Verbatim: Merrill’s Comments About FNC

MediaPost’s report about a recent Merrill Lynch analysis of News Corp. may have taken Jessica Reif Cohen‘s comments out of context. Here’s what she wrote, in full, in a passage titled “Fox News Negotiations Could Provide Upside:”

The long-awaited Fox News affiliate renewals will begin in September (DTV) and October (CVC). While Fox News is reportedly asking for $1/sub, we would be quite pleased if the company were to receive $0.50/sub/month (a double from current rate) or higher. We assume that Fox News will receive $0.50 in year 1 and that it will grow only 5% per annum thereafter, with 25% of the affiliate fees renegotiated per year. For advertising, we have modeled modest growth of only 4%/year between now and FY10. This could prove conservative, as recent ratings weakness is largely due to difficult comparisons with Katrina-related coverage from a year ago. We also assume relatively significant increases in cash costs (10% CAGR between FY07 and FY10), although margin expansion should still be substantial.

In an e-mail to TVNewser, an FNC ad executive says: “We are anticipating double digit ad sales growth in the next four years.”

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