Murdoch's News Warp

Shrinking ad sales may call for hard choices about the company's stable of newspapers.

On Sunday evening, John Oliver bemoaned the struggle of the newspaper industry. On Monday evening, News Corp. embodied it. 

The $7.5 billion publishing company controlled by billionaire Rupert Murdoch reported fourth-quarter results late Monday that drew a dull response initially from investors. While total company revenue beat estimates, advertising sales at the company's main news unit fell 5 percent (overall, ad revenue was relatively unchanged) and profit was below expectations. The stock was flat in after-hours trading Monday, but rose almost 4 percent by Tuesday's close.

News Corp., which owns the Wall Street Journal and New York Post as well as papers in Australia and the U.K., tried to offset what it called challenging print ad trends by highlighting the Journal's 26 percent year-over-year increase in digital-only subscribers. 1 If only digital ad sales -- along with News Corp.'s growing division -- were enough. Here's how Oliver, on his HBO show "Last Week Tonight," described the industry's shift to digital against the backdrop of declining print subscriptions:

It's "like finding a lucky penny on the sidewalk on the same day your bank account is drained."


U.S. newspaper ads are down 71% from the peak in 2005. The future looks bleak, writes Bloomberg Intelligence analyst Geetha Ranganathan, citing this Magna Global data:

Source: Magna Global, Bloomberg Intelligence

News Corp. investors are already pricing in the uncertainty around its ability to generate revenue in the future; the company is valued at a 23 percent discount to estimated revenue for the current fiscal year ending June 2017. The average S&P 500 Index member commands a premium to sales.

It's a contrast with Murdoch's other property, 21st Century Fox, from which News Corp. split in 2013 and which is valued at 2.3 times forward revenue. Fox News is the highest-rated and most profitable cable news network, and it's riding the election cycle wave in a way that newspapers like the Journal can't. People who want to take in the latest twists and turns of this year's distinctive presidential race can turn on their televisions sets and tune into Fox News (or some other station). They're not going to start buying newspapers. And even if something like the presidential election draws more digital subscribers, we know those ad dollars just aren't the same.

News Slump

Here's how News Corp. and Fox shares have performed since Rupert Murdoch unshackled them in 2013:

Source: Bloomberg

If anything, this shows the wisdom of Murdoch's decision to break apart the two businesses (although since the ouster of Roger Ailes, Fox News has issues of its own). It does make one wonder what kind of strategic moves Murdoch will make next and if there will be more pruning. Do the 85-year-old's sons really want to retain control of all these newspapers?

(Corrects second paragraph of story published Aug. 9 to show that the 5 percent decline in ad revenue pertained to the news unit, not the whole company. Updates share trading.)
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
  1. Bloomberg LP, the parent of Bloomberg News, competes with News Corp. in providing financial news and services.

To contact the author of this story:
Tara Lachapelle in New York at

To contact the editor responsible for this story:
Beth Williams at

Before it's here, it's on the Bloomberg Terminal.