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MELBOURNE, Feb 7 AAP

February 07 2013, 3:45PM

The future of News Corp's Australian newspapers looks more uncertain as the company partly blamed them for an earnings downgrade and said how excited it was to be spinning them off.

Advertising revenue at the Australian newspapers fell again in the three months to December, following a string of poor results and massive writedowns in value last year.

However, the global media giant more than doubled first-half profit after increasing its stake in pay TV network Fox Sports.

The disappointing "under-delivering" performance in Australia, along with Sky Italia and Fox TV in the US, forced the earnings downgrade.

President Chase Carey said News expected operating income growth in the mid-to-high-single-digit range, instead of a high-single-to-low-double-digit rise.

"In Australia we've been hammered by an economy that we keep hoping has hit bottom but seems to continue to find new lows," Mr Carey told analysts on Thursday.

News Corp shares were sold off on Wall Street following the results announcement and its voting stock was down 64 cents, or 2.3 per cent, to $26.85 by 1537 AEDT.

Its publishing division, which includes newspapers such as The Australian, The Times and Wall Street Journal, saw first half operating income fall to $US291 million ($A283.25 million) from $US328 million ($A319.27 million) despite a $US16 million ($A15.57 million) rise in the second quarter.

The division has been rocked in recent years by falling advertising revenues, and the UK phone hacking scandal sparked by News' former Sunday tabloid The News of the World.

During the second quarter, News forked out another $US56 million in costs associated with the investigation into the scandal and compensation to victims.

Under pressure from investors not keen on newspapers, News plans to split its operations into a media and entertainment business and a separate publishing arm in June.

The move is yet to be approved and will likely increase scrutiny of the newspapers' earnings at a time when advertising revenue and circulation is falling.

"We remain more excited than ever about our opportunities, especially as we get closer to the proposed split and are confident it will position us to unlock even greater value for our shareholders," Mr Carey said.

Overall, News reported a better-than-expected net profit of $US4.61 billion ($A4.45 billion) for the six months to December 31, up from $US1.8 billion ($A1.74 billion) in the prior corresponding half.

Operating income rose to $US2.96 billion from $US2.88 billion, driven by improved performances at its television businesses.

News' acquisition of Consolidated Media and an increased stake in Fox Star Sports Asia delivered $US1.4 billion in additional pre-tax income.

Morningstar media analyst Michael Corty said while investors may have reacted negatively to News' results, the group's long-term prospects had not changed.

"I don't think there is a buyer out there to buy their publishing assets," he said.

"Rupert Murdoch came into the business as a publisher, but he values those assets a lot more than the stockmarket and probably a lot more than management."

By Greg Roberts