Make your own decision about the relative seriousness of the problems confronting major media groups Disney and News Corp, then compare them to the enormous success and prosperity of The New York Times Co.
Disney and News this week revealed dramatic moves to halt a nasty slide in their core businesses and cost pressures that have been allowed to fester since the pandemic in 2020.
Contrast their moves with those from the New York Times Co – better than expected revenue and earnings performance, as well as subscriber numbers and a $US250 million increase in its share buyback (see below).
This week, Disney announced cuts of $US5.5 billion, 7,000 jobs and a massive revamp into cleaner more identifiable businesses and the resumption of a dividend later this year.
Disney job cuts were equal to around 3% of its global headcount.
News Corp revealed job cuts of 1,250 – around 200 of which have already been revealed by its big book publisher, Harper Collins. There was no estimate on the cost cuts except a leaked story this week that $A20 million would be cut from News Corp Australia by 2025.
There’s a possible restructure coming with Move, the 80%-owned US real estate listings business, on the block. REA group, 61% owned by News, owns the other 20%. The reported price is $US3 billion, $US600 million of that will flow to REA but still remain within the News Corp empire.
The percentage of the respective workforces impacted by the cuts tells us News Corp’s problems are deeper than those at Disney, even though the sums involved are much larger (because Disney is a much larger company).
The 5% cut at News is a deeper cut than at the much large Disney where a 5% cut would have seen over 10,000 jobs cut.
With Move to be sold, it’s not certain if the News cuts estimate includes jobs that will go in the sale. If so, the cuts will be easy peasy.
But the weak performance by News in the December quarter helps explain why the proposed re-merger of the company with Fox Corp, the other Murdoch family media group, was abandoned a couple of weeks ago.
Buying or merging the weak News Corp would not have sat well with shareholders in the stronger Fox Corp.
News blamed the tough macroeconomic environment and higher interest rates (which have boosted the value of the US dollar and generated higher translation losses when foreign revenue and earnings are converted into greenbacks) have been hurting the company.
The stronger US dollar saw News’ December quarter revenue fall 7% to $US2.52 billion from the year-earlier period.
Net income fell 64% in the quarter ending December 31, to $US262 million from $US94 million. The news media segment was among the worst affected, with earnings [before interest, tax, depreciation and amortisation] slumping 47% to $US59 million.
Total segment earnings before interest, taxes, depreciation and amortisation of $409 million was down from $586 million a year earlier.
Dow Jones was the star. It publishes the Wall Street Journal, and owns market data companies and websites and the Investors Business Daily. It was the only division to report growth in revenue and earnings, climbing 11% in revenue to $US563 million.
Foxtel saw a miserly 1% rise in earnings and a 4% fall in revenues, mostly due to foreign currency factors.
For the six months ending to December 31, Revenue dropped to $US4.99 billion from $US5.219 billion and net income to shareholders slumped 76% to just $US107 million from $US431 million in the December, 2021 half.
“Just as our company passed the stress-test of the pandemic with record profits, the initiatives now underway, including an expected 5 percent headcount reduction, or around 1,250 positions this calendar year, will create a robust platform for future growth,” CEO Robert Thomson said in the earnings release.
Thomson noted that despite “the obvious global challenges,” its professional information business at Dow Jones, the publisher of the Journal, saw revenue surge. Quarterly revenue for the overall Dow Jones segment rose 11% from the year-earlier period.
In Australia, revenue fell 13%, impacted by negative foreign currency fluctuations. On a constant currency basis, News Corp Australia saw revenue down 3%.
At Foxtel, revenue fell 7% to $US462 million in the quarter due to a $US52 million, or 10%, negative impact from foreign currency fluctuations.
Adjusted revenues of $US514 million increased 3%.
Higher revenues from Kayo and BINGE, driven by increases in both volume and pricing, and higher commercial revenues were partially offset by the impact from fewer residential broadcast subscribers and lower advertising revenues.
Foxtel Group streaming subscription revenues represented approximately 26% of total circulation and subscription revenues in the quarter, as compared to 19% in the prior year.
At the end of December, Foxtel’s total closing paid subscribers were more than 4.3 million, a 10% increase, primarily due to the growth in BINGE and Kayo subscribers, partially offset by lower residential broadcast subscribers.
Foxtel’s household subscribers – the financial heart of Foxtel totalled 1.4 million at December 31, the lowest they have been for years.
…………
And the New York Times Co?
It’s handy not having to tap dance around a strong US currency. The NYT is a domestically focused company and that limited scope proved an enormous (if somewhat unseen) advantage in the final quarter and 2022 as a whole.
It topped Wall Street quarterly earnings estimates as more people signed up for its digital subscription bundles, offsetting a slowdown in ad sales and helping the newspaper unveil the $US250 million share buyback.
The paper and its managers have in the past few years used a strong bundling push, combining its core news reports with digital content ranging from podcasts to cooking recipes and games to boost revenues from readers beyond that from paper subscriptions and ad revenues.
That saw it add 240,000 digital-only subscribers in the fourth quarter, compared with 180,000 in the three months to September.
Clearly the paper is not as reliant on Donald Trump as many people though when he was President, even though he was a big subscription driver for the paper.
For the year, the newspaper added more than a million subscribers, the second most since 2020 when the pandemic dominated headlines. It has nearly 10 million subscribers and a goal of 15 million subscribers by 2027.
In the December quarter, the New York Times’ reported revenue of $US667.5 million, beating the $US646.4 million estimated by analysts.
Less encouragingly, digital advertising revenue growth for the 4th quarter was sluggish. The Times reported $US119.2 million in digital ad revenue, just a 0.6% growth rate. Altogether, digital advertising amounted to around one-sixth of its $US667.5 million December quarter revenues.
The company forecasts that its digital subscription revenue will increase by between 13% and 16% in the current first quarter, alongside a low single-digit fall in digital advertising.
For the final quarter the company said Operating profit fell to $US93.0 million in the fourth quarter from $US94.1 million in the same period of 2021 “as higher digital subscription revenues at The New York Times Group segment and the impact from six additional days in the quarter were more than offset by a one-time charge related to the Company’s withdrawal from a multi-employer pension plan and operating losses at The Athletic (a sports skewing website) segment.
But on an adjusted basis, operating profit increased to $US141.8 million from $US109.3 million in the final quarter of 2021.
For all of 2022, revenue rose more than 11% to $US2.308 billion and net operating profit fell to $US202 million from $US268 million. The 2022 figure was after just over $US50 million in one off costs.
The $US250 million buyback is in addition to the $US150 million program approved a year ago.
The buyback is not time limited and is part of a new policy which the company says “aims to return at least 50% of free cash flow to shareholders in the form of dividends and share repurchases over the next three to five years, an increase from the target initially announced in June 2022.”
The bottom line is that Disney and News are cutting and retrenching – with Disney offering a return to dividends for shareholders later this tear (News is paying its tony dividend of 10 US cents a share).
And the New York Times has a buyback and a promise of higher dividends when earnings are strong.
