Now we know News' losses -- how do they compare with Fairfax's?
Fairfax has always been more transparent about reporting its profits and losses on a granular level. Now we finally have the same information for News Corp. And guess which company comes out on top ...
The News Corp Australia operating accounts published exclusively by Crikey yesterday enable, for the first time, apples-with-apples comparisons to be made with rival newspaper publisher Fairfax Media.
Traditionally the financial performance of News Corp’s Australian newspapers division has been lumped in with other suburban and overseas publications, but it can now be compared directly with Fairfax’s metropolitan media and regional media divisions.
News Corp, which accounts for roughly 60% of newspaper circulation in Australia, is a much bigger publisher than Fairfax and has traditionally given much less granular detail in its disclosures to the sharemarket.
As Crikey reported yesterday, the internal News Corporation operating accounts for the week ending June 30, 2013, provide a complete snapshot of the performance of the business, masthead by masthead, including year-to-date, year-on-year comparisons and variance to budget targets.
News Corp’s Australian newspapers division includes flagship broadsheet The Australian, major metropolitan tabloids, Melbourne’s Herald Sun, Sydney’s Daily Telegraph, Brisbane’s Courier-Mail and Adelaide’s Advertiser, plus suburban papers in those cities, as well as newspapers in other capitals and regional cities from Hobart to Darwin, the Gold Coast to Geelong. It also includes other papers like Perth’s Sunday Times, PNG’s Post-Courier and commuter freebie mX.
In 2012-13 the division recorded print circulation revenue of $444 million, down 5% on $468 million a year earlier, plus digital subscriptions revenue of $14 million, a near-sevenfold increase on the $2 million a year earlier. Combined, the total revenue from circulation and subscriptions was down 2% to $459 million.
On the advertising side, total revenue was $1,364 million, down 18% from the $1,659 million a year earlier. Total advertising and circulation revenue was $1,869 million, down 14% from $2,185 million the previous year. Operating income was $94 million, down 67% on the $287 million recorded a year earlier.
We don’t know what currency rate News Corp used internally in 2012-13, but in a year when the Australian dollar was closer to parity this $193 million drop in operating income corresponds roughly with the US$192 million drop in the Australian newspapers earnings before interest tax depreciation and amortisation that year, detailed in the company’s 2013-14 accounts contained in the annual report filed last week.
Those accounts also confirmed that circulation and subscription revenues at News Corp’s Australian newspapers fell by US$45 million in 2013-14, or $49 million** assuming an average exchange rate of US92c to the dollar, which if subtracted from the previous year’s operating income would represent a roughly 11% drop in local currency terms to some $410 million.
The same accounts confirmed total advertising revenue from the Australian newspapers fell US$314 million in 2013-14, or $341 million, which would represent a roughly 25% fall on the $1,364 million in ad revenues recorded the previous year.
Fairfax’s Metro Media division includes The Australian Financial Review, The Sydney Morning Herald, The Age and The Canberra Times, in print and online, including real estate business Domain. The Regional Media division, basically the old Rural Press, includes titles like The Land and country newspapers.
In 2012-13, Fairfax’s Metro Media division recorded a 17% increase in circulation revenue to $222 million. Advertising revenue fell 21% to $634 million. Total revenue fell 12% to $996 million. In the Regional Media division, circulation revenue fell 4% to $98 million, ad revenue fell 13% to $388 million, and total revenue fell 10% to $511 million. EBITDA at the Metros fell 26% to $76 million and in Regional it fell 16% to $133 million.
In 2013-14, ignoring the restructure of Regional Media into Australian Community Media, the corresponding figures were as follows: Metro Media circulation revenue grew 9% to $228 million while ad revenue fell 14% to $460 million and total revenue fell 9% to $803 million; Community Media circulation revenue fell 7% to $103 million while ad revenue fell 16% to $409 million and total revenue fell 15% to $530 million. On the EBITDA line, the Metros reported a 41% increase to $121 million while Community Media fell 17% to $152 million.
Adding the two divisions, to make the comparison easier, circulation revenue at Fairfax grew 13% to $327 million in 2012-13, and another 1% to $331 million in 2013-14. Ad revenue fell 18% in 2012-13 to $1,022 million, and another 15% to $869 million the year after. Total revenue fell 11% to $1,507 million in 2012-13, and another 12 % to $1,333 million in 2013-14. There was a moderate improvement in profitability, however, with EBITDA rising 3% to $269 million in 2012-13 and 1% to $273 million in 2013-14.
In terms of percentage growth and/or declines, from year to year, the comparison shows Fairfax outperforming the News Corp papers on most measures, counting both revenues and earnings.
**Correction and update
We have realised that we did not properly account for the impact of currency devaluation when calculating News Corp’s advertising and circulation revenue declines for 2013-14. We estimated that, assuming an average exchange rate of US92c to the Australian dollar in 2013-14, a reported drop in circulation and subscription revenues at News Corp’s Australian newspapers of US$45 million that year would translate to a $49 million fall in local currency terms, or a roughly 11% drop on the previous year’s figures. On our revised analysis, using the same exchange rate assumption but first deducting a proportionate share of the reported $US199 million in foreign exchange impacts, a better estimate would be that circulation revenues fell by approximately $22 million or 5% in local currency terms, compared with the previous year. Similarly, we estimated that a reported $US314 million fall in total advertising revenue from the Australian newspapers would convert to $341 million in local currency, or a roughly 25% drop. A better estimate would be that the advertising revenues fell $151 million in local currency or 11%, compared with the previous year. We stress that these figures are estimates only, based on the limited disclosures in the News Corporation accounts.