News Corp reader revenues

Murdoch’s The Australian — along with The Times in London and The Wall Street Journal in New York — has been proclaimed a glittering jewel, at this morning’s post-results analysts briefing. It received lavish praise from CEO, Robert Thomson and Chief Financial Officer, Susan Panuccio (an old News Corp Australia hand) for achieving an industry rarity: higher revenue and higher earnings before interest, tax, depreciation and amortisation (EBITDA), and higher digital subscriptions. A boon at a time of gloom and doom in the print business. We can’t wait for the self congratulatory pats on the back from Australia’s home of right wing lunacy.

The 2016-17 results though show that News Corp is rapidly becoming a digital real estate business (which is where there is growth), supplemented by book publishing. Judging by the weak revenue and earnings from the news and information department and cable TV (Fox Sports in Australia and Sky News), the rest of the business is marking time or going backwards. And that was reflected in the results as its fading news and information business held back stronger contributions from its digital real estate businesses in Australia and the US. News said the earnings from Move in the US and REA Group in Australia now account for “nearly 40% of profits”.

The Oz increased its digital subscriber numbers to 95,000 by the end of 2016-17 (which is roughly equal to the paid print sales each day). Total sales (digital and print were not given for the Oz) at the briefing. In contrast CEO Thomson pointed to the rise at The Wall Street Journal which had 2.3 million print and digital subscribers at June 30 — 1.273 million of those were digital, up from 948,000 at the end of 2015-16. That is still well short of the bitter rival, The New York Times, which had 2.3 million digital subscribers and more than 3 million total digital and print sales a day.

And, being News Corp, no actual hard figures were offered. But Panuccio said that the Oz managed to lift revenues in a market where revenues went backwards. Indeed, News Corp Australia saw a 10% decline in ad revenues, but a small rise in circulation revenues because of price rises and higher digital subscribers which totaled 363,000 for the group in Australia at year’s end, up from 271,000 a year ago. From that you can understand why the paper’s editor in chief, Paul Whittaker, hasn’t been summoned to Los Angeles for the now annual inquisition by Rupert Murdoch of his editors from around the world (the 86 year old can’t stand long distance travel and instead of him making his usual annual trip down under to re-assemble the deck chairs on the Titanic, the deckchairs now make the trip to LA).

But the use of EBITDA is a give away because its a way of massaging a loss into a “profit” without all those bothersome extras like interest, tax (which has seemed to be optional at times at News Corp Australia), depreciation, etc. News and Information Services saw EBITDA fall in the year up to June, and a loss after tax, as well as another round of asset impairments.

Overall News reported a loss from continuing operations of US$643 million (A$820 million) compared to US$235 million in 2015-16 as losses and write downs surged to nearly US$1 billion (A$1.28 billion). The loss includes more than US$1 billion of pre-tax non-cash impairments and write-downs and a one-time pre-tax profit of US$107 million as a result of the sale of REA Group’s European business.

The impairments totaled US$785 million against News Corp assets (led by the US$310 million write-down in the value of long life assets at News Corp Australia) plus the US$227 million write-down in the value of the company’s 50% stake in Foxtel.  Further impairments, US$464 million, mainly related to the write-down of fixed assets at the company’s UK newspapers (The Sun, The Times and The Sunday Times) where they totaled US$360 million. Having warned that up to US$1.4 billion in extra impairments were possible (in addition to the US$537 million at the halfway mark), there are at least another US$1 billion of possible write-downs at Fox Sports in Australia and at The Wall Street Journal, although WSJ’s improving performance probably means it is out of the woods for the time being with 55% of full year revenues at Dow Jones coming from digital against 25% for News and Information as a whole. The laggard here is News Corp Australia.

But, as bright as The Oz’s performance was in the year to June, it is clear there will be no let up in the aggressive cost cutting that has already seen hundreds of people — journalists and photographers, production people and other back office employees cut. Panuccio said News Corp Australia made its A$40 million in cost savings in the year to June, and why she didn’t proffer another target for 2017-18, made it clear that it will be more of the same. She said the company was looking for savings of “at least that” (the A$40 million).

She said News Corp Australia was more dependent on print than in the US at Dow Jones where the Wall Street Journal cut US$60 million from its costs in the year to June and faces another US$40 million in the current financial year under its 2020 plan. In the UK the business faces “fairly aggressive” cost targets according to the CFO.

All that glitters, as they say. The Oz may not be as economically viable as News Corp would have you believe.