News Corp. Reports Loss After Australia Publishing Writedown
News Corp., the media company controlled by billionaire Rupert Murdoch, reported a $1.55 billion quarterly loss as shrinking advertising revenue led to a writedown of its Australian publishing business.
The net loss was 64 cents a share, compared with net income of $683 million, or 26 cents, a year earlier, the New York-based company said yesterday in a statement. Excluding the writedowns and other items, profit was 32 cents a share, in line with the average analyst estimate compiled by Bloomberg.
The majority of News Corp.’s value comes from its entertainment operations, which include the Fox News cable network and Twentieth Century Fox film studio. Murdoch, who began building his media group with the Adelaide News in 1953, announced a plan in June to split off the declining publishing division, home to the Wall Street Journal in the U.S. and the Sun newspaper in the U.K., into a separate public company.
“Publishing will continue to be mixed,” Chief Operating Officer Chase Carey said in an interview. “We certainly have initiatives to improve on execution, and we have an ongoing focus on being as efficient as we can be. There will be revenue growth.”
News Corp. shares were little changed in New York today, closing at $23.67. The stock has surged 33 percent this year, bolstered by the plan to break up the company. Australian-listed shares dropped 3.2 percent to A$21.88 at the close in Sydney.
Murdoch has assembled a global media company with assets including Fox News and the Wall Street Journal, after inheriting Adelaide newspaper assets from his father, Keith. News Corp. publishes about 146 newspapers in Australia, including The Australian, The Daily Telegraph and the Herald Sun, according to its annual report.
Annual publishing profit fell 31 percent to $597 million, partly because of shrinking advertising revenue at the Australian newspapers as well as the closure of the News of the World newspaper, the company said yesterday.
Publishers in Australia are cutting jobs as readers shift to the Internet and print circulation slides. News Corp. in June announced job cuts in Australia as it reduces the number of its units, while Fairfax Media Ltd. (FXJ), publisher of the Sydney Morning Herald, said the same month it would cut 22 percent of its workforce.
News Corp.’s plans to reignite publishing growth include the new Sun on Sunday, a weekly U.K. tabloid that filled the void left by News of the World. The company also raised the cover price of the daily Sun newspaper.
News Corp.’s cable network business, meanwhile, performed well, said Brett Harriss, an analyst with Gabelli & Co. in Rye, New York. Operating profit at the company’s cable business rose 26 percent to $792 million, driven by increases in advertising and the fees the company receives from pay-TV operators.
“Cable is the most significant segment for the company,” Harriss said.
The company reported writedowns of $2.8 billion in the fourth quarter, “principally related to the company’s publishing businesses, most significantly the Australian operations.”
The spinoff of the publishing business should take about a year to complete, the company said in June. While the remaining entertainment company will continue to be led by Murdoch, the board has yet to designate a chief executive officer for the publishing side.
Sales (NWSA) fell 6.6 percent to $8.37 billion in the fourth quarter, which ended June 30. Analysts had estimated $8.72 billion.
News Corp. has been trying to move past a hacking scandal that erupted last year after reports that one of its newspapers in the U.K. accessed the voice mail of a murdered teenager, Milly Dowler. Rebekah Brooks, the former head of the company’s British division, was charged by London police this month for her part in those alleged crimes.
The scandal prompted News Corp. to abandon its bid to buy the remaining stake in British Sky Broadcasting Group Plc. (BSY) A U.K. committee, after probing whether News Corp. misled Parliament during the hacking scandal, concluded in May that Murdoch is “not a fit person to exercise the stewardship of a major international company.” The nation’s media regulatory commission, called Ofcom, may force News Corp. to sell or cut its 40 percent stake in BSkyB.
Coping with the scandal’s fallout has cost News Corp. about $315 million since it broke in July 2011, with $57 million coming this past quarter. That includes legal fees, settlements and losses from closing the News of the World, where the hacking originated.
The company adopted a $5 billion buyback plan in the wake of the scandal and doubled the size of the program in May.
Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.
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