Media at ‘pivotal moment’ with big tech: News Corp

The media major’s shares shot up on a spike in subscriptions and advertising across its digital platforms in the December quarter.

News Corp chief executive Robert Thomson. Picture: Jonathan Ng

The global news media industry is at a “pivotal moment” in its history, as governments move to rein in the unchecked market power and dysfunction of the digital platforms, News Corp chief executive Robert Thomson has declared.

Handing down the media major’s second quarter results, Mr Thomson warned of the creeping growth of the tech titans in the sector, and spoke of the worldwide push to regulate them, including through Canberra’s news media bargaining code.

“We are at a pivotal moment of those discussions in Australia, where new regulations and new terms of trade will be introduced. But that debate now extends across the globe. There is not a single serious digital regulator anywhere in the world who is not examining the opacity of algorithms, the integrity of personal data, the social value of professional journalism, and the dysfunctional digital ad market,” Mr Thomson said on an investor briefing.

Seattle-based Microsoft this week said it would back the media bargaining code, which requires digital platforms to pay news media organisations for the use of their content. Both Google and Facebook have held talks with the Morrison government but are yet to endorse the code.

Mr Thomson’s comments came as News Corp more than doubled its December quarter net profit to $US261m ($343.4m), helped by a better-than-expected jump in revenue, as the media major saw a surge in subscriptions and advertising across its digital platforms.

The company which owns mastheads including The Australianand metropolitan titles including the Herald Sun, Daily Telegraph, The Courier-Mail and The Advertiser, and has a majority stake in Foxtel, said the three months to end-December was its most profitable second quarter in more than seven years, underscoring the digital transformation of the business.

News Corp’s locally traded stock jumped 13.2 per cent to close at $28.41, making it the best performer on the S&P/ASX 200 Index on Friday.

The rebound in second quarter profit from $US103m the same time a year earlier also sees News Corp benefit from a strengthening Australian economy as it emerges from the COVID-19 downturn.

News Corp booked revenue of $US2.41bn for the second quarter to end-December, which was up from $US2.12bn in the September quarter and compares to consensus estimates of $US2.21bn.

The company, which also owns The Wall Street Journal and The Times of London, posted total December quarter earnings before interest tax, depreciation and amortisation of $US497m, which was up 40 per cent from the same time last year. In total December half earnings of $US765m were up 33 per cent from the previous corresponding period.

Mr Thomson said the past few months have been characterised by “considerable upheaval” across the world with economic, political and health-related issues unfolding across the world.

“In the midst of this tumult, which has been a severe stress test for individuals and businesses and countries, I am gratified to report that News Corp has navigated the turbulence, and, to be candid, significantly, very significantly, increased profitability,” Mr Thomson told investors on a briefing.

“The second quarter of fiscal 2021 was the most profitable quarter since the new News Corp was launched more than seven years ago, reflecting the ongoing digital transformation of the business,” he said.

Driving the bounce was a 77 per cent jump in quarterly earnings for News’ subscription video services to $US124m, mostly as Foxtel rebounded with streaming customers increasing over 90 per cent during the quarter, sports and programming costs were reset and audiences for summer sports were at record levels.

At the end of December Foxtel’s total closing paid subscribers were 3.314 million, a 12 per cent lift compared to the prior year, mostly due to the launch of streaming services Binge and the growth in Kayo sports subscribers.

“In the past, there had been scepticism about whether we could transition from our reliance on traditional broadcast, but those concerns have proven unfounded and Foxtel is now a company with a diverse portfolio and much momentum,” Mr Thomson said.

Meanwhile, digital real estate earnings jumped 20 per cent during the quarter to $US142m with a lift in property listings across US based Move and realestate.com.au in Australia.

Elsewhere Dow Jones, which houses The Wall Street Journal, experienced its most profitable quarter since the acquisition of the company more than a decade ago, with segment earnings increasing 43 per cent to $US109m. Figures for Dow Jones were broken out for the first time in August.

Total subscriptions to The Wall Street Journal grew 19 per cent compared to the prior year, to a record 3.22 million average subscriptions in the quarter. Digital revenues at Dow Jones in the quarter now represents 70 per cent of total revenues compared to 64 per cent in the prior year.

Earnings across the News Media business of $US66m were steady during the December quarter compared to the same time a year earlier. Digital revenue for the unit, which includes News’ Australian mastheads, represented 31 per cent of News Media segment revenue in the quarter, compared to 22 per cent in the prior year, and represented 29 per cent of the combined revenue of the newspaper mastheads.

Closing digital subscribers at News Corp Australia’s mastheads have hit a record 738,300, compared to 566,600 in the prior year.

“In Australia, we were fortunately ahead of the curve in transitioning many of our local and regional print properties to digital platforms, which helped them weather the storm of lockdown,” Mr Thomson said.