News Corp will cut costs at British and Australian newspapers to offset revenue decline
News Corp’s revenues have slipped for the fourth straight quarter in a row as growth in its digital real estate business failed to offset lower advertising revenue from the news division. The business announced it would respond by cutting costs at its Australian and British newspapers.
News Corp has reported a 4 per cent decrease in revenues for the first quarter of fiscal 2016 in the three months leading up to 31 December 2015, with overall revenue of $2.16 billion. The media giant cites weakness in the print advertising market, volatile foreign exchange fluctuations, and a poor performance in its book publishing division as contributing factors for the decline.
However, the company saw a strong performance from its digital real estate business, with revenues growing 35 per cent from the prior year, thanks largely to strong traffic from realtor.com, which it took control of in its acquisition of Move Inc. in November 2014. Chief executive Robert Thomson claims the company is by most measures “the world’s largest player in digital real estate”, a position enhanced by the rapid growth in the U.S. of realtor.com.
News and information services suffered an 8 per cent decline, with total segment advertising revenues down 12 per cent, with the company citing weakness in print advertising and lower revenues at its US marketing division as contributing factors. The segment did see a growth in digital advertising revenues, however circulation and subscription revenues declined by 5 per cent.
Thomson said: “We are particularly focused on cost reductions and sharing services around News Corp to streamline operations at the newspapers in Australia and the U.K.”
“For our Australian mastheads, it was clearly a difficult quarter in advertising and to that extent we’ve clearly embarked on a cost-cutting program,” Thomson told investors, saying “Cost cutting has a short-term cost and a long-term benefit.”
NewsCorp’s $176m aquisition of ad tech company Unruly in September last year has helped the company’s social sensibility and metric measurement. In its acquisition of Unruly, the company hoped to drive more video ad views in an increasingly video-centric environment.
Thomson, said: “We are developing advertising products for clients keen to benefit from the rise of video and mobile, and taking advantage of our world-class mastheads which are increasingly powerful platforms, editorially and commercially.”
The corporation’s book publishing sector suffered a blow. The popularity of The Pioneer Woman Cooks: Dinnertime by Ree Drummond and overall strong sales in general books were not enough to offset the lower revenues from the Divergent book series, coupled with a decrease in e-book sales, that contributed to the 5 per cent decline in earnings from the previous year.
In cable network programming, revenues decreased $6 million, or 5 per cent, with earnings EBITDA dropping 28 per cent compared with the prior year. The company cited expected higher programming rights and production costs related to the Rugby World Cup as $11 million, a contributing factor to the total earnings decrease.
The Australian company Foxtel saw marked subscriber growth, driven by cable and satellite subscribers, which increased over 7 per cent compared to the prior year period, along with higher Presto subscribers - Netflix’s prime competitor in Australia.
“Clearly there’s a lot of competition in the market at the moment when you look at Netflix and others, but what you need to understand is that Netflix in the US is very different to Netflix in Australia,” Thomson said, continuing that Netflix Australia has quantitatively and qualitatively a far lesser offering.