News Corp. (NWS) is on a roll. Its 20th Century Fox studio hit the jackpot with “Avatar,” which is well on its way to beating the studio’s “Titanic” as the highest grossing movie ever. So far the film has taken in more than $1.3 billion in ticket sales. Rentals and other ancillaries should push “Avatar” past the $1.8 billion gross from “Titanic.”
To top that, the Fox Network announced this week that it signed a deal with Sarah Palin for a series of occasional reports for the network to be called “Real American Stories.” Palin’s signing is an effort by Fox, and News Corp., to bring her popularity and knack for controversy to the network.
Bill Shine, Fox executive vice-president of programming, noted the opportunity for Palin to say something controversial is “probably going to help us in that that’s what people will want to watch.”
Fox News has no shortage of controversial characters, and the network’s ratings bear out Shine’s judgment. Fox News drew a record-breaking 2.2 million viewers last year according to Nielsen, more than CNN, owned by Time Warner (TWX), and MSNBC, owned by General Electric (GE), combined.
Still, the news is not quite as bullish as it may seem for News Corp.
First, “Avatar” cost about $430 million to make and market, and the gross receipts need to be split between theater owners and investors who coughed up about 60% of the movie’s $250 million production budget. The actual take for News Corp., even if the movie hits $2 billion in total gross is likely to be less than $500 million.
The company’s recent deal with Time Warner Cable for a per-subscriber fee in exchange for letting Time Warner carry Fox Network programming, though smaller at the outset, should have a greater impact on News Corp. earnings over time.
The Palin deal is much the same. The audience for Palin, and Fox News in general, is not likely to grow much once the curiosity factor dies. Fox will not add a lot of new viewers because of Palin, nor will it generate substantial new advertising revenue.
Palin’s deal made news, but it’s unlikely to make a lot of new revenue for the network. TV ad revenues are being squeezed, with even Super Bowl ads selling for less than last year. The viewers for TV news programming are either fixed or falling. As a result, ad revenues will continue to decline, and not even Sarah Palin will be able to fix that.