News Corp has reported its results for the second quarter of the financial year ending December 31, 2018.
Revenues were US$2.63 billion, a 21% increase compared to $2.18 billion in the prior year, reflecting the consolidation of Foxtel and continued strength at the book publishing and digital real estate services segments.
Commenting on the results, chief executive Robert Thomson said:
“News Corp has reported increased profitability and revenue growth during the first half of fiscal 2019, highlighting the power of premium content and authenticated audiences in a fact-challenged world that craves credibility.
“At news and information services, we saw a continuation of positive trends in paid digital subscriptions, including accelerating gains at The Wall Street Journal, and stronger digital advertising revenues in both the US and Australia.
“Although our teams have been diligent in pursuing revenue opportunities, the digital platforms, which arbitrage algorithmic ambiguity, remain dysfunctional. It is clear that there has been a regulatory awakening and the time has come for a regulatory reckoning.”
“Within our subscription video services segment, this quarter we launched Kayo Sports, a sports-only OTT product, to positive reviews, and we look forward, with confidence, to the peak selling season for the most popular winter sports in Australia.”
News and Information Services
Revenues in the quarter decreased $41 million, or 3%, as compared to the prior year, reflecting a $34 million, or 2%, negative impact from foreign currency fluctuations. Within the segment, Dow Jones revenues grew 4%, while revenues at News UK declined 10%, which includes the negative impact from the absence of Sun Bets revenues discussed below. News America Marketing and News Corp Australia revenues declined 7% and 5%, respectively.
Digital subscribers and users across key properties:
• The Wall Street Journal average daily digital subscribers in the three months ended December 31, 2018 were 1,709,000, compared to 1,389,000 in the prior year (Source: Internal data)
• Closing digital subscribers at News Corp Australia’s mastheads as of December 31, 2018 were 460,300, compared to 389,600 in the prior year (Source: Internal data)
• The Times and Sunday Times closing digital subscribers as of December 31, 2018 were 269,000, compared to 220,000 in the prior year (Source: Internal data)
• The Sun’s digital offering reached approximately 80 million global monthly unique users in December 2018, compared to 86 million in the prior year, based on ABCe (Source: Omniture)
Foxtel trading update
As of December 31, 2018, new Foxtel’s total closing subscribers were approximately 2.9 million, which was higher than the prior year, primarily due to Foxtel Now subscriber growth, the inclusion of commercial subscribers of Fox Sports Australia beginning in the first quarter of fiscal 2019 and the launch of Kayo Sports, partially offset by lower broadcast subscribers. 2.5 million of the total closing subscribers were broadcast and commercial subscribers, and the remainder consisted of Foxtel Now and Kayo Sports subscribers.
As of February 5, 2019, there were 115,000 Kayo Sports subscribers, of which approximately 100,000 were paying subscribers. Broadcast subscriber churn in the quarter was 15.6% compared to 14.5% in the prior year, reflecting the impact of the price increase implemented in October. Broadcast ARPU for the quarter declined 3% compared to the prior year to A$78 (US$56), reflecting a 2% negative impact related to the adoption of the new revenue recognition standard.
News Corp commented this morning that the growth in Kayo did no correspond with a drop in premium Foxtel subscriptions. As to speculation Foxtel subscribers might be ditching their iQ boxes, Robert Thomson quipped: “The higher the iQ the better.”
News Corp also revealed that research into the 70% of Australians who do not subscribe to Foxtel indicated many would pay for a cheaper version of the subscription offering.