News Corp’s Australian arm is digesting the news of its first quarter-to-quarter fall in subscriber offerings. As confidence in unlimited blue-sky growth crashes into the hard ceiling of reality, it is time to ask: has the company in Australia reached its Netflix moment?
The market seems to think so. Shares in the US company slid about 7% in New York on Friday, more than undoing the tick-up out of January’s announced axing of plans to re-merge News Corp with Fox Corp.
The Australian arm seems most troubled. For the first quarter in a decade, subscriptions for its mastheads (The Australian and the capital city tabloids) are down on the previous quarter. So are subs to its legacy pay-TV and streaming services it’s trying to spin out of the Foxtel wreckage.
Most reporting on the company’s end-of-year report has focused on the profit dip — down 30% on the December quarter in 2021, largely due to exchange rate fluctuations (that is, a stronger US dollar and a significantly weaker British pound). Deeper analysts would be concerned about the slip to cashflow negative due to falls in operating income.
Australians should be looking at local subscription numbers. They not only foretell the company’s financial future but also how its political and cultural power will evolve.
The modern News Corp was spun off from Fox Corp in 2013, almost as a grab-bag of legacy assets, propped up by the cashflow-strong REA Group (and Fox’s commitment to underwrite the continuing drain of the UK hacking scandal — by 2020, costing about $1.6 billion).
Under CEO Robert Thomson, News Corp transformed itself with a pivot to a consumer-facing subscription business to replace lost advertising dollars.
Pat on the back: News Corp pulled it off, second only to The New York Times (where, we learnt this week, success seems to have been built off a beef stew recipe).
Quarter by quarter, News Corp’s Australian digital news mastheads grew through two distinct offerings: The Australian and the city tabloids. Last September’s quarterly earnings reported total subscriptions for the two had peaked at 929,000.
Looked good — until it didn’t. Suddenly, this past December quarter, it teetered, sliding to 924,000.
It may not seem like much, but it came matched with a slide over at Foxtel, with the legacy pay-TV and streaming services Kayo, Binge, Foxtel Now and Flash between them sliding about 136,000 subscribers in the quarter.
It contrasted with the continued digital subscription growth at the company’s Wall Street Journal (now about 4.14 million) and the London Times (now 489,000). More seriously, it came with recession fears and a corporate warning of hard times, which flagged a 5% cut to its global workforce.
Expect those cost cuts to drive the continuing shift in the internal balance of power in the Australian arm. Before the pivot to subscriptions, the tabloids held the power, while The Australian was a largely loss-leading luxury. Now it’s the other way around.
Although the company doesn’t release masthead-by-masthead figures, about a third of News’ total subscriptions are thought to be for the Oz. Expect the bulk of the impending cuts to be borne by local news, further turning the city tabloids into franchises of the company’s national tabloid product.
News Corp has also foreshadowed rises in the cover price of the print papers. Reduced print sales are likely, as well as a hurrying on of print’s eventual end.
Like the Netflix slide last year, the market will read News Corp’s subscription stutter through the business metaphor of the S-curve: the idea that innovations (like News’ pivot to reader subscriptions) trace an S. They start slowly, grow rapidly, then slow to maturity as the curve flattens as they saturate the market.
News Corp hurried its rise along the curve by increasing its Fox-like appeal to the grumpy old man demographic. The trouble is these subscription numbers make it look like that market is not only saturated but declining — literally, dying. The result? News Corp needs to run faster — become more hysterical — just to stand still where it is at the top of the S-curve.
Meanwhile, its streaming push is taking it into a market already saturated by players like Netflix, Stan and Disney, as well as niche competition like Optus Sport with the English Premier League.
It leaves News Corp in a tricky place, at least in Australia. Suddenly it seems its survival depends on finding a new idea, a new curve, to get it out of its demographic dead-end.
If only News Corp would sell off Kayo so I can subscribe for AFL coverage. I refuse to release even a single dollar to that media organisation (a polite description).
Kudos.
I’m the same with F1 and Touring cars. I will never give any money to that man.
I tuned into Sky-after-Dark the other evening and with the likes of Peta Credlin, Rita Panahi, Paul Murray, Andrew Bolt, Cory Bernardi and others it was a very amateurish and highly partisan presentation.
To survive, they will have to focus on impartial news presentation and drop all this Right Wing rubbish or the are finished.
Reporting actual News?????……………….
…………that would be a bridge too far for He Who Must Not Be Named.
Finally, some good news! The only thing to trump that would be a death in the family.
SAD what a great acronym, nominative determinism?
The Sky After Dark Comedy Show appears to be like some strange US sitcom.
Set in a TV station where the inmates appear to be mendacious, paranoid, scared of the other, black/brown/yellow/aliens of any sort, people who have the temerity to present facts and question them and are all very shouty at such and that even at their own cohort.
The inmates consist of far right wing to libertarian current and ex politicians, their enablers, media hacks of much the same variety, as well as the really odd RWRNJ, the second R being for Religious.
Out here in regional Australia Sky has been inflicted on FT , in a desperate attempt to increase its dismal ratings, so no need to subscribe to the stupidity it pops up while going through to other channels.
One of their most comic turns was when on SAD all the inmates were rabbiting on about the POTUS election that was stolen from their Radge Orange Bampot, as the Scots have it.
It was amazing to watch the antediluvians Alan Jones, also Maurice Newman followed by the younger inmates Bolt, Credlin , Dean, Panahi et al, frothing at the mouth in their lunatic presentations about the electoral fraud concerning Trump’s loss of both the Electoral College and the popular vote by c. 6 million votes.
The question never asked of them , as far as I could hear/see…if the Democratic Party was exercising such electoral fraud, how come they lost seats in the House of Representatives and at that stage had yet to win a single Senate seat?
I am so glad that other people are watching this farce. For two years I’ve worried that my confusion and disbelief about the SAD content was being seen as paranoia and overstatement.
Obscurity their destiny.