News Corporation, parent company of The Times, reported a 30 per cent drop in first-quarter profits, as falling revenues from television advertising and declining film studio sales hit the bottom line.

Net income dropped to $515 million (£324 million), or 20 cents a share, from $732 million, or 23 cents, a year earlier, slightly below the consensus analyst forecast of 22 cents a share.

Operating income, an alternative measure of profit defined as gross profit minus operating expenses, fell by 9 per cent to $ 953 million. News Corp’s sales rose by 6.3 per cent to $7.51 billion, helped by the acquisition of Dow Jones, parent company of The Wall Street Journal.

News Corporation was hit by $447 million of losses relating to Premiere, a German pay-TV and radio channel service, most of which arose from a writedown of the group’s investment in that company. Premiere’s shares have dived in recent weeks as it has suffered management departures, issued a profit warning and restated downwards its total of subscribers, all amid a tough advertising market in Germany.

Operating income at News Corp’s television unit declined from about $183 million to $54 million in the three months to September 30, after most of the group’s Fox television stations had a fall in advertising revenues, as companies cut advertising budgets and the Olympics coverage by the rival NBC network lured away viewers. The advertising slump cut the operating income of Fox Television Stations by 48 per cent.

Cable network programming sales jumped by 19 per cent to $1.3 billion, on advertising revenue gains by the Fox News Channel as it increased the price of airtime. This lifted the Cable unit’s profit 31 per cent to $379 million.

Rupert Murdoch, chairman and chief executive of News Corporation, acknowledged the “negative macro-economic conditions around the globe, including weak advertising markets”. He added: “All media companies are being tested and the year ahead will be difficult.”

News Corp yesterday revised its outlook for the year, changing its prediction from growth of 4 to 6 per cent in operating income on the 2008’s $5.13 billion to a decline in the low to mid teens.

Profits in News Corp’s film division, which includes 20th Century Fox, fell 31 per cent to $251 million as revenue declined by a fifth to $1.3 billion. Mirrors and Space Chimps, the biggest releases of the quarter, collected $114.6 million worldwide, according to Box Office Mojo, the film researcher. That compares with $526.9 million for The Simpsons Movie a year earlier.

Meanwhile, sales at the newspaper group leapt 37 per cent to $1.71 billion, as News Corp benefited from its $5.2 billion acquisition of Dow Jones. Operating profits of the division rose 44 by per cent to $134 million.

Revenues at News Corp’s Fox Interactive Media also performed well, jumping by 17 per cent on the back of growing advertising and search revenues at its MySpace networking site.

News Corp reported a $117 million jump to $165 million in operating income of its SKY Italia, from $117 million, with net subscriber additions of 359,000 over the past 12 months.

News Corp shares fell 5.8 per cent to $9.22 in after-hours trading after closing down 10 per cent at $9.79 on the New York Stock Exchange.

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