The chickens of a declining advertising market and the coronavirus king-hit are coming home to roost at News Corp, with the media giant calling in consultants to its Australian operations as it looks to shrink costs and jobs.
The move, reported in Nine Newspapers, comes after Rupert Murdoch’s flagship called out a poor performance in its Australian operations since July.
The group pointed to “weakness in the print advertising market, primarily in Australia, and lower home-delivered revenues” as being the main drivers of a 10 per cent fall in pre-tax earnings to $US198 million for the half in its news and information segment.
The new world
But that was before COVID-19 struck.
“Revenues are going to be a long way down. Not 5 per cent, but 30 per cent to 50 per cent,” said independent media analyst Peter Cox.
“I don’t think that revenues are going to go back to where they were and that is going to hit the bottom line,” Mr Cox said.
“The world’s moving in a different direction and cutting costs is the only option for companies like News.”
The pandemic has already seen News take drastic action.
It has stopped printing about 60 community newspapers, forced journalists and others to take leave, and management have warned of significant job cuts.
It also said that coronavirus would have a “material adverse impact” on its revenues.
Nine reported Deloitte’s review would focus on centralising editorial and commercial functions, and reviewing and cutting print costs.
Major publishers got some joy last week with the government pledging to force Google and Facebook to share some of the revenue they make through running stories on their sites created by traditional media.
Where is the money?
Mr Cox questioned the value of those revenues and said major media companies would be hit if Google and Facebook resisted by running less traditional media copy.
“Stories published on Google and Facebook in turn drive a lot of readers back to companies like News and Nine,” Mr Cox said.
“If those visits are cut, then I assume advertising revenues would fall because advertising revenue depends on the level of traffic on media sites.”
News Corp reported an overall decline of 4 per cent for pre-tax earnings across all its businesses, but its subscription video segment was hit hard with a 23 per cent fall for the half.
Most of that relates to Foxtel, which is losing subscribers while its cheaper broadcast video on demand [BVOD] subsidiaries Kayo and Foxtel Now build viewers.
But the overall effect of that is to cut the high-margin Foxtel revenues and replace some of them with lower-margin BVOD revenues.
“Foxtel is a disaster for News,” Mr Cox said.
News was taking advantage of the times to do something revenue pressures were forcing it to do before the crisis.
“If you’re going to restructure, then now is a good time to do it,” Mr Cox said.
News is not alone taking drastic action in response to the coronavirus crisis.
Australian Community Media, bought from what is now the Nine group by real estate entrepreneur Antony Catalano, has suspended publication of 170 regional and suburban print mastheads until the situation improves.
Nine has urged staff to take leave and has suspended the production of a range of insert magazines into its newspapers until advertising levels improve.
A range of regional papers have closed, including the Sunraysia Daily, and all up 51 news rooms and outlets have shut.
Elsewhere, real estate platform Domain has given staff the choice of taking 20 per cent of their salaries for six months in share rights, or working shorter hours.
The company has also halted its print publications and cut spending on outdoor, radio, sporting and events. That includes support for Cricket Australia’s Tests, which Domain ceased midway through a four-year contract in February.
The government responded with a $100 million lifeline to keep afloat troubled media organisations.
News Corp did not respond to questions for this story.
The New Daily is owned by Industry Super Holdings