You wouldn’t know that the Hulu auction was a failure based on the way News Corp COO Chase Carey describes the owners’ plans. They decided to hang on to the digital video service because its value to them “dwarfed some of the values that were being put on it” by bidders including Dish Network and Google. Keeping Hulu reflects “a judgment that this digital space is incredibly important and is going to be, over the next five years and beyond, the most important field we have to navigate.” As a result, he told the UBS Annual Global Media and Communications Conference, “we’ll do what’s necessary to make it grow.” But that doesn’t necessarily mean adding movies to the package to make it more competitive with Netflix. “Me-toos aren’t a great place to be in this business,” Carey says. “We want to look at it with a fresh eye.”

Investors strangely seemed uninterested in the News Of The World hacking scandal. But one of the consequences — News Corp’s decision to abandon its effort to buy BSkyB — was a concern. Carey says that it’s “one of the things we have to figure out” because he says the company gets “a fraction of credit” it believes it deserves for its 39% stake in the UK media company. News Corp must “do a better job communicating value.” Still, he didn’t leave investors empty-handed: Carey says that News Corp’s recently launched round of share repurchases is “certainly not a one-time thing. It’s an important part of our capital allocation,” he said, adding that News Corp shares are “woefully undervalued.”

Carey seemed less enthusiastic than some of his colleagues were at the conference about the state of TV ad sales. The current quarter is “a little softer than a quarter ago,” he says. He expects to see additional spending in early 2012. Even if he’s wrong, “we’re in a pretty good place. We decided to sell deeper into the upfront than anybody else,” and there have been few cancellations. Meanwhile, Fox is counting on a proven commodity, American Idol, to drive the second half of the broadcast season. The talent show will be “priority one” for network. “We were thrilled with Idol‘s performance” last year, he says.

Even if the ad market disappoints, Carey looks forward to additional revenues from retransmission consent deals. “We’re beginning to get fair value for what the Fox Network represents,” he says. And he says there’s a long way to go: “If ESPN is worth $4 (a month for each home it reaches), then Fox is worth $5.” But he rejects the argument from pay TV providers that programmer efforts to collect more cash for broadcast and cable services will drive up consumer prices. “Some of that is negotiating,” he says. “If you create good content you will, and should, be compensated.” And although he says that he understands “the attraction of paying less,” he says that consumers “will pay a fair price for a quality experience.” That should include digital distribution to mobile devices which he says will “excite that customer.”

Carey says that the company isn’t necessarily going to plow that retransmission consent cash into higher-priced programming — including sports. “You don’t want to have indistinguishable, mediocre product,” he says, but adds that “you can’t buy everything.” Fox remains interested in the NFL. “Their value is truly unique.” Still, Carey says that “there are costs associated with it that make you swallow hard. … Sports is a double-edged sword, and the NFL is the ultimate double-edged sword.”

As for the other hot topic at the confab — Netflix and other digital services interested in content — Carey says that they represent “an exciting new dimension to the business” but “we don’t see it as an alternative to the broad experience you get” from pay TV. It helped with FX’s Sons Of Anarchy, which would have been hard to syndicate. “We now have a market for it because it works for Netflix.” Digital also is a great platform for the series 24. “It has a tail on it in DVD, but that’s about it.” Meanwhile, News Corp doesn’t feel threatened by some of YouTube’s new channels that feature professionally produced content. “I don’t think they’ll in any way, shape, or form become: ‘This will be my television experience,’ ” he says. “Over time, you have to figure out how it fits into the larger hole.” Still, he adds, “you have to be sure you’re making your own judgments, not chasing the crowd.”