News Corp experiences 23% growth in digital subscriptions in Australia, despite ‘listless economy’, but Foxtel continues to suffer
News Corp Australia’s focus on growing its digital subscription base has paid off with a 23% growth in digital subscriptions across the country, despite, as chief executive Robert Thomson said, a “listless economy”. That figure was generated largely by The Australian which now has 65% of its subscribers on a digital-only basis. Digital subscribers across News Corp Australia currently sit at 566,600.
Advertising revenue, however, was down 5% across the business, with News Corp putting the blame largely on a “weakness in the print advertising market, primarily in Australia”.
Thomson said News Corp Australia had done well in a ‘listless economy’
The overall News Corp business reported “sluggish” results for the second quarter of FY20, with revenues dropping 6% to US$2.48bn. Net income was US$103m compared to US$119m from the year prior, and total segment earnings before interest, tax, depreciation, and amortisation (EBITDA) was US$355m, compared to US$370m. News Corp Australia revenue dropped 9% overall.
The webcast for the results began with Thomson giving thanks to Australia and the bushfire-affected regions, and paying his respects to the Australian media, the editors, reporters and photographers, and their work bringing to light the profound consequences of the bushfires.
Thomson reported the company and its founders had donated more than AU$11m to the crisis and would do “significantly more over the coming months”.
Thomson also said that “no company has been more influential in the transformation” of news businesses from print to digital than News Corp had, thanks to Rupert and Lachlan’s leadership.
Regarding Foxtel, Thomson said the business was about to enter its seasonal selling peak with winter sports on the horizon, and said the business has been doing well, despite being in the low season, bolstered by the success of Kayo. A 3% rise in Foxtel subscribers was reflective of the growth of Kayo, with Thomson calling the platform peerless in its user experience, and saying customer reviews are overwhelmingly positive. Foxtel has a 3m paid subscription base, including Kayo subscribers.
Foxtel will continue to focus on its “powerful entertainment lineup” said Thomson, and work is well underway on the entertainment platform inspired by Kayo which will launch in the fourth quarter, making Foxtel the “go-to provider of programming in Australia”. News Corp did report lower subscription revenues at Foxtel, with revenues from the subscription video services segment dropping 11%, or US$61m, and 6% when adjusted for foreign currency fluctuations.
A question during the webcast of the financial results about HBO programming and how important it is to the Foxtel lineup, amid reports the company is looking to launch in Australia, wasn’t answered by Thomson, but he did say Foxtel had an “unparalleled collection of programming”, even without HBO.
Regarding the slowdown of subscribers at Kayo, Thomson denied that the product had met full saturation, saying that cricket “is not as compelling to Australian viewers” as AFL and NRL and that they expect the subscribers to increase in the peak selling season.
News Corp revenues Q2 FY20 [Click to enlarge]
Churn increased from 15.6% to 16%.
Segment EBITDA dropped US$14m, or 17%. Expenditure dropped from US$139m to US$129m. The Foxtel debt refinancing has been finalised, with the business entering into a subordinated shareholder loan facility with Telstra, providing Foxtel with AU$170m. Foxtel has also been on a saving spree, with a recent restructure of its sales and marketing departments resulting in a dozen redundancies.
The focus on digital wasn’t exclusive to Australia, with Dow Jones and the Wall Street Journal (WSJ) two highlights of News Corp’s reporting. Dow Jones subscribers hit a new high of 3.5m, and 2m digital-only subscribers are reported at the WSJ. Thomson also paid tribute to the relationship between News Corp and Apple and Facebook, saying they are finally yielding financial dividends as the big tech companies recognise the premium journalism on offer from the “talented people at News Corp”. He wouldn’t comment on whether a closer partnership with Google was on the horizon.
Digital growth is now outpacing print across the business.
REA Group’s soft results played in to News Corp’s overall flat reporting, but a potential improvement in the Australian property market is likely to boost the final FY2020 reports.
News Corp sold Unruly in January 2020 to Tremor International, with Tremor agreeing to an exclusive right to sell outstream video advertising on all of News Corp’s digital properties in exchange for a total minimum revenue guarantee of £30m – (approx AU$57m). Thomson made it clear the business is still trying to sell News America Marketing and declined to comment on speculation other businesses are also up for grabs, including Sky News. Thomson said News Corp was in the final stages of agreements around News America Marketing.
Thomson also paid tribute to News Corp’s new chief technology officer, David Kline, who joined the business from Viacom in December 2019. He is set to continue News’ ‘technological transformation’.
This article should balance this one up: https://thenewdaily.com.au/finance/finance-news/2020/02/07/news-corp-in-dangerous-times/
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Foxtel customer reviews “overwhelmingly positive”? Obviously Foxtel/News doesn’t read the Foxtel Complaints page on Facebook. There the customer reviews are overwhelmingly critical to downright furious! They have three major complaints: (1) the continual chopping of channels and “replacing” them with something that isn’t a replacement at all; (2) the number of repeats of repeats of repeats; (3) the number of adverts and in particular the number of house ads, repeated every ten minutes.
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As long as Sports rights and KAYO continue to remain as they are, Newscorp will be fine in Australia
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