News Corporation
News Corp. headquarters on Sixth Avenue in New York City. Reuters

News Corp. (Nasdaq:NWSA) is expected to report higher second-quarter 2013 earnings on Wednesday as its cable networks continued to fuel most of its growth and the success of Steven Spielberg’s “Lincoln” ushered in a better-than-expected awards season for its filmed entertainment unit.

Analysts polled by Thomson Reuters expect the New York-headquartered multinational media conglomerate to report net income of $988.57 million, or 42 cents per share, Wednesday at 4 p.m. EST. That’s an 8.1 percent increase over the $981 million, or 39 cents per share, the company reported last year for the three-month period that ended Dec. 31. News Corp. is expected to report revenue of $9.27 billion, up 3.2 percent from $8.98 billion, for the same period last year.

Cable television is expected to continue to drive the company’s growth for the quarter, although ratings declines at Fox News, the leading cable news network, have pushed down ad-growth expectations, according to research provided by James Dix, an analyst for Wedbush.

Nevertheless, cable television will contribute an estimated 75 percent of News Corp.’s overall operating profit, according to Michael Corty, a media analyst with Morningstar. And the value of the cable unit will only increase this year as News Corp.’s much-publicized separation becomes finalized and its entertainment business is spun off from its less-profitable publishing business.

“Fox News has been the key generator of recent growth in the cable network portfolio,” Corty wrote in a Dec. 7 research note, “but we believe investors under-appreciate the regional sports networks and international channels.”

While investors may under-appreciate regional sports channels, News Corp. clearly does not: The company moved aggressively toward building its sports-programming portfolio during the last quarter. On Nov. 20, News Corp. completed a $2 billion deal to acquire a 49 percent equity stake in the YES network, the regional channel that broadcasts New York Yankees games. The deal includes an option for News Corp. to up its stake to 80 percent in three years. And on Dec. 28, two days before the end of the quarter, News Corp. purchased SportsTime Ohio, the regional sports network owned by the Cleveland Indians. That deal was worth a reported $230 million.

News Corp.’s Fox Sports network has not been as successful in other regional sports markets. It lost out to Time Warner on a recent bid for the TV rights to broadcast the games of the Los Angeles Dodgers (NYSE:TWX), but the long-fought battle shows just how pivotal sports programming has become to the television industry.

“News and sports programming tend to be consumed in real time, which makes them less vulnerable to digital video recorders that can skip commercials,” Corty said, “a fact not lost on advertisers.”

Operating profit for News Corp.’s filmed entertainment unit, which includes the 20th Century Fox movie studio, is expected to increase 4 percent for the quarter, despite a slight drop in revenue, according to Dix. Typically, October is a slow month for movie studios, as they gear up for holiday and awards-season releases. Fox’s holiday season was boosted by the success of Steven Spielberg’s “Lincoln,” an Oscar favorite, which so far has taken in a domestic gross of $167 million on a $65 million budget. Conversely, the Maggie Gyllenhaal movie “Won’t Back Down” was a disappointment, earning only $5 million domestically. The movie, which centered on a parent’s efforts to take administrative control of her daughter’s elementary school, was blasted as anti-union propaganda by the American Federation of Teachers and may have been hurt by the union’s PR campaign against it.

Corty noted that high-margin DVD sales in News Corp.’s filmed entertainment unit will continue to face headwinds as consumers buy fewer movies and rent more. Morningstar expects the transition from DVD to digital streaming to be gradual in the marketplace.

News Corp.’s split, which is expected to be finalized this summer, will turn the conglomerate into two publicly traded companies. The publishing company -- which includes the Wall Street Journal, the New York Post and HarperCollins -- will retain the News Corp. name, while the entertainment company will become known as the Fox Group. Rupert Murdoch, current chairman and CEO of News Corp., will remain chairman of both companies and CEO of the Fox Group. In early December, News Corp. announced that it had tapped Robert Thompson, the managing editor of the Wall Street Journal and a longtime Murdoch confidante, to take over the publishing side of the business.

The pending split has largely been seen as a positive move, a sign that the newspaper-loving Murdoch is coming around to the difficult realities facing the modern publishing industry.

Shares fell 19 cents on Monday to $28.42.