News Corp reported sharply lower revenue but is optimistic of fairer winds ahead as its business increasingly turns to digital revenue streams.
The global media group posted a 9% drop to $US2.43 billion in the June quarter, just below expectations of $2.48 billion by market analysts.
CEO Robert Thomson says the results highlight the durability and depth of revenue streams and stringent cost controls despite a turbulent economic climate.
And he sees better times ahead.
“Our results showed marked improvement in the second half, so with inflation abating, interest rates plateauing and incipient signs of stability in the housing market, we have sound reasons for optimism about the coming quarters,” says Thomson.
“For the first time, digital accounted for over 50% of News Corp's revenues for the full year, marking a profound transformation during the past decade.
“That momentum is surely gathering pace in the age of generative AI, which we believe presents a remarkable opportunity to create a new stream of revenues, while allowing us to reduce costs across the business.
“We are already in active negotiations to establish a value for our unique content sets and IP that will play a crucial role in the future of AI.”
Thomson told analysts in a briefing that the rise of digital revenue marks a profound transformation at News Corp during the past decade.
"That momentum is surely gathering pace in the age of generative AI, which we believe presents a remarkable opportunity to create a new stream of revenues, while allowing us to reduce costs across the business," he says.
"We are already in active negotiations to establish a value for our unique content sets and IP that will play a crucial role in the future of AI...."
News posted a net loss of $32 million in the June quarter, including $166 million related to higher non-cash writedowns and and restructuring charges, including those related to a 5% cut in staff.
For the full year, revenue was down 5% to $9.88 billion with profit at $1.4 billion, the second highest profitability recorded by News.
The fall included a 5% negative impact from foreign currency fluctuations and the absence of a $110 million, or 1%, benefit from the additional week in the prior year.
In the June quarter, revenue at News Corp Australia fell 15%, dragged down by currency fluctuations comparison to a 53 week year.
Closing digital subscribers at News Corp Australia at the end of June were 1,059,000 (943,000 for news mastheads), compared to 964,000 (882,000 for news mastheads).
Foxtel’s closing paid subscribers at the end of June were up 5% to more than 4.6 million, mainly due to the growth in streaming subscribers to nearly 3.1 million, driven by BINGE and Kayo, partially offset by lower residential broadcast subscribers.
Broadcast subscriber churn improved to 11.1%, the lowest level since 2016, compared to 13.8% in the prior year. Broadcast revenue per user for the quarter increased 2% to A$84.
Foxtel revenue increased but its contribution to global revenues fell due to a weaker Australian dollar against the US.
Revenue in the quarter was down 4% to $501 million but adjusting for foreign currency fluctuations it was up 3% to $538 million.
Thomson described the growth for the fourth quarter and full year on an adjusted basis a “remarkable turnaround from the recent past and a tribute to the team in Australia”.
The Australian business is nearing completion of its debt refinancing which is expected to provide a pathway for repayment of News Corp’s shareholder loans.
Foxtel streaming subscription revenues represented about 29% of total circulation and subscription revenues in the quarter, compared to 23% in the same three months last year.
Across News Corp's news media business, advertising revenue fell $40 million, or 15%, primarily due to the absence of a $15 million, or 6%, benefit from the additional week in the prior year, lower print and digital advertising at News Corp Australia, lower print advertising at News UK and a $6 million, or 2%, negative impact from foreign currency fluctuations.
The decline was partially offset by growth in digital advertising at News UK. Excluding the absence of the benefit from the additional week in the prior year and the impact of negative foreign currency fluctuations, advertising revenues would have decreased 7%.
The numbers by segement:
And overall results:
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