News Corp. CEO Robert Thomson predicts 'reconsideration of the value of print in the next year or so,' as company's Australian papers see stable print demand despite increasing digital subscribers
May 9, 2014
– News, publisher of The Australian, reported third-quarter total segment earnings before interest, taxes, depreciation and amortisation of $US175 million ($186.8m), a 4 per cent increase on the $US169m achieved in the previous year, underpinned by stronger performances in the book publishing and digital real estate services segments.
The result, which was above analyst expectations, was underpinned by better than expected cost reductions across the group and sent News shares in local trading 3 per cent, or 54c, higher to $18.29.
But the gains were offset by declines in the company’s core newspaper business and adverse foreign currency fluctuations. Revenue fell 5 per cent, while bottom-line earnings fell 85 per cent as the previous corresponding quarter benefited from the company selling its stake in Sky Network Television, New Zealand’s biggest pay-television operator.
Mr Thomson predicted a “reconsideration of the value of print in the next year or so” and said print had been “oversold’’.
His comments were backed by the chief executive of The Australian, Nicholas Gray, who said growth in the newspaper’s digital subscribers, now well past 60,000, had accelerated over the past quarter with the launch of the Business Spectator bundle and new iPad App.
“Digital subscriptions and advertising revenue are driving the growth, but print remains a very significant proportion of our engagement and revenue. It is valuable for advertisers and I agree with Robert Thomson that it’s been oversold,’’ Mr Gray said.
Mr Thomson also delivered a broadside to rival Fairfax Media, noting there was “a certain fatalism at other media companies in Australia that may have infected the perception of papers”.
Fairfax chief executive Greg Hywood immediately hit back, telling a conference in Sydney held by Macquarie Group that News Corporation was not responding to the structural shift in advertising from print to digital.
“I just find it extraordinary that the once great News Corp has such weak excuses for, I think, their inability to move with the times,” Mr Hywood said. “We are very happy where we are, we are managing a very important medium that delivers public good in a commercial model as well as we possibly can and we are required to sustain our business.”
Fairfax’s overall revenue fell 4 per cent between January and April and Mr Hywood said the company was focused on adopting a leaner and more agile structure and taking decisive action to reduce costs. The publisher this week announced a further 80 job cuts.
Mr Thomson said he was “cautiously optimistic” about the global advertising outlook but said Australia remained a challenge after newspaper revenues declined 21 per cent in the quarter, of which 13 per cent was related to foreign currency.
Advertising revenues were down 24 per cent and News chief financial officer Bedi Singh said the fall had continued in the current quarter.
But Mr Thomson said circulation revenues in the Australian papers rose following price rises across the company’s core print and digital offerings.
EBITDA at the broader news and information services segment, which includes Dow Jones and The Wall Street Journal, fell 12 per cent to $US146m.
Goldman Sachs said costs in the global newspaper business were 2.4 per cent below its estimates, helping underpin a “strong’’ EBITDA performance for the company.
Another highlight of the result was the performance of News’s 61 per cent-owned real estate classifieds business REA Group, where EBITDA rose $US12m, or 29 per cent.
ADDITIONAL REPORTING: BRIDGET CARTER
Copyright 2014 News Limited. All rights reserved.