News Corp Reports 3% Drop in Revenue in First Quarter

rupert murdoch

News Corp, the recently spun off publishing side of Rupert Murdoch’s media empire, reported that its revenue fell in the first quarter of its fiscal 2014, due to lower advertising revenue and foreign exchange fluctuations.

The company reported that its earnings before the deduction of interest, tax and amortization expenses increased 58% in the quarter ended Sept. 30 to $141 million, mainly due to the consolidation of Fox Sports Australia and lower costs at its newspaper division. Circulation and subscription revenues declined 6%, the company said.

Excluding the costs related to the legal expenses and settlements in the News of the World phone hacking scandal, as well as the impact of acquisitions and sales, the company said that total EBITDA fell 5% compared to fiscal 2013.

“Our first quarter as the new News was the beginning of a journey in the digital development of the company,” CEO Robert Thomson said in a statement. “There are certainly headwinds in Australia, magnified by inauspicious currency movements, but we have been consistently cost conscious and are transforming our publishing operations longer term into multi-platform businesses.”

Revenues in the most recent quarter were $2.07 billion, compared to $2.13 billion a year earlier, results that were lower than some analysts’ expectations.

Shares of News Corp. were down 1.02% on the NASDAQ exchange, trading at $17.42 per share.

News Corp reported legal fees and costs of $40 million related to the News of the World scandal, compared to $61 million a year earlier. The company said that the impact from legal costs and settlements on EBITDA was $17 million in the most recent quarter.

In a conference call with analysts, Thomson said that revenues were particularly soft in its Australian publishing, while ad revenues at the Wall Street Journal and U.K. newspapers have essentially been stable. He pointed to the growth in mobile usage among Journal readers — some 50% from a year earlier — as the company seeks greater returns from digital.

The company declined to break out its digital revenues. “What we truly are seeing is mass migration in mass media,” Thompson said, adding that it was still “a little too early for us to quantify what that means.”

Revenues in its book publishing division fell by $24 million, or 7%, as the company divested a Woman of Faith live events business. E-book sales, however, increased by 30%. Thomson said that they “collectively recognize the need to evolve” on the publishing side, and that they are looking at being less dependent on ad revenue and “much more subscription focused.”

Revenue from its cable network Fox Sports Australia saw EBITDA fell 31% to $29 million, with expenses from a national Rugby League rights contract that began in March 2013.

Thomson said that the company has “our costs under vigilant watch,” but CFO Bedi A. Singh said that the company is looking at “natural operational efficiencies.” “I don’t think we have any particular targets or slash and burn cost reductions in mind as we go forward.”

News Corp’s Amplify division incurred higher expenses of $29 million as it continues product development for the educational market. Singh said they expect the first sales in fall of 2014.


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