. We’re not making a bid. I think Rupert said it pretty succinctly.

In terms of the Google call, I didn’t hear that call but a couple of things I’d like to point out. First of all, clearly our revenue from Google is guaranteed, so that’s not a particular issue for us. Secondly, the assumptions on which that deal were made always suggested that Google expected the deal to reach break-even towards the latter part of the three-year period and for the deal to function as a loss leader during the early period. So I think their performance is no surprise.

That being said, we are regularly working with them to continue to improve their performance. We think they are an important partner to us and we want to see them continue to grow their revenue and that has all sorts of things -- you know, it’s trying to do a better job monetizing the data, it’s -- we’re constantly looking at the placement of the search box on the page, the size of the search box, where we deliver the ads, how to get higher click-thru rates. And I would say that we have a very positive working relationship and to be fair, I think an improving working relationship over the past year with Google.

So we are working together. We’d like to see them improve their results and we expect -- but it is important to note that deal, from their own modeling and certainly what they told us, they expected it to reach break-even towards the end of the deal, not right at the beginning.

Jessica Reif Cohen - Merrill Lynch

Is there any way they can back out of this contract?

Peter Chernin

No.

Jessica Reif Cohen - Merrill Lynch

Thank you.

Peter Chernin

That was three questions, Jessica.

Jessica Reif Cohen - Merrill Lynch

One topic.

Peter Chernin

Yeah, but it wasn’t one -- you’re supposed to ask one question.

Jessica Reif Cohen - Merrill Lynch

Thank you, Peter.

Operator

Michael Nathanson, Sanford C. Bernstein.

Michael Nathanson - Sanford C. Bernstein

Peter, I have one for you -- one topic -- this was the most profitable second quarter in broadcast TV for you guys as far back as our model goes. So I wondered, in light of your revenue position, do you think we’re at a sustainable pace for Fox profits? And then, in light of the strike, what kind of costs can you take out? What kind of costs can you take out and when will that be seen?

Peter Chernin

Well, I think first of all, there were costs that came out, that have come out of the first six months of the year but most of them are not strike related. They tend to be more sports related. We had some -- [a bit of abandonment] here before, et cetera. We do think there are more -- I think you’ll start seeing some costs coming out, not out of our volition but you know, we clearly haven’t made pilots yet. We’ve had fewer scripted series because we started running out of episodes during the strike, so more costs will come out.

But look, long term I think the key to the business, we are not looking to cost cut our way to success into the network. We are committed to continue to grow our revenues and that’s the most important thing and we’ll do that by putting on the best shows we can and continue to grow our ratings.

And while we had a good cost side on the network, I think the much more important thing is the growth in our ratings and the growth in our CPMs, particularly the sports business. I think that’s what we are happiest about on the network side in the first half of the year.

Michael Nathanson - Sanford C. Bernstein

Okay, and can you just tell me how much was -- was network up this quarter, in terms of network revenues ex baseball?

Peter Chernin

Were network revenues up in the second quarter?

Michael Nathanson - Sanford C. Bernstein

How much were they up ex baseball?

Peter Chernin

I don’t have a breakout of how much they were up ex baseball but you know, we had higher ratings and higher CPMs, so -- no, I think they were up somewhere in the range of about $50 million on the entertainment side.

Michael Nathanson - Sanford C. Bernstein

Okay, thanks.

Operator

Doug Mitchelson, Deutsche Bank.

Doug Mitchelson - Deutsche Bank

Thanks very much. So I think a four-part single question -- I think in the last call you mentioned that you wanted to rebuild your cash position, get some of your asset sales done before you would consider more aggressive share repurchases. And given the operating momentum you laid out, your stock on the A shares was now under 20, I’m curious where you stand on the concept of share repurchases and deployment of capital. Thanks.

Rupert Murdoch

Well, we have three negotiations. We’ve completed negotiations for the sale of a small number of television stations for $1.2 billion. That will take six or seven months to close because of all the usual regulatory matters and we’re certainly not going to spend it before we see it.

David F. DeVoe

I think we’re really in the same position we were at the last call because we’ve completed the asset sales but [they haven’t closed yet].

Doug Mitchelson - Deutsche Bank

I guess the question is at what price do you get more aggressive repurchasing shares?

Rupert Murdoch

It will depend on what opportunity is around. You know, a great opportunity may be in the shares, I think they are a great opportunity now but who knows what bargains will be around in the next six months. We’re not committing ourselves at this stage.

David F. DeVoe

No, I think we’re in the same place we were with regards -- I mean, long term we’re committed to buying back the stock. But where we are in this call, we’re still in the same place and given the current financial situation with respect to markets and debt markets, we’re waiting to close on these asset sales that we’ve announced and after we’ve done that, we will reevaluate where we are.

Doug Mitchelson - Deutsche Bank

Thank you very much.

Operator

Rich Greenfield, Pali Capital.

Rich Greenfield - Pali Capital

A question on MySpace; you made a comment about what its search revenues were. I’m trying to understand, what is the mix currently between search and display revenues for MySpace on a global basis?

And then just a housekeeping question for Dave -- in terms of Nat Geo, you mentioned it was consolidated for the first time. Can you just give us a sense of why it ended up being consolidated and how much that added from an operating profit, revenue and operating profit to the quarter?

David F. DeVoe

Well, I would say on the first question search represents between about a quarter and a third of FIM revenues, most of FIM revenues are MySpace. So the rest of it is a mix of both display and performance advertising, but that should give you a sense of what the size of search is.

And Nat Geo was consolidated because we now control the operations, both internationally and domestically. And Rich, we’ve roughly -- I think you asked revenues and operating profit -- $125 million of revenue approximately, and approximately $35 million of operating income in the quarter.

Rupert Murdoch

Thirty-eight, I think.

Rich Greenfield - Pali Capital

Thanks so much.

Operator

Jolanta Masojada, Credit Suisse.

Jolanta Masojada - Credit Suisse

Thanks very much. Just following up on the FIM story, can you talk about the international/domestic mix of revenues at FIM right now and the international rollout of MySpace? Because right now, Facebook seems to be doing much better in overseas markets.

Peter Chernin

Well, I think that in terms of MySpace advertising, no, I think it’s probably about 85% domestic and around 15% international. And we are continuing to -- you know, I think you’re seeing Facebook grow in certain markets although I don’t think they are growing nearly as quickly as we are from a monetization point of view. And we continue to see good strong growth internationally and are pleased with our progress and are continuing to make investments and continuing to improve the user experience.

Operator

Spencer Wang, Bear Stearns.

Spencer Wang - Bear Stearns

Thanks. Good afternoon. Just a quick question for Dave on the guidance; so you guys have grown EBIT about 24% through the first half. I guess with your new guidance, I guess that implies EBIT growth in the second half of the fiscal year in the high-single-digits, I guess. So could you just shed a little bit of light on the growth dynamics in the back half? Thank you.

David F. DeVoe

Yeah, I think what you have in last year, we will have tough comps as we go in the second half of the year on the film company. We had a different comp -- our comps at Fox News will get tougher because our first contracts started to come in with the new affiliate rates in the last half of the year. And we have continued spending and investment spending for both Fox Business and the Big 10 Channel, neither of which we had a year ago. So those are the dynamics.

Operator

Anthony DiClemente, Lehman Brothers.

Anthony DiClemente - Lehman Brothers

Thank you very much. Turning to some of the older economy assets, to the newspapers, which I think is more than 20% of your business. It does seem as though, especially on the international side, that your publishing and newspaper businesses have faired better than the U.S. businesses. I’m just wondering why that is and if that’s sustainable. Does that speak to your Internet presence on some of the national papers in the U.K. and Australia, or is it less exposure to real estate or classified? And then, how do you think of that in terms of a global slowdown and exposure to international non-U.S. advertising? Thanks.

Rupert Murdoch

I think our newspapers, with one or two exceptions, are not major -- don’t have major classified revenues. And in Britain, we’re dominant in every -- it’s very competitive. We’re dominant in each section of the market and our revenues there are strong and good. I wouldn’t say that they couldn’t be better but they are fine and in Australia, they are going gangbusters. The economy is great and that was really the home run in Australia.

Next, from now on, of course, we’ll have gone through our special write-offs and the change of all of our printing arrangements in Britain and that should also get better.

As for the U.S., the Post is very small but we are probably the only newspaper that is up in revenue. We’re up 9% so far this fiscal year, so we’d like it to be better but that’s pretty good.

And these figures don’t take account of anything for the Wall Street Journal but our present pacing is that we’re down a little bit in January and we appear to be making budget or ahead of it in the next two months.

And Dow Jones generally, which is not included in any of our forecasts, we’ll be a bit better than they were last year. And a lot of savings will be coming through but some of those savings we’ll be spending on expansion.

Anthony DiClemente - Lehman Brothers

That’s just -- pre the any purchase price amortization that we might have, the true operations of the business?

Rupert Murdoch

Yeah, that’s purely operating.

Operator

David Bank, RBC Capital Markets.

David Bank - RBC Capital Markets

Thanks very much. I was wondering if you could give a quick update on strategy and progress for My Network?

Peter Chernin

The My Network, while we are still losing money and frankly losing money at a pace that we’re not satisfied with, we do think we’ve made a lot of progress. We’ve taken a lot of costs out of the business and we’ve seen our ratings grow significantly. And so we had budgeted to improve pretty significantly this year over last year and we are actually outperforming our budget quite a bit. I think we want to see the advertisers begin to catch up with the improved ratings and we’d like to see some more ratings progress but certainly in this quarter alone, for example, we had about a $30 million reduction in program costs and still managed to deliver significantly higher ratings than we had been with the old formats. So we are on the right track. The right track is going faster than we expected but not as fast as we’d like and we’ll keep the pressure on it and get it back to break-even.

David Bank - RBC Capital Markets

Thank you.

Operator

Michael Morris, UBS.

Michael Morris - UBS

Thank you very much. Can you provide us with an update on the writers’ strike talks and maybe just give a little color on why the directors were able to negotiate and avoid strike and the writers still seem to be dragging on?

Also, in terms of television, do you think that this could be a catalyst for change in terms of things like the up-front, rolling up the seasonal at one time in the fall? Or would you expect things to go back to business as usual if this gets resolved? Thanks.

Peter Chernin

I don’t really have much to add to the writers’ strike negotiations. We are under a press blackout but I am optimistic and I think we are having positive discussions and I am optimistic that we will get to some resolution.

The directors, you know, I can’t speak to -- you’d have to ask them as to why we were able to get a deal done more quickly with them.

In terms of -- you know, we are certainly examining every part of our business, although to be honest we were examining every part of our business before the strike. I think you are not going to see Fox abandon the up-front. We believe the up-front is a valuable way to interact with our advertisers and a valuable platform to interact with our advertisers and frankly, from a marketer point of view, is a good opportunity for them to plan their spending in advance for the year. So we think it’s a valuable part of the process for both sides.

We have been looking at our scripted development process. We were moving towards probably making fewer pilots and trying to get some waste out of that system before the strike and we’re continuing to look at that.

But you know, I would say that sure the strike may be a catalyst but we’ve also been exploring and reevaluating all parts of that business on an ongoing [basis], as I think is only appropriate.

Michael Morris - UBS

Thank you.

Operator

Adam Alexander, JB Were.

Adam Alexander - JB Were

Good afternoon. I’ve got a question on Fox Business Channel. Can you just give us an update of how the channel is performing versus your expectation so far? Has there been anything in the initial months that’s surprised you on the positive or negative side?

Peter Chernin

I’ll go first and maybe Rupert, you can pick up. I think the performance of the channel is right on track. It’s exactly where we would expect it to be. I guess the only thing I’d say personally is that I think to start a 24-hour channel from scratch, I think the programming is probably a little bit stronger than I would have expected six months ago. I think it’s been a great achievement to be able to put up that quality program right from the get-go. You’re beginning to see them scoop the competition on various things, so I think I would say qualitatively probably better and quantitatively, exactly what we expected.

Rupert Murdoch

The only figure I’ve seen financially is that we are losing a little less than we budgeted for, capital.

Adam Alexander - JB Were

And just on the new channels, Big 10, are you any closer to signing up any more carriage for that one?

Peter Chernin

You know, look, we’re in conversations but I don’t know if we’re any closing to signing up. We continue to believe that it’s a very, very strong product. Our ratings are extremely strong and as we are in basketball season right now, more frequent, we’re on more nights a week. And we know the performance in the satellite homes and cable homes that are taking us and the telco homes that are taking us is very strong. And so we believe that people will ultimately see the wisdom and the value of taking this channel but we’re not closing to announcing something.

Adam Alexander - JB Were

Thanks.

Operator

Ingrid Chung, Goldman Sachs.

Ingrid Chung - Goldman Sachs

Thank you. Good afternoon. Could you talk about trends in engagement at MySpace among tenured users? You know, perhaps people who have been on MySpace for at least a year or more? And what kind of things can you do to increase that engagement?

Peter Chernin

Well, I don’t have a lot of specific statistics in front of me. In general, we find that people who have been on a year or longer actually get more engaged. They have more friends, they’ve gotten involved in more different aspects, they customize their pages more, they’ve added more bands, et cetera, et cetera. So in general, we think the trends grow over time and users become more engaged.

And I think in terms of increasing that, I think the opening up of the platform to the Open Social thing, starting to put on a lot new social networking applications will only increase that. We think it will make the sort of ecosystem richer, more interactive, have more features on there -- not only the features we develop and the things we add, but opening up to outside developers to do that. So I think that will only increase that engagement.

Ingrid Chung - Goldman Sachs

Okay, great. Thank you.

Operator

Alex Pollak, Macquarie Research.

Alex Pollak - Macquarie Research

Thanks. A great result, gentlemen. Just a quick question; what do we expect on the closure of DIRECTV and what is the holdup there? When should we expect that to close?

And number two, I know you are seeing no impact from the sub-prime thing, but I guess my question is typically it does take a little bit of a lag. Do you think it might be a 2009 issue or is that a bridge too far right now?

Rupert Murdoch

It has taken far too long. It’s certainly not been our fault and we expect to have closure very soon.

Peter Chernin

The second part of the question was what?

Alex Pollak - Macquarie Research

Just typically it does take a little bit of time for the financial market issues to roll through into actual slower advertising revenues and volumes. Do you think that that might be a 2009 issue for you or is it too early to call?

Peter Chernin

First of all, it’s hard to predict. We’re obviously mindful and obviously diligent looking for signs and we’re certainly examining our cost structure aggressively to make sure we are well-positioned. But beyond that, we haven’t seen -- you know, we’ve seen a little bit of exposure in some markets that have been particularly hard hit by sub-prime foreclosures, et cetera, some of the local markets. But on a national basis, we’re not seeing the signs but we’ll be diligent and pay attention if we start seeing them. But right now, business seems pretty strong.

Operator

Jason Bazinet, Citigroup.

Jason Bazinet - Citigroup

Thanks so much. Over at SKY Italia, I think Media Set recently launched some new programming packages and I was just wondering if you could comment on how, if at all, you expect that to impact SKY Italia's results? Thanks.

Rupert Murdoch

We don’t see any impact at all at this stage. We watch any competitive move very, very carefully but we’ve not slowed down at all.

Jason Bazinet - Citigroup

Okay. Thank you.

Operator

Kit Spring, Stifel Nicolaus.

Kit Spring - Stifel Nicolaus

Can you talk about where you are with Fox News affiliate fees, how much more opportunity there is to renegotiate prices on other cable systems? Thanks.

Rupert Murdoch

I don’t think we have the opportunity to increase by the same percentage that we’ve done in Fox News but certainly these things are under rolling contracts and we normally get increases when we get to renewals. Is that right, Peter?

Peter Chernin

Yeah, I think on Fox News specifically, I would guess we are somewhere in the neighborhood of about a third of the way in terms of number of subs that are paying the new sub fees, and that the remaining two-thirds, we would expect to roll in at similar -- obviously the same kind of rate increases over the next three years or so, the remaining two-thirds. And there are reasonably a constant stream of expirations and there will be renewal negotiations as those deals expire.

Kit Spring - Stifel Nicolaus

Thank you.

Operator

Benjamin Swinburne, Morgan Stanley.

Benjamin Swinburne - Morgan Stanley

Thank you. Good afternoon. Rupert, you talked at the outset about the Journal and Dow Jones and the investments there, and online being a key to the growth story. Can you talk a little bit about the decision to keep the core content pay? What is behind that, if that is still something that you are thinking about changing down the road?

And in terms of staffing and technology infrastructure at the Journal, is there a lot of investment that needs to be done ahead of it and how does that investment level sort of compare to the cost saving opportunities you see at the papers, now that it’s part of the News Corporation?

Rupert Murdoch

I think as far as online goes, the fact is that those items, those matters that are basically commodities and that you can get free elsewhere, or those subjects, that will be in our new wider, more open online service.

But we have unique financial information. It is clearly of tremendous value to people and we think we ought to charge for, the same as everybody else does. And as we open new niche online sites, some of them will be extremely valuable and we expect it will take -- you know, this is not going to happen in the next three months but we are having talks with a lot of financial institutions who seem to be welcoming this approach and we are hopeful that over the next couple of years, we’ll have major increases in revenue in the enterprise group.

Benjamin Swinburne - Morgan Stanley

And in terms of the spending ahead of you in the near-term, in terms of investing in either the staff levels or the technology assets, the infrastructure at the paper versus the cost savings? Is that sort of a push or do you expect to see --

Rupert Murdoch

Well, you have paper and price increases coming through I think in the next year. No, we’re doing things -- you talk about savings, for instance, we’re just making changes in our -- it’s a small thing, our printing in Colorado, a lot of which we are moving to Utah. It’s going to save a fortune in transport. The actual closing down of our plant and the changeover may cost $2.5 million. We expect to get it back in 12 months. Equally in -- we’re going to move, we hope -- we’re in negotiations. I shouldn’t preempt them, with a Tribune company and Gannett and others to be printing in more places at certainly no increase in cost but getting a much better product and a much later edited product to all our subscribers.

Benjamin Swinburne - Morgan Stanley

Thank you.

Operator

Tuna Amobi, Standard & Poor’s.

Tuna Amobi - Standard & Poor’s

Thank you very much. I guess I wanted to first clarify one of the numbers I heard from Rupert on the call, $250 million for the Super Bowl related advertising. I guess the first question -- presuming that does not include MySpace, and if I can confirm that that number, that Super Bowl is a substantially beyond break-even operation, that would be helpful.

And to my real question would be on the recent appointment of James to head international operations. I was hoping perhaps Rupert could share with us the top three priorities that he’s been mandated to focus on and perhaps, given the success that he had at BSkyB, I was hoping that perhaps Rupert can address some of the core transferable skills that he brings along to News Corp to benefit News Corp’s shareholders. Thank you.

Rupert Murdoch

Well, I believe that we are very lucky in the people we have and that we are uniquely good at sports broadcasting. The $250 million yesterday, that was for the television network from really start up in the morning until we closed after the episode of House in the evening. It was an all-day, all evening effort but still a very big one. But was it profitable? Certainly. How profitable, I couldn’t tell you.

Tuna Amobi - Standard & Poor’s

Okay, but --

Rupert Murdoch

Not that much, probably --

Peter Chernin

And just on the network. It did not include our television stations or MySpace or anything else.

Rupert Murdoch

Right, right.

Tuna Amobi - Standard & Poor’s

Any quantification of those ones as well, just to get a ballpark?

Peter Chernin

No, we don’t have all those numbers in yet.

Tuna Amobi - Standard & Poor’s

Okay, then. And the other question?

Rupert Murdoch

The qualifications James brings -- pretty smart and a great deal of experience in Asia and he’s done a tremendous job, I believe, and he’s -- and the directors certainly believed at BSkyB. So we’re extending his responsibilities.

Tuna Amobi - Standard & Poor’s

Can you perhaps share with us his priorities, his top priorities over the next year?

Gary Ginsberg

We need to -- you asked a couple of questions. We’re going to move on to the last question. We need to get to the press.

Tuna Amobi - Standard & Poor’s

All right.

Gary Ginsberg

Thank you very much, Tuna. Brent, just one more question from the investors and then we’ll go to the press, please.

Operator

(Operator Instructions) Alan Gould, Natexis Bleichroeder.

Alan Gould - Natexis Bleichroeder

Thank you very much. Rupert, could you comment on the premiere investment and what you see happening in the German market, please? And some of us longer investors have lived through a premiere before, so what’s happening?

Rupert Murdoch

Exactly. We’ve lived through it before and that’s why we’re doing very carefully, but we do feel there may be an opportunity there and we took a relatively small investment so we can have the opportunity to study it carefully without being preempted by somebody else. But it is the third greatest economy in the world and it doesn’t have any real pay TV operator.

Alan Gould - Natexis Bleichroeder

Thank you.

Operator

Thank you very much, Mr. Gould. Ladies and gentlemen, members of the financial and analyst community, we are welcoming you to stay onto the call but that does conclude your Q&A session for today. Next we’ll move directly into members of the media that are joining us today.

Gillian Wee, Bloomberg News.

Gillian Wee - Bloomberg News

Just wondering what kinds of acquisitions you are considering this year and how big they’ll be. Also, when you anticipate the writers’ strike to be resolved.

Rupert Murdoch

I’ll take the first piece and say that we are not considering anything of any significance at this moment. But we’ll see what comes along. We won’t do anything that won’t be synergistic and add to the long-term prospects of the company.

Historically, we’ve done better with start-ups than with purchases.

Peter Chernin

I’m not sure -- I don’t have anything in terms of anticipating a date when it’s going to be over. We are working hard to try to see if we can come to a resolution and I hope as soon as possible for everybody’s sake.

Gillian Wee - Bloomberg News

Thank you.

Operator

Jane [Schultze], The Australian.

Jane Schultze - The Australian

Hello, Mr. Murdoch. Lachlan Murdoch is obviously making a bid for Consolidated Media in Australia, along with James Packer. The competition regulator has said it’s going to look to see whether or not News Corp is involved in that at all. Could you comment on that deal and whether or not News Corp is involved?

Rupert Murdoch

Not only are we not involved, I’m pretty ignorant about it.

Jane Schultze - The Australian

Do you think it’s going to change the way news will operate with Consolidated Media in the future?

Rupert Murdoch

Change what?

Jane Schultze - The Australian

Change the relationship between news and Consolidated Media -- would they work more closely --

Rupert Murdoch

No, this is a -- they are talking about a 25% interest in something that someone else has 75% of, if you’re talking about the Consolidated press piece.

Gary Ginsberg

Next question, please.

Operator

Peter Ryan, Australian Broadcasting Network.

Peter Ryan - Australian Broadcasting Network

Mr. Murdoch, you made a point in the earlier analyst briefing there about the U.S. economy and you mentioned that you felt that it was resilient. But I was wondering if you could outline to us your concerns about the U.S. economy and whether or not you think that the current interest rate cuts we’ve seen from the U.S. Federal Reserve will avert a recession or a consumer-led recession in the United States.

Rupert Murdoch

I think we’ve got a long way to doing that, and as well as the package that’s coming out of Washington. But this is an extraordinarily resilient economy. We still have 95% full employment and you can see from our businesses that things are pretty good.

Operator

Kenneth Lee, Reuters.

Kenneth Lee - Reuters

I would like to know if you can make a finer point on Yahoo!. If not an outright purchase, are you interested in some sort of transaction, possibly with a partner?

Peter Chernin

I think we’ve been pretty clear that we are not interested, we’re not bidding, we’re not looking at it. I’m not sure there’s anything else we can really say at this point, Ken.

Kenneth Lee - Reuters

I’d like to follow-up; if AOL comes up for sale, would you be interested in some sort of transaction for that?

Rupert Murdoch

That’s an even easier question -- no.

Operator

Joshua Chaffin, The Financial Times.

Joshua Chaffin - The Financial Times

Following on from that, if you could just give any more color on what kind of impact a Microsoft/Yahoo! pairing might have on your business?

Rupert Murdoch

What kind of influence it might have? None.

Peter Chernin

We’re not going to really comment on that. Sorry.

Operator

Merissa Marr, The Wall Street Journal.

Merissa Marr - The Wall Street Journal

I just want to ask one other follow-up question on Yahoo! -- you held some talks last year with Yahoo! about possibly combining MySpace and Yahoo!. Is that something that you could still pursue?

Rupert Murdoch

I think that day has passed but you never know. We never really had -- talks is an exaggeration. There was some references to it, social meetings but that was about all. And that was with the previous chairman.

Operator

[Shera Ovita], Dow Jones.

Shera Ovita - Dow Jones

My question has been answered. Thanks.

Operator

George [Silino], The Hollywood Reporter.

George Silino - The Hollywood Reporter

Thank you. Gentlemen, I was wondering -- is there anything you are trying to do business wise with the looming recession, even if you think the economy is pretty resistant and resilient? Anything you can do to strengthen your operations right now in case we do slump into a recession?

Rupert Murdoch

No, we think we’re running the company pretty well. We can always do better and we are trying to but we are not going to -- we are running a pretty slim operation and we are not going to turn around fire hundreds of people just for safety’s sake.

Operator

Stacey Kramer, paidContent.

Stacey Kramer - paidContent

I was wondering if you could address the situation with Jamba right now and where you think that’s headed.

Peter Chernin

I think that so far, business is pretty stable and I think the main thing there is we just announced last week the hiring of a new CEO, Mauro Montanaro, from Nokia. I think he’s been in the job about four days now, so we are expecting results from him next week.

Stacey Kramer - paidContent

Do you think that the European focus is going to help Jamba?

Peter Chernin

Well, I think the company was European-focused when we acquired it and the European mobile market has been more developed but we would also like to see the company expand more into the U.S. and more into other markets. I think it evolved out of Europe but we’d like to see it evolve to a wider geographic focus.

Stacey Kramer - paidContent

Thank you.

Operator

Jesse Hogan, The Age Newspaper.

Jesse Hogan - The Age Newspaper

Thanks for that. Mr. Murdoch, if your son Lachlan’s takeover bid for Consolidated Media in Australia succeeds, his company would share some investments with News and compete with News in some other areas. Would that produce [inaudible] on the New Corp [inaudible]?

Rupert Murdoch

Yes, if there is any conflict at all, the board will certainly face up to that. But we don’t anticipate or see that at all. In the two areas where we would be associated, which is Fox News and Fox Tel, News Corp has clear contractual management control.

Jesse Hogan - The Age Newspaper

Could there be any synergistic benefit about having I guess an ally on the board? Would you see Lachlan as that?

Rupert Murdoch

Well, there’s no conflicts there and we never had any conflicts when it was just solely Mr. Packer and we don’t see any conflicts with Lachlan on the board. These are management -- it’s really about management. We appoint the management and they answer to our management in Australia, so -- that’s not -- I would hope it would be a very friendly relationship and continue to be.

Operator

Seth Sutell, Associated Press.

Seth Sutell - Associated Press

Hello. Two quick ones, please. Could you guys supply anymore detail on the settlement that you reached with Judith Regan? That’s one. And the second one is Rupert, you mentioned earlier that the hold-up with the DTV closing was not anything from your side. Could you give us some more detail about what exactly is holding up that deal, please? Thanks.

Rupert Murdoch

Certainly we’re bound not to say anything about the Judith Regan settlement. But -- no, it was -- I think probably I better not say anything but it was at the Justice Department, which took quite a long time to come through. It’s now at the FCC.

Seth Sutell - Associated Press

Okay, thanks.

Operator

If time allows, we do have a follow-up question. Peter Ryan, Australian Broadcasting Network.

Peter Ryan - Australian Broadcasting Network

Mr. Murdoch, you mentioned earlier that you thought the Australian economy was going great, and you might have even used the word gangbusters in relation to Australian operations. But are you aware that the Australian Government is facing, or the reserve bank in Australian is facing challenges on the inflation front and while rates are being cut in the United States, they are on the rise here in Australia. Are you concerned about the impact of the rising interest rates scenario in Australia?

Rupert Murdoch

Well, it certainly doesn’t affect us directly. If they are trying to slow the economy down, they could be doing that. Domestically, I think it would be very hard on people. The price of food is rising, the price of gasoline is rising, and these are world things which have nothing to do with the Australian economy.

But I’m not an economist and I’m certainly not an expert on the thinking of the Australian Reserve Bank. Sorry not to be more helpful.

Operator

With that, Mr. Murdoch, Mr. Chernin, our host panel, I’ll turn the call back to you for any closing remarks.

Gary Ginsberg

Thank you all for joining us. If you have any questions, feel free to call us in New York tonight.

Operator

Very good and thank you, gentlemen, for your time today. We do appreciate that. Ladies and gentlemen, Mr. Murdoch is making today’s call available for digitized replay. It’s for two full weeks starting at 6:30 p.m. Eastern Standard Time February 4th all the way through 11:59 p.m. February the 18th. Please access AT&T’s executive replay service by dialing 800-475-6701 and at the voice prompt, enter today’s conference ID, 906723. Internationally, you may access the replay as well by dialing 320-365-3844, again with the conference ID of 906723.

And that does conclude our earnings release for the second quarter. Thank you very much for your participation as well as for using AT&T’s executive teleconference service. You may now disconnect.

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