MySpace Suffers More Ad Declines

Earnings at News Corp.’s digital media group fell $32 million during its most recent fiscal quarter as MySpace hemorrhaged search and advertising revenue.

News Corp. does not break out total digital media revenue, but the “Other” operating segment of which it is part reported a net loss of $73 million, compared with a net income of $34 million during the year-ago period.

CEO Rupert Murdoch said MySpace has seen recent “signs of traffic stabilization,” which he credited to last year’s management shake-up. Aside from MySpace, the digital media unit houses IGN Entertainment, Jamba, Photobucket, and the company’s Hulu joint venture with NBC Universal and Disney.

The digital picture was rosier at the company’s newspaper division, where operating results were buoyed by 17 percent growth in ad revenue at The Wall Street Journal’s digital network.

Murdoch: 3D Is the Future

Of course, News Corp’s greatest recent success has nothing to do with newspapers or ad revenues. Twentieth Century Fox picture “Avatar” last week became the highest grossing box office release of all time, and remains the top draw in theaters seven weeks after its release.

Elated with that success, management heralded the next generation of 3D consumer technology – as well as the onslaught of programming they believe will soon arrive to leverage that technology.

“You will see more 3D films, but more fundamentally there will be exponential growth in 3D programming over the next couple of years,” Murdoch said during the company’s conference call with investors.

He noted BskyB, in which News Corp. holds an equity stake, will soon launch a 3D channel, and has already begun to experiment with 3D broadcasts.

Not everyone is bullish about the technology. Chris Allen, director of video innovation at Starcom USA, suggested to ClickZ the 3D craze triggered by Avatar’s release has yet to prove itself as more than a fad.

“It’s great if you’ve got a hardcore gamer who wants to be immersed in that experience,” he said. “I don’t see it catching on as a real trend for consumers.”

Allen said several clients have inquired about whether they should begin to produce commercials in 3D. He said Starcom’s advice is no, “unless someone’s going to use a spot in a cinema environment as the primary point of delivery.”

Overall, News Corp. reported net income of $254 million during the second quarter, which ended Dec. 31, 2009, compared to a net loss of $6.4 billion a year ago.