News Corp annual profits fall by 28%; digital real estate beats news as main source of profit
News Corp has revealed that its global profits slid by almost 30% in the 2016 financial year, thanks to a dramatic drop in profitability in its news operations around the world.
However, the fall has been partly offset by a rapid growth in the company’s digital real estate operations, which include REA Media.
The company, which locally publishes newspapers The Daily Telegraph, Herald Sun and The Australian, and owns half of Foxtel, reported global revenues for the financial year of US$8.3b, down 3% on the previous year.
So revenues for the News and Information division have gone backwards 7% in the year, but the EBITDA for same division has plummetted by 65%. What’s happening to their cost base? Higher marketing and promotion costs, indeed……sounds like they’re spending up a storm in a desperate attempt to hold back the tide of dwindling readership.
Clearly the revenue is coming with low margin. Is this what native advertising looks like? Also note that both Fairfax and News are resting on the Australian real estate bubble and the RBA is trying to blow that up.
The low margin revenue gain might be a function of native ads? And it’s worth noting that both news and Fairfax are reliant on the Australian housing bubble.
Real estate agents only have so much to spend on digital advertising and at the top of the bubble where we are now, they are spending the most they ever will. When the bubble bursts (as all bubbles have throughout history), digital revenue will be heavily impacted. Vendors it seems are already pushing back at being asked to spending over $2,000 for a premium digital listing and the real estate agents isn’t going to fund this cost from their own pocket.