News Corp Q1 2021: Aust ad revenue tumbles YOY, but digital subs up

News Corp

• 1.232m subscribers to streaming services Kayo, Foxtel Now and Binge

• Revenues were US$2.12 billion, a 10% decline compared to $2.34 billion in the prior year, primarily driven by the sale of News America Marketing.
• Segment EBITDA at Digital Real Estate Services grew 45%, with record revenue and profit contribution by Move, operator of realtor.com
• Segment EBITDA at Dow Jones grew 47%, driven by record average consumer product subscriptions of 3.88 million, led by 29% growth in digital-only subscriptions

At a briefing on the company’s results, CEO Robert Thomson said: “News Corp has started the fiscal year strongly, with higher revenue in many of our segments during the first quarter, and a 21 percent increase year-on-year in profitability, despite the disruptive economic consequences of COVID-19.

“Total revenues for the quarter were $2.1 billion, a fall of 10 percent, but that contraction was largely due to the sale of News America Marketing, and the adjusted decline was 3 percent. Meanwhile, three of our segments, Dow Jones, Digital Real Estate Services and Book Publishing, reported year-over-year Segment EBITDA increases of at least 45 percent, highlighting the success of our investment strategy in publishing and digital real estate.

“Dow Jones posted a record first quarter in profitability and higher revenues, thanks to its role as one of the world’s most trusted providers of business news and analysis. There is undoubted U.S. and international potential for Dow Jones to expand audiences and revenues, and the team is pleased by the early returns on a subscriber offering for the previously free MarketWatch service.

“We are continuing our drive to be a more focused, more digital company and we believe the positive results of that strategy are already clear. Our aim is to generate enhanced returns for our investors in the months, quarters and years to come.”

Subscription Video Services

Revenues in the quarter decreased $18 million, or 4%, compared with the prior year, including a $20 million, or 3%, positive impact from foreign currency fluctuations. The revenue decline was driven by the impact from fewer residential broadcast subscribers and a $14 million, or 3%, negative impact from lower commercial subscription revenues resulting from the ongoing restrictions on pubs, clubs and other commercial venues due to COVID-19, partially offset by higher revenues from OTT products. Adjusted Revenues decreased 7% compared to the prior year.

As of September 30, 2020, Foxtel’s total closing paid subscribers were 3.287 million, a 7% increase compared to the prior year, primarily due to the growth in subscribers at Kayo and the launch of Binge, partially offset by lower residential and commercial broadcast subscribers. 2.055 million of the total closing subscribers were residential and commercial broadcast subscribers, and the remaining 1.232 million consisted of Kayo, Foxtel Now and Binge subscribers.

As of September 30, 2020, there were 681,000 Kayo subscribers (644,000 paying), compared to 430,000 subscribers (364,000 paying) in the prior year. As of September 30, 2020, there were 310,000 Foxtel Now subscribers (298,000 paying), compared to 385,000 subscribers (375,000 paying) in the prior year. Binge, which launched in May, had 321,000 (290,000 paying) subscribers as of September 30, 2020.

Broadcast subscriber churn in the quarter increased slightly to 14.6% from 14.4% in the prior year. Broadcast ARPU for the quarter increased 1% to A$79 (US$56).

Segment EBITDA in the quarter decreased $3 million, or 4%, compared with the prior year, primarily due to lower revenues as discussed above, partially offset by lower entertainment programming costs and lower other operating costs. The $36 million (A$51 million) negative impact related to the deferral of sports programming rights and production costs from the fourth quarter of fiscal 2020 into fiscal 2021 as a result of the suspension of sporting events due to COVID-19 was partially offset by the savings from renegotiated sports rights. Adjusted Segment EBITDA decreased 9%.

News Media

Revenues in the quarter decreased $280 million, or 37%, as compared to the prior year, including a $19 million, or 2%, positive impact from foreign currency fluctuations. The decline was primarily driven by a $200 million, or 26%, impact from the divestiture of News America Marketing in May 2020. The decline also reflects the $35 million, or 5%, impact from the closure or transition to digital of certain regional and community newspapers in Australia. Within the segment, revenues at News Corp Australia and News UK declined 20% and 8%, respectively. Adjusted Revenues for the segment decreased 16% compared to the prior year.

Circulation and subscription revenues increased $1 million compared to the prior year, primarily due to digital subscriber growth, a $10 million, or 4%, positive impact from foreign currency fluctuations and price increases, offset by lower single-copy sales revenue, primarily at News UK, as a result of COVID-19.

Advertising revenues decreased $262 million, or 59%, compared to the prior year, reflecting a $200 million, or 45%, negative impact from the divestiture of News America Marketing. The remainder of the decline was driven by continued weakness in the advertising market, exacerbated by COVID-19, and a $29 million, or 7%, negative impact related to the closure or transition to digital of certain regional and community newspapers in Australia, partially offset by a $7 million, or 1%, positive impact from foreign currency fluctuations.

In the quarter, Segment EBITDA decreased $29 million compared to the prior year, reflecting lower revenues, as discussed above, and the absence of a net $12 million contribution due to the divestitures of News America Marketing and Unruly, partially offset by higher cost savings across the businesses.

Digital revenues represented 28% of News Media segment revenues in the quarter, compared to 19% in the prior year. For the quarter, digital revenues at the newspaper mastheads represented 25% of their combined revenues. Digital subscribers and users across key properties within the News Media segment are summarized below:

• Closing digital subscribers at News Corp Australia’s mastheads as of September 30, 2020 were 685,200, compared to 542,400 in the prior year (Source: Internal data)
• The Times and Sunday Times closing digital subscribers as of September 30, 2020 were 337,000, compared to 312,000 in the prior year (Source: Internal data)
• The Sun’s digital offering reached 140 million global monthly unique users in September 2020, compared to 129 million in the prior year (Source: Google Analytics)
• New York Post’s digital network reached 144 million unique users in September 2020, compared to 107 million in the prior year (Source: Google Analytics)

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