Exclusive docs show News’ Australian papers dragging down the empire
Internal operating accounts for the Australian arm of Rupert Murdoch’s News Corporation show alarming revenue and profit falls across the metropolitan newspapers in fiscal 2013, and widening losses at flagship broadsheet The Australian.
Combined with the sharp earnings drop already reported in 2013-14, and with circulation and advertising revenues continuing to decline, the accounts suggest News Corp’s Australian newspapers, including the national, metro and regional publications, will struggle to break even this financial year.
The confidential operating accounts for News Corp Australia have never been seen by investors and provide a detailed picture of a print business in rapid decline, with swingeing cost-cuts, cover price increases, new digital subscriptions and digital advertising failing to make up for the loss of revenues from advertising and circulation.
Crikey has received a copy of the last weekly financial statements for 2012-13, which provide line-by-line, year-on-year comparisons across the business, from a well-placed source concerned about misrepresentation of the profitability of News Corp’s Australian newspapers.
The accounts raise the question of how long the rest of the News Corp empire can carry the underperforming Australian newspapers business.
The accounts were produced last year just as Murdoch spun off his troubled print media assets worldwide from the profitable Fox film and cable television empire in the United States, in the wake of the UK phone-hacking scandal.
News Corp was spun out on June 28, 2013, from the renamed 21st Century Fox, and houses mastheads including The Wall Street Journal and New York Post in the US, the Times and Sun in the UK, News’ Australian newspapers, plus book publisher Harper Collins, Foxtel and Fox Sports in Australia, and a 62% stake in ASX-listed REA Group, which operates the successful realestate.com.au website.
“The Australian newspapers are dragging on recovering newspaper operations in the US and UK, as well as divisions reporting profit growth, such as book publishing.”
Listed on the NASDAQ and the ASX, News Corporation, valued at $11 billion, goes to considerable lengths to avoid breaking revenue or earnings down by country or masthead, lumping its worldwide newspaper operations plus other businesses together into the “news and information” segment, which accounts for 71% of the group’s total revenue, and only offering finer detail selectively.
Crikey can reveal that, amid a forest of negative brackets, revenue from News Corp’s Australian newspapers fell 14% to $1.9 billion in 2012-13, with circulation revenue dropping 5% and advertising revenue falling 18%, while operating income fell 67% to $94 million.
Within the division, The Australian stands out as the worst performer: revenues dropped 20% from $135 million to 108 million in 2012-13, while operating income fell 41% from a loss of $19 million to a loss of $27 million. After depreciation, the masthead’s operating loss fell to $30 million.
The profit drop in newspapers was only partly offset by growth in other operations like REA Group and Fox Sports, with total operating income falling 38% to $221 million. After income from investments including Foxtel, the group recorded a total profit before interest or tax of $367 million, down 28%.
After a recent visit to celebrate The Australian’s 50th anniversary, Rupert Murdoch tweeted he’d had an “exciting week in Australia with great team digging company out of many holes” but the heavy falls in print have continued if not accelerated through 2013-14. This is confirmed in News Corp’s most recent quarterly earnings update and annual report, showing the Australian newspapers are dragging on recovering newspaper operations in the US and UK, as well as divisions reporting profit growth, such as book publishing.
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