News Corp records second-highest year of profitability

News Corp’s digital revenues accounted for more than 50 per cent of its total revenues, marking a key inflection point.

News Corporation chief executive officer Robert Thomson.

News Corp has registered its second highest year of profitability, with a surge in digital revenues and Foxtel’s subscription services growing.

The media company booked revenues of $US9.88bn ($15.16bn) in the 2023 financial year – a 5 per cent decrease from the previous year.

For the first time, its digital revenues accounted for more than 50 per cent of total revenues, marking a key inflection point for the company’s transformation.

Chief executive Robert Thomson said the company’s second-highest year of profitability was due to a combination of the company moving to “increasingly digital, recurring revenues, higher margins, significantly more free cash flow, robust finances, and bright prospects for long-term growth and value creation for all our shareholders”.

“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,” Mr Thomson said.

Full-year EBITDA was $US1.42bn — a 15 per cent decrease compared to $US1.67bn in the prior year — including the impact of foreign currency fluctuations and higher costs, increased sports programming costs and rising newsprint costs and the acquisitions of OPIS and Chemical Market.

But fourth quarter total segment EBITDA was $341m, up from $315m in the prior year to be one of the most profitable quarters in the past 10 years.

Net income for the year was $US187m, a 75 per cent decrease from the prior year, including a non-cash writedown on REA Group’s investment in PropertyGuru and higher income tax expenses.

Foxtel’s paid subscriptions grew by 5 per cent compared to the previous year, with streaming revenue growth more than offsetting broadcast declines for the fourth quarter and full year, as subscribers to BINGE (entertainment) and Kayo (sports) services and reached nearly 3.1 million.

BINGE’s subscribers grew from 1.263 million to 1.541 million, while Kayo subscribers rose from 1.312 million to 1.411 million.

Mr Thomson said he was “confident” about the future of Foxtel, led by CEO Patrick Delany, which includes long-term sports rights to key both domestic and international sports for Australian viewers.

Meanwhile, News Corp Australia also achieved almost 1.1 million digital subscriptions – a rise of 10 per cent and news.com.au remained the leading news website in Australia, Ispos rankings showed, while The Australian ranked in the top 10 publications.

News Corp is publisher of The Australian.

During Friday’s investor briefing, Mr Thomson also thanked News Corp executive chair Rupert Murdoch and co-chair Lachlan Murdoch, employees and investors and noted: “News Corp achieved its three strongest fiscal years ever in the last three fiscal years: 2021, 2022 and 2023”.

“In fact, fiscal 23 was our second-most profitable year, following fiscal 22, despite the

difficult macro conditions in a couple of core segments.

“And our fourth quarter profitability was significantly higher than last year.”

Mr Thomson also spoke of his ongoing concerns about the rise in use of artificial intelligence and said News Corp hoped to “set precedents that benefit creators, publishers and journalists around the globe”.

“We have been characteristically candid about the AI challenge to publishers and to intellectual property,” he said.

“It is essentially a tech triptych. In the first instance, our content is being harvested and scraped and otherwise ingested to train AI engines.”

He also warned that “ingestion should not lead to indigestion”.

“Secondly, individual stories are being surfaced in specific searches,” Mr Thomson said.

“And, thirdly, original content can be synthesised and presented as distinct when it is actually an extracting of our editorial essence.

“These super snippets, distilling the effort and insight of great journalism, are potentially designed so the reader will never visit a news site, thus fatally undermining journalism and damaging our societies.”

News Corp’s digital real estate arm, REA, continued to face macroeconomic challenges but Mr Thomson said such challenges would ease as the interest rate cycle peaks.

Chief financial officer Susan Panuccio said as the company continues to move towards digital, while these revenues now comprise of more than half of News Corp’s fiscal revenues.

REA revenues were $223m, down 11 per cent, due to foreign currency fluctuations, lower Australian residential revenues and less national listings most notably in Sydney and Melbourne and lower settlement activity.

“We remain focused on driving both usage and engagement through continued product enhancements and improvements to SEO (search engine optimisation) while expanding our core adjacencies of seller, rental and new homes,” Ms Panuccio said.

She also noted the significant growth to Foxtel’s streaming services and said the business will soon launch a streaming aggregation device leveraging Sky Glass technology.

“Expectation is for a commercial launch later in fiscal 2024,” she said.

Dow Jones also recorded its highest profitability for both the fourth quarter and full year since News Corp acquired the company, with revenues of $546m, down 3 per cent and digital revenues accounted for 79 per cent of total revenues in the fourth quarter.

News Media revenues were $571m, down 9 per cent, which Ms Panuccio said was primarily due to the extra week in the 2023 financial year.

Advertising declined about 15 per cent and impacts in Australia were due to “last year’s federal election and some softness in real estate and retail”.

“News UK and New York Post were relatively stable compared to the prior year,” Ms Panuccio said.

In the months ahead Ms Panuccio said there were several key factors impacting the media sector.

“We still expect some inflationary pressures but are hopeful they will be at a more modest rate," she said.