Why News Corp fared worse than you might think when reading the results

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Rupert Murdoch’s News Corp hit the headlines Friday, announcing that its net income of $ 389 million

The sales for the fourth quarter are 30 percent above that of the June quarter of 2020.

Well, as independent media analyst Peter Cox said, those profits would want to grow.

“That is compared to the June quarter of 2020, the worst three months that have suffered when the coronavirus hit and everything shut down.”

“In the June quarter of this year, everything was mostly open,” said Cox.

There have been some bright spots in News’ performance. The online real estate operation, which owns Realestate.com.au, saw sales jump 31 percent and pre-tax profit of 49 percent as real estate boomed after the lockdown.

The Dow Jones business that the Wall Street Journal and business data operations, revenue increased 7 percent and pre-tax income increased 41 percent to $ 332 million.

Currency values

However, News Corp’s total revenue rose 4 percent to $ 9.36 billion while it generated 6 percent gains from positive currency movements (FX), meaning actual liquidity was 2 percent lower than last year.

The way most Australians relate to News Corp through their newspapers was a bad story.

The newspaper business, with branches in Australia, the United States and the United Kingdom, recorded a 2 percent decrease in profit before tax to $ 52 million and the Australian newspaper operation decreased 1 percent.

Filing regional newspapers costs news money

The actual drop in Australia was 6 percent, but a stronger Australian dollar masked much of it and gave a 5 percent valuation advantage.

The Australian operation was hit by a $ 90 million loss in revenue caused by the closure or switch to digital production of a number of regional newspapers, a move that attracted negative public attention during the worst of the pandemic.

Who pays television?

Another key interface for the Australians, News Foxtel’s pay-TV and streaming video-on-demand (SVOD) business, had a negative outcome that was completely obscured by exchange rate movements.

Revenue was up 10 percent, but an exchange rate gain of 12 percent means it’s really down 2 percent.

Foxtel’s pre-tax profit, which rose 11 percent, was complemented by an 11 percent currency gain. In other words, nothing really happened in business.

A big shift is underway at Foxtel as the business moves from Pay TV to SVOD. For a couple of years this meant the total number of subscriptions went down, but that changed in 2021.

While Foxtel’s subscriptions continued to decline, the Kayo sports channel and Binge movie outlet rose dramatically, bringing together 1.1 million viewers. Foxtel’s total viewership is now 3.89 million paying guests, more than in 2019.

There is, of course, a problem with this move.

“Nobody wants to pay for a monthly subscription of $ 150 as they did a few years ago when two million people did that,” said telecommunications consultant Paul Budde.

Now people are switching to SVOD offerings where Foxtel’s highly regarded sports coverage can be bought on Kayo for $ 25 a month and you can add binge to watch movies and TV series for $ 14 a month. All in all, the Foxtel premium subscription for $ 149 can now be purchased from SVOD for $ 40 per month.

Or people can get off the Foxtel ship and get a $ 10 Sports add-on to their $ 14 Stan subscription – for respectable, if not extensive, coverage.

“Sport was the key market for Foxtel and that is now being undermined by various providers offering a bit of sport,” said Budde.

Foxtel is giving the situation its best face and says that in the June quarter “higher revenues from streaming products more than offset the decline in revenues from the broadcast product”.

However, the subscription lead-up during the pandemic added to that – but the company’s pre-tax profit declined due to the added cost of buying sports content and the added cost of the business from lifting the pandemic restrictions.

All of this resulted in a 37 percent decline in pre-tax income last quarter to $ 66 million for the Foxtel company.

Back in the pub

Despite the major move to lower-income streaming, News said that Foxtell’s total revenue per user increased 4 percent to $ 81.

However, this was likely “influenced by the return to Foxtel’s commercial subscriptions by pubs and clubs after the bans were lifted late last year,” said Cox.

During the pandemic, the pubs mainly stopped paying their expensive sports subscriptions. And the relocation back to payment can only be done once (although it is now threatened again).

The consistent erosion of Foxtel’s traditional domestic pay-TV memberships, which News referred to in its press release, will undermine those margins per viewer going forward.

Overall, Mr Cox said, “I think you are trying to make this report very positive and the question you should be asking yourself is, ‘Is that? [Murdoch] Family doesn’t just want to sell Foxtel, they want to sell the whole box and cube? ‘

The Murdoch family control about 40 percent of the voting shares in News Corp, and as the aging Rupert Murdoch’s influence dwindles along with the newspapers they own, his heirs could seek to get out.

The Murdochs sold their stake in the giant 21st Century Fox to Disney Corporation in a $ 66 billion deal in 2017.


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