Housing downturn blunts earnings at Murdochs’ News Corp

News Corp’s cost-cutting drive, which included 1250 job losses globally, will strip $US30 million ($45 million) more out of its businesses’ costs than originally forecast, helping to offset a sharp drop in property listings at the Murdoch-controlled company’s real estate business.

Sydney listings fell 20 per cent for the quarter at realestate.com.au, the property site majority-owned by News Corp, and 18 per cent in Melbourne after even sharper falls earlier in the year. That slump, reflecting a weaker property market and 11 interest rate rises, fed a 13 per cent drop in revenue for News Corp’s real estate business compared with the same period last year.

REA Group, which operates realestate.com.au, told investors that property prices had stabilised recently as more migrants come to Australia and supply stayed low. Its chief executive, Owen Wilson, said in an earnings announcement that the figures were coming off very strong numbers before interest rates started to rise.

“While interest rate uncertainty continued to impact the Australian property market, conditions have improved with the stabilisation of house prices and more vendors returning to the market,” Wilson said.

The federal government expects Australia’s population to grow by 400,000 this year in net terms as the country rebounds from coronavirus-era border closures, and while the government is making tweaks to immigration rules, arrivals will still be higher than previously expected.

News Corp, which owns newspapers including The Australian, Daily Telegraph and Wall Street Journal as well as pay TV business Foxtel, publisher HarperCollins and its real estate business, released subdued quarterly earnings on Friday. It said it now expected to save about $US160 million from cost cuts, up from its previous estimated savings, as earnings before interest, tax, depreciation and amortisation (EBITDA) across its segments fell 11 per cent.

Foxtel lost broadcast subscribers, though that was made up with more streaming customers, while publishing and news media were roughly flat. Foxtel shed about 150,000 traditional broadcast customers over the year to March 31, but its Binge and Kayo streaming services gained about 420,000 paying customers combined.

The company faces disruption from the advent of artificial intelligence bots such as ChatGPT, which can write news articles from simple prompts. Chief executive Robert Thomson was sanguine, however, saying the Japanese division of its HarperCollins publishing house was experimenting with using AI to generate manga panels, which could make it much simpler to create works in that medium.

News Corp Australia owns a range of local assets, including The Australian, the Herald Sun and The Daily Telegraph.Credit: Rhett Wyman

Thomson said on an earnings call that traditionally, “the more you customise, the harder and more expensive it is to scale”, but AI could change that. “As the well-known management consultant Socrates said, the secret of change is not to focus on fighting the old, but on building the new.”

Thomson said revenue across the company fell 2 per cent to $US2.4 billion, mainly because of foreign exchange movements, and this was a better performance than many media businesses when advertising markets were “clearly insipid” in parts of the world. He said a company-wide cost-cutting program was starting to gain traction.

“That cost reduction drive includes taking the difficult but necessary step of reducing head count by an expected 5 per cent, and we now anticipate that program will yield at least $US160 million in annualised savings by the end of this calendar year,” he said.

Susan Panuccio, the company’s financial chief, said News Corp’s businesses were “actually pretty good” at cutting costs, in a reference to the repeated downsizing at media firms in recent years.

News Corp’s shares were up 4 per cent at 11am AEST on Friday in after-hours trade on the back of the earnings announcement. The company said net income in the quarter fell 43 per cent to $US59 million, mainly because of lower EBITDA across segments such as its digital real-estate businesses, its Australian news operations, Dow Jones and book publishing.

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