News Corp reports best quarter since establishment in 2013
News Corporation (News Corp) today released its financial results for the three months ended 31 December 2020.
Commenting on the results, chief executive Robert Thomson said the quarter was “the most profitable quarter since the new News Corp was launched more than seven years ago”, reflecting the ongoing digital transformation of the business.
News Corp reported total revenues of $2.41 billion for the quarter, which was 3% lower compared to $2.48 billion in the prior year equivalent period. According to the financial report, the decline was mainly due to “lower revenues at the News Media segment”, this was primarily driven by a $191 million, or 8%, negative impact from the divestiture of News America Marketing, weakness in the print advertising market, and a $34 million, or 1%, impact from the closure or transition to digital of regional and community newspapers in Australia.
The decline was partially offset by growth in the Book Publishing, Digital Real Estate Services and Dow Jones segments, as well as a $75 million, or 3%, positive impact from foreign currency fluctuations. Adjusted Revenues (which exclude the foreign currency impact, acquisitions and divestitures) would equate to an increase of 2%.
News Corp, along with Guardian Australia and Nine Entertainment Co are currently pursuing a News Media Bargaining Code in Australia that would see them derive revenue from Australia-produced news content that is displayed in Google Search or Facebook. The outcome of the Federal Government’s review of submissions on the code is due to be released next Friday, 12 February.
In the News Media division of the organisation revenues in the quarter decreased $238 million, or 29%, as compared to the prior year, including a $22 million, or 3%, positive impact from foreign currency fluctuations. Weakness in the print advertising market led to a $34 million, or 4%, decline. Revenues at News Corp Australia and News UK declined 11% and 5%, respectively. Adjusted revenues for the segment decreased 9% compared to the prior year.
Circulation and subscription revenues increased $12 million, or 5%, compared to the prior year, primarily due to digital subscriber growth, and a $9 million, or 4%, positive impact from foreign currency fluctuations and price increases.
Advertising revenues were down $231 million, or 48%, compared to the prior year, reflecting a $191 million, or 40%, negative impact from the divestiture of News America Marketing. The remainder of the decline was driven by continued weakness in the print advertising market, exacerbated by COVID-19.
Digital revenues represented 31% of News Media division’s revenues in the quarter, compared to 22% in the prior year, and represented 29% of the combined revenues of the newspaper mastheads. Digital subscribers for News Corp Australia’s mastheads were up at the end of the quarter compared to the same period the year prior, going from 566,600 to 738,300. The New York Post’s digital network and The Times and Sunday Times digital subscribers were also up on the previous equivalent period.
In the Digital Real Estate services division, revenues in the quarter increased $45 million, or 15%, compared to the prior year, including a $12 million, or 4%, positive impact from foreign currency fluctuations.
The Subscription Video Services division also reported increased revenues in the quarter, up $10 million, or 2%, compared with the prior year, reflecting a $33 million, or 7%.
As of 31 December 2020, Foxtel’s total closing paid subscribers were 3.314 million, a 12% increase compared to the prior year (Foxtel is 65% owned by News Corp and 35% by Telstra). The report cited the launch of Binge and the growth in Kayo subscribers, as an offset to lower residential and commercial broadcast subscribers. Two million of the total closing subscribers were residential and commercial broadcast subscribers, and the remaining 1.31 million consisted of Kayo, Binge and Foxtel Now subscribers.
As of 31 December there were 648,000 Kayo subscribers (624,000 paying), compared to 372,000 subscribers (350,000 paying) in the prior year. Binge, which launched in May 2020, had 468,000 subscribers (431,000 paying) as of 31 December. While paid Foxtel Now subscribers reached 258,000, compared to 334,000 in the equivalent period the prior year. However, broadcast subscriber churn in the quarter increased to 17.5% from 16.0% in the prior year.
Looking ahead the report cited that the “continuation of remote working” in the US and, to a lesser extent, the current domestic travel restrictions in Australia are expected to “continue to negatively impact these revenue streams” in the second half of the fiscal year.
However, News Corp added that it has seen increases in digital paid subscriptions and digital audience gains at online versions of many of its news properties. Additionally, it has implemented strict and immediate discretionary cost controls towards the end of fiscal 2020 in response to COVID-19 and related uncertainty. Within the News Media division, cost declines in the second half are expected to moderate from the rate of decline in the first half as the Company laps these COVID-19 related cost savings as well as the sale of News America Marketing.
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Olivia Kruimel is the managing editor at Mumbrella. She has more than 15 years of experience in journalism, communications and marketing. Her journalism career began at Fairfax Media (now part of Nine) and includes various B2B publications such as B&T, Travel Today and ALB. As a marketer Olivia has worked for Standard Chartered and various global law firms.
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