News Corp enjoying boost as real estate listings lead the charge

News Corp once again confirmed that it is only a print media and book publisher tail to the more profitable of its real estate website listing businesses in Australia (REA Group) and the US (Move). Once the reshuffle at Foxtel and Fox Sports concludes by June 30 next year, print will be an even smaller share. Judging from the comments in the report, print advertising revenues, which are still the main area of revenue for the News and Information business, will be lower than they are now as they keep falling, but the contribution from digital ads and especially subscriptions will be higher.

The quarterly report reveals that the company’s real estate listing businesses enjoyed a 20% increase in revenue (compared to just 2% at News and Information) to $271 million for the quarter, while so-called segment earnings before interest, tax, depreciation and amortisation jumped 59% to $95 million, the largest contribution to the group bottom line of all the divisions. News and Information saw a 79% rise to just $73 million, helped by a number of factors which offset yet another unquantified slide in ad revenues.

That revenue and earnings contribution will change from 2018-19, once the Foxtel/Fox Sports deal is done with Telstra and clears the ACCC. News chief financial officer, Susan Panuccio made it clear in the results briefing that News will be looking for “synergies” (corporate code for cost cuts) in the merging of Foxtel and Fox Sports.

In the News September quarter report this morning, CEO Robert Thomson underlined that about how the merger of Foxtel and News will change the company:

“The combined company, with majority control by News Corp, is expected to fundamentally transform our revenue and EBITDA profile, and increase the relative share of digital subscription businesses.”

He made the point in the post results briefing that the merger will give News the ability to better control sports offerings and products and meet the challenge from OTT (Over The Top) sports streaming in coming years. 

While Thomson talked confidently about the company’s newspapers — or as he describes it “our premium media businesses” the report confirmed that News is enjoying the same sort of digital subscription shift that the likes of the New York Times, the Washington Post, The Economist and the Financial Times.

News said digital revenues represented 27% of segment revenues in the quarter, compared to 24% in the prior year (and 25% in the June quarter).

“The Wall Street Journal average daily digital subscribers in the three months ended September 30, 2017 were 1,318,000, compared to 967,000 in the prior year and 1.270 million at June so (so a rise of 48,000 in the quarter);

“Closing digital subscribers at News Corp Australia’s mastheads as of September 30, 2017 were 375,400 (including ARM), compared to 283,100 in the prior year and 363,000 at June 30, so a rise of 12,400 in the quarter.

“Advertising revenues were flat compared to the prior year as the growth driven by $23 million from the acquisition of Wireless Group, $21 million from the acquisition of ARM, the positive impact from foreign currency fluctuations and a modest increase in digital advertising revenue was offset by the weakness in the print advertising market and lower free standing insert revenues at News America Marketing.”

News said circulation and subscription revenues increased 3%, “primarily due to healthy contribution from Dow Jones, which saw an 11% increase in its circulation revenues and growth in its professional information business, and higher subscription pricing and selected cover price increases at News Corp Australia and News UK, partially offset by lower print volume.”

Segment earnings before interest, tax, depreciation and amortisation rose increased by US$27 million in the quarter, or 59%, as compared to the prior year. “The increase was due to revenue growth and lower expenses at Dow Jones, lower investment spending at Checkout 51, the absence of transaction costs associated with the acquisition of Wireless Group, as well as lower expenses due to ongoing cost efficiencies. Adjusted Segment EBITDA increased 33% (excluding foreign currency impact, acquisitions and divestitures).

The improvement in the News and Information business came on top of higher contributions fro the real estate listings businesses, book publishing and cable TV. Overall News report quarterly revenues of US$2.07 billion, up 5% from a year earlier and net income of US$87 million, up from nil a year ago.