News Corp's earnings plummet under strain of print ad sales decline

Arvind Hickman
By Arvind Hickman | 11 August 2017

News Corp has reported a 5% decline in revenue and 14% drop in earnings (EBITDA) across its news and information segment as newspapers massive declines in print advertising revenue continue to outpace gains in subscription and circulation revenue.

News and Information revenue dropped to US$5.07 billion in the year to 30 June, leading the group to a 2% decline in revenue to US$8.14 billion.

News Corp's digital real estate segment, including REA in Australia, helped soften the blow with strong 14% revenue growth to US$938 million. The booming digital real estate business now accounts for a 37% share of group revenue and is the major bright spot in a challenging year.

Foxtel revenues increased by 1% to US$2.41 billion on a US GAAP basis. In local currency terms, however, the business had a 2% revenue decline due to a drop in subscribers, ending the fiscal year with 2.8 million. News Corp said the drop was largely due to the SVOD Presto shutting down and was partially offset with the launch of Foxtel Now.

News Corp's book publishing business reported a marginal drop in revenues of 1% to US$1.64 billion.

Advertising decline

News Corp's problems are mostly due to a 7% decline in advertising revenue across news and information businesses. Advertisers have been scaling back print budgets for several years as more readers consume news online. While advertisers continue to back news brands online, most of the growth in digital ad spend in the past year has gone to tech giants Facebook and Google.

News Corp said advertising revenue was down US$202 million to US$2.61 billion, mostly due to declines in print ad revenue. The results were also impacted by foreign currency fluctuations, a weaker pound sterling impacted British newspaper results. A $33 million decline was down to sales from an additional reporting week in FY16.

Newspaper circulation and subscription revenues also dropped by US$90 million (5%) to $2.01 billion but this was due to foreign currency fluctuations ($97 million) and lost sales from an additional reporting week in FY16 ($39 million).

Without these anomalies, circulation and subscriptions revenue would have grown by 1%.

Several News Corp mastheads are aggressively trying to grow subscription revenue to create more sustainable business models. Australia CEO Michael Miller earlier this month said that The Australian's subscription revenue now outweighs its advertising revenue. 

News Corp's Australian mastheads grew digital subscribers from 271,000 at the end of FY16 to 363,000 this year. British tabloid The Sun more than doubled its digital audience to 85 million monthly uniques. 

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