News Corporation is on its way to separating itself into two companies from June 28, with the one centred on Australia to be left behind as the rest of the group grows more rapidly in the growth markets of media content and production.
As expected voting shareholders in News Corp have approved the separation of the Murdoch empire into good company (21st Century Fox) and bad company (the about to become News Corp).
The new News Corp will own the group’s papers in Australia, plus Fox SPorts, 50% of Foxtel and internet businesses such as REA Group. It will also own papers in the US and UK and an online education business called Amplify. All will be low growth compared to the assets in the other company, to be called 21st Century Fox, which will contain the US film and TV content businesses, plus its cable giant Fox News and 39% of BSkyB in the UK and pay TV businesses in Germany, Europe and Asia.
For the Australian newspaper assets, contraction, not growth, will be the future.
Already well over $US3 billion has been written off the papers’ values, hundreds of staff have been sacked, papers closed or curtailed, paywalls introduced, with more to come. $1.2 billion to $1.4 billion was written off the value of the Australian analogue newspaper assets last month, which tells us that times are very tough.
That was underlined by the news this week that Kerry Stokes West Australian Newspapers is sacking 100 people, 30 of those journalists in Perth because of weakening ad revenues. New News Corporation has one paper in Perth – The Sunday Times and analysts are now wondering if cuts will come at its operations.
That’s because News Ltd (the Australian newspaper arm) has been cutting costs, including staff, for more than a year.
But the cutting has started in London at The Times, where the acting editor warned that the "era of being subisised" was coming to an end.
John Witherow, the acting editor of The Times cut 20 journalists jobs (just under 10% of the paper’s newsroom) on Monday night, our time, and in doing so said:
"For several years now, Times Newspapers has been losing money," Witherow said. "The company has tolerated this because it could use profits from elsewhere in News Corp to pay for our papers and because the proprietor has a passion for newspapers.
"I fear that era of being subsidised is coming to an end. The separation of the two companies means that the newspapers will form a bigger and more exposed element in the new News Corp."
His comments will worry journalists on the Australian, The New York Post and any other News Corp papers not performing financially.
The Times lost nearly 28 million pounds in 2012, a figure which included 12 million pounds of redundancy costs. The Australian is said to be losing money and so is the New York Post where editor Col Allan cut 13 jobs last Friday.
These were forced redundancies after a call last month for volunteers didn’t get the required number (News was looking to cut 10% of its newsroom staff).
The Times is traditionally subsidised by The Sun (The News of the World chipped in as well up to its closure in July 2011 over the phone hacking scandal). In the US the Post has been a long time source of losses which have been covered since 2007 by the revenues and earnings at the Dow Jones Co and the Wall Street Journal. Now those are under pressure.
In Australia, the Daily and Sunday Telegraphs have covered the losses on The Australian, along with earnings elsewhere, such as in Melbourne.
The impairment write down last month of $US1.2 to $1.4 billion on the value of the Australian newspapers tells us that the days of red ink flowing out of the the paper’s Holt Street offices in Sydney are numbered.
Ironically The TImes circulation has held up in the past year – it has only lost 0.2% of its sales, compared with more than 13% for The Sun and 8.8% for the Sunday Times. The New York Post saw its print and digital sales for the six months to March down 9.9%. But print sales were down 26.6% for the Monday to Saturday papers and 18% for the Sunday.
In New York, holders of the company’s B voting shares overwhelmingly approved the split without an independent director in sight. the Murdoch family’s 39.4% control of the voting shares and Prince Alweed’s 7% made it a forgone conclusion.
Only Mr Murdoch, News’ General Counsel Gerson Zweifach and chief financial officer David DeVoe were on the stage at the meeting, according to news agency reports.
Mr Zweifach also rejected claims in London papers that News Corp (the old one) was in negotiations to reach a cash settlement of claims made by the US Justice Department under the Foreign Corrupt Practices Act.
The stories suggested that the payment could be in the hundreds of millions of dollars and would end an investigation by US authorities into the phone hacking and corrupt payments made by journalists at the defunct News of the World and group’s main London paper, The Sun.
News Corp shares fell 26c to $33.54 in Australia yesterday.
