For 24 hours Rupert Murdoch’s audacious attempt to divert attention form his company’s poor second quarter result, especially a surprising large fall in revenue, worked as the market and analysts gobbled up his talk of things looking better.

He joined the likes of Viacom and Disney this week where their bosses or big shareholders (hint for News Corp watchers) have talked about conditions easing and starting to look better.

Rupert Murdoch mumbled a few words about how things seem to be changing for the better and up surges the News Corp share price, as investors forgot what a rotten track record Mr Murdoch has in forecasting.

Just one quote was all it took for the master of spin and smoke and mirrors to divert attention from the collapse in profits, cashflows and the nasty fall in revenues in his global free to air TV businesses (mainly in the US) and newspapers in the US, UK and Australia.

“I’m not an economist and we all know economists were created to make weather forecasters look good,” he said. “But it is increasingly clear the worst is over. There are encouraging signs in some of our businesses that the days of precipitous decline are done, and things are beginning to look healthier.”

The recession may have crunched News Corp’s third quarter profits, especially from its TV and newspaper businesses where profits have collapsed, but Rupert was tap dancing at full speed, and the market followed his feet and not the figures.

Operating profits fell 47% after the 42% fall in the second quarter.

In Australia News Corp shares jumped by around 9.5% in trading yesterday or $1.27 a share and ended at $14.56. In the US, home of some of the most credulous media analysts, the gains were smaller, up 1.1% to $US10.77, with a further rise in late trading to $US10.98.

Remember how Rupert forecast oil would fall to $US20 a barrel after the invasion of Iraq? It hit a high of $US147 a barrel last July and traded just under $US57 a barrel overnight. Remember his take that The Wall Street Journal was a bargain at $US6 billion? It’s now written down by half or $US2.8 billion what about his contention that the company’s second quarter results would be down in the “mid to high teens”? Instead they fell 42%.

The market and many analysts had obviously forgotten his appalling forecasting record (it is probably better to believe the reverse of what Rupert forecasts).

And then a few hours ago the quarterly results for the huge CBS TV network in the US were released and they were bad, terrible and no one was impressed. Revenue fell 13%, but a sharp fall in advertising costs plunged the company into a loss for the first three months of the year.

Revenue fell to $US3.16 billion from $US3.65 billion, a greater-than-expected drop for the only TV broadcast network to have boosted its prime-time audiences during the American latest season. TV revenue fell 12%.

The crash in advertising spending was reflected in the company’s first quarter loss of $US55.3 million, down from a profit of $US244.3 million in the first quarter of 2008.

Results from NBC Universal, Viacom Inc, Time Warner Inc and Walt Disney Co were all down by around 40%-50%, but were bolstered by their cable networks, where revenue is generated by both advertising and affiliate fees. News Corp’s cable business in Fox did better, lifting operating earnings $US99 million on higher affiliation fees, but lower ad revenues.

CBS’s cable business is limited to its pay TV network, Showtime. CBS focuses on its broadcast television network, local television stations, and radio and outdoor advertising, all of which have been hard hit as advertisers have cut spending in the weak economy.

Viacom (and CBS’s) biggest shareholder, Sumner Redstone was talking up things this week, but he has had margin calls on his shares because of funding pressures in his private businesses, so he wants to see share prices rising.

But like Murdoch, CBS CEO Les Moonves and Chief Financial Officer Fred Reynolds claimed the second half would be better and told analysts, investors and media to look ahead to what they said would be stronger results later in the year.

Reuters reported from the earnings conference call:

“We are seeing early signs of improvement in the advertising market place both locally and nationally,” Moonves said.

“In each of the last several weeks, we have seen sales pacing improve. It is premature to call it a full recovery, but the trends are encouraging particularly on — as we look to the back half of the year.”

But unlike Australia, the market ignored that advice and CBS shares fell 13% in after hours trading to $US7.15.

Peter Fray

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