News Corp reader revenues

News Corp Australia’s dominant cable network, Fox Sports Australia, is the next to face job losses as the outlook for broadcasting and print revenues continues to worsen. With News Corp directors warning in February that the cable network division of the company (Fox Sports) faces impairment losses of up to US$500 million by June 30, Fox Sports announced yesterday a small but significant rationalisation that strengthens the position of Sky News and its boss, Angelos Frangopoulos, in the Murdoch clan’s local pecking order.

There has been no confirmation of how many jobs will be cut, or where they will be cut from. According to yesterday’s announcement, Fox Sports Australia will move to the Australian News Channel (Sky News), and staff will be given the option of moving with the channel to Sky’s offices at Macquarie Park.

In a separate announcement, News Corp Australia revealed early last month that it was cutting at least 200 journalist jobs at its local tabloids (exempting for the moment The Australian, where job cuts are expected later in the year). Shares at the Ten Network — which is also part of the News Corp orbit, with Lachlan Murdoch owning around 8% — are tanking, and job losses are likely there too. 

Fox Sports News already provides content for News Corp mastheads (The Daily Telegraph, Herald Sun, The Courier Mail, and fox, which will be expanded into Sky News channels and the Qantas in-flight entertainment service.

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The Australian News Channel will produce Fox Sports from early August, according to yesterday’s announcement from Fox Sports boss Patrick Delany. The statement said:

“The process will begin this week with the move expected to be completed within the next three months … ANC’s extensive news gathering capabilities and state of the art production facilities will enable it to deliver more up-to-the-minute live breaking news to sports fans than ever before.”

The latest cuts at the newspapers, Foxtel and now starting at Fox Sports follow impairment losses revealed in the December quarterly financial report from News Corp released in February, which revealed impairment losses of US$310 million against News Corp’s Australian tabloids and US$227 million against the value of News’ 50% interest in Foxtel. The quarterly report also contained a further round of warnings of impairment losses totalling US$2.4 billion (US$1.9 billion at the news and information business, and US$500 million at the “cable network programming segments”.

News Corp directors explained the Foxtel impairment:

“As a result of Foxtel’s performance in the first half of fiscal 2017 and the competitive operating environment in the Australian pay-TV market, the company revised its future outlook for the business, which resulted in a reduction in expected future cash flows.”

These remarks apply equally to Fox Sports, which is Foxtel’s main supplier of content (AFL, NRL, cricket, soccer, car racing and more). More cuts at Fox Sports are in store. It is also clear that it, like Ten, Nine and Seven are facing increasingly difficulties paying higher fees for sports content. Ad revenues are weak to falling for all broadcast media.

Yesterday’s announcement also has some interest for the jockeying at the top of the Murdoch empire. Delany, Sky News boss Angelo Frangopoulos and the head of Foxtel, Peter Tonagh, all report to Siobhan McKenna, who is head of News Corp’s broadcast operations. Up to March 15 she was a director of the Ten Network, along with Tonagh, who was representing Foxtel, which owns around 13.8% of Ten. Tonagh remains on the Ten board. The move to Sky News means it is not facing cost cuts, unlike Foxtel and Fox Sports.

Foxtel put in $77 million in 2015 and at the close yesterday, it was worth around $12.2 million. Foxtel has already written that down by US$22 million. Ten shares sank even further yesterday, losing more than 14% to close at 23 cents (2.3 cents before last year’s one for 10 consolidation). The company’s value sank to just over $83 million at the close from $99 million on Friday. The shares have fallen by more than 39% on Friday and yesterday.