Rupert Murdoch and News Corp’s CEO Robert Thomson will cut millions from their annual salaries but could still bring home over $20 million between them as News Corp hunkers down for the coronavirus hit.
Mr Murdoch, News Corp’s founder and chair, and Mr Thomson made the public sacrifice as the company reported a $US1 billion [$1.58 billion] net loss for the March quarter and an 8 per cent fall in revenues, to $US2.27 billion [$A3.6 billion].
“We are operating in a different, difficult time,” Mr Thomson said as he announced he would forego 75 per cent of his cash bonus [$A8.73 million last year] and Mr Murdoch all [$A3.5 million last year] of his.
The News and Information side of the business, which includes the famous news mastheads such as The Herald Sun, the Daily Telegraph, The Australian, Times of London and The Wall Street Journal, saw revenues down 8 per cent. While the US segment, known as Dow Jones, rose 5 per cent, the UK and Australian divisions fell 9 per cent and 14 per cent respectively.
That’s why News is gunning for cost cuts, with consultants Deloitte let loose to find ‘fat’ in Australia, where local chair Michael Miller said further jobs would go.
“The result is what we expected, but the real [coronavirus] kick will come in the June quarter. April has been very negative and we need to acknowledge that [after the virus] things won’t go back to being the same,” said independent media analyst Peter Cox.News has placed a temporary halt on production of 60 community publications.
“I think Deloitte is going to recommend big cuts, so some of them won’t come back,” Mr Cox said.
Foxtel on the skids
The $US1 billion net loss News recorded was not a fair picture of trading conditions. What drove it was a move to slash $US931 million [$A1.47 billion] from the value of its pay-TV operator, Foxtel. Telstra, which owns the 35 per cent of Foxtel News doesn’t, also wielded the knife, slicing $300 million from its value as both owners face up to the fact that its falling revenues won’t return.
Foxtel has been on the slide for years with streaming channels like Netflix and Stan increasingly eating its lunch. There was no sign during the presentation of the expected emergence of Foxtel’s streaming service, said to be named Binge.
That is said to be Foxtel’s fightback option and the reason it outbid Stan this week for Australian rights to retain HBO’s programming. But that is something of a forlorn hope, according to telecommunications analyst Paul Budde.
“It’s best to face reality. Foxtel is under increasing pressure. It did its content deals when its pay-TV business was charging $100 a month to subscribers.”
“Now, for the same content, people are paying $25 a month and its way out of balance with its content based on prices from five or 10 years ago,” Mr Budde said.
For Foxtel’s cable subscription service prices still range between $109 per month for premium access and $49 for the no-frills service. For its Foxtel Now and Kayo streaming services subscriptions are only $25 a month but even that is not competitive with the majors like Stan, Netflix, Amazon Prime and others priced between $10 and $15 a month.
“It’s far too expensive,” Mr Budde said.
“The competition is at $10 and the difference is a lot for people, so its very difficult to attract people,” Mr Budde said. Even that price difference is understated as Foxtel Now does not give viewers access to all its content for a standard price.
Depending on the bundle chosen, Foxtel Now can be as dear as a full cable subscription at $109 per month.
Hard to Binge successfully
Even if Foxtel hits the market with Binge, there is little upside for it.
“It’s too late to start a new streaming service because there is so much competition. They might get another five per cent of the market and bring in 100,000 to 200,000 subscribers, but that’s not going to turn Foxtel around,” Mr Budde said.
Outbidding Stan for HBO [which has shows like Game of Thrones and Succession] is not necessarily a winning thing to do.
“Channel Nine [Stan’s owner] will have made an assessment and taken a value decision on bidding for HBO. If Foxtel pays above the odds it won’t benefit,” Mr Budde said.
Foxtel seems to be in a downward spiral that News can’t rescue it from.
“It has $2 billion in debt that no-one wants to fund so News Corp has had to do it themselves,” Mr Budde said.