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Nov 22, 2017

A closer look at the frailty of News Corp’s ledger

News Corp's Australian assets appear to be doing well but the reality is much more complicated.

Glenn Dyer — <em>Crikey</em> business and media commentator

Glenn Dyer

Crikey business and media commentator

News Corp shares jumped more than 4% last week (and are now up 32% so far in 2017). And it’s not because its September quarter earnings were the best for some time, but because eager beaver analysts reckon it might be a player in the coming consolidation of the struggling US media sector, after US regulators changed the rules.

That’s despite co-chair Rupert Murdoch telling last week’s News Corp annual meeting that digital advertising “has been tremendously damaging to print” and some of his papers were struggling. It also flies in the face of what Murdoch is doing at stablemate 21st Century Fox in tantalising rivals with the suggestion he could be selling assets.

These rivals have not bothered to stop and ask the questions: why is Murdoch selling and, has anyone made money buying an asset from him? He is a rare seller of assets and the answer would be no. So why pay a lot of money for assets Murdoch has treasured for decades? Besides, he is not willing to sell jewels like Fox News Channel or Fox Sports, which must be a big hint to circling would-be buyers.

Legacy business under pressure

Murdoch’s changed his tune by ruling News Corp out of any new purchases. He bought control of the APN regional dailies in Queensland and northern NSW last year, and Australian News Channel, the pay TV news channel in Australia on Foxtel, 50% owned by News. 

The frailty of the newspaper assets of News are underlined in the first quarterly revenue figures for its major News and Information Services businesses such as News Corp Australia, the Dow Jones Co, News UK and News America Marketing. 

The latest figures show the legacy newspaper and magazine businesses remain under pressure, especially News Corp Australia where $US21 million of ad revenues were lost in the quarter. Fox Sports Australia saw another fall in ad revenues in the quarter, while 50% Foxtel had a weak three months, continuing the slide seen in the previous couple of years.

The figures in the News Corp filing with US regulators confirm the Australian operations outside of REA Group are still suffering from lagging demand and falling sales and ad revenues that have been hidden by currency movements. Usually it has been the strength of the US dollar that has trimmed returns from Australia, but in the three months to September, it was the strength of the Aussie dollar that boosted returns to the parent in US dollar terms.

The quarterly report reveals that revenues at the Australian newspapers were $US332 million for the three months to September 30, up 4% or $US14 million, compared to revenues of $US318 million in the same period of 2016-17. On the face of it that’s a not too bad outcome, but it’s down to currency. News said the Australian papers’ advertising revenues increased $US5 million, primarily due to the acquisition of ARM and the $US7 million positive impact of foreign currency fluctuations, which offset the weak print advertising market and loss of advertising revenue from the Sunday Times, sold to Seven West Media a year ago.

Realty of the cable TV business

At News Corp’s cable TV operations — Fox Sports and Australian News Channel (ANC, Sky News) — where a $US17 million lift in revenues is primarily down to News’ acquisition of the Australian News Channel, higher affiliate revenues at Fox Sports Australia and currency fluctuations. 

News said that for the three months ended September 30, 2017, segment earnings before interest, tax, depreciation and amortisation (EBITDA) at the Cable Network Programming business rose $US13 million, or 93%, as compared to the corresponding period of 2016-17. The increase in Segment EBITDA was due to accounting factors and not higher revenues — the timing of programming amortisation related to the launch of a dedicated National Rugby League channel at Fox Sports Australia and lower other sports programming rights costs.

At Foxtel revenues for the three months were $US633 million, up $US15 million, or 2%. Operating income fell by a third to $US63 million in the corresponding period of fiscal 2016-17 due to AFL and other sports rights, and lower revenues in local currency.

Foxtel’s net income rose to $US24 million from $US16 million in the same quarter of 2017, which News said was because it no longer had the losses associated with Presto, which shut down in January. The report didn’t mention subscriber numbers where Foxtel has been experiencing a drain — down 100,000 in the year to June. News Corp and Telstra are now in talks to revamp Foxtel and Fox Sports so that the merged company will be owned 65% by News and 35% by Telstra. That deal will transform the News Corp balance sheet, revenue and income lines in the profit and loss account. It is a bigger deal than buying dying legacy print business — newspapers or magazines.


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3 thoughts on “A closer look at the frailty of News Corp’s ledger

  1. brian crooks

    only a small percentage of the population of any of the country`s new s corp publish in or have T.V stations in now read or watch their programs and the circulation and viewer base has shrunken dramatically for the simple reason they are so biased, they preach to the converted only, consequently their market is very narrow, if you only sell a product to a very small market then you wont sell much, its a wonder the share holders have`nt woken to this and kicked him and his family out years ago, murdoch has lost much of his political influence and is less feared by politicians now, and I suspect he`ll get short shift from an incoming labor government, just as in the U.K , even the tories are deserting him.

  2. Bill Hilliger

    A closer look at the frailty of News Corp’s ledger. Did the News Crap ledger also show the $30MILLION gift of Australian taxpayer monies from the LNP government?

  3. AR

    The NewsCorpse’s ledger would be a great deal worse if governments (state & federal) would stop using it for job vacancies.
    No wonder the civil service is so busted if it is staffed by readers of the mudorc’s shit sheets.

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