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Tara Lachapelle
On Sunday evening, John Oliver bemoaned the struggle of the newspaper industry. On Monday evening, News Corp. embodied it.
The $7.5 billion publishing company controlled by billionaire Rupert Murdoch reported fourth-quarter results that drew a dull response from investors. While total company revenue beat estimates, advertising sales fell 5 percent and profit was below expectations. The stock was flat.
News Corp., which owns the Wall Street Journal and New York Post as well as papers in Australia and the U.K., tried to offset what it called challenging print ad trends by highlighting Journal’s 26 percent year-over-year increase in digital-only subscribers. If only digital ad sales — along with News Corp.’s growing Realtor.com division — were enough. Here’s how Oliver, on his HBO show “Last Week Tonight,” described the industry’s shift to digital against the backdrop of declining print subscriptions:
It’s “like finding a lucky penny on the sidewalk on the same day your bank account is drained.”
News Corp. investors are already pricing in the uncertainty around its ability to generate revenue in the
future; the company is valued at a 23 percent discount to estimated revenue for the current fiscal year ending June 2017. The average S&P 500 Index member commands a premium to sales.
It’s a contrast with Murdoch’s other property, 21st Century Fox, from which News Corp. split in 2013 and which is valued at 2.3 times forward revenue. Fox News is the highest-rated and most profitable cable news network, and it’s riding the election cycle wave in a way that newspapers like the Journal can’t. People who want to take in the latest twists and turns of this year’s distinctive presidential race can turn on their televisions sets and tune into Fox News (or some other station). They’re not going to start buying newspapers. And even if something like the presidential election draws more digital subscribers, we know those ad dollars just aren’t the same.
If anything, this shows the wisdom of Murdoch’s decision to break apart the two businesses (although since the ouster of Roger Ailes, Fox News has issues of its own). It does make one wonder what kind of strategic moves Murdoch will make next and if there will be more pruning. Do the 85-year-old’s sons really want to retain control of all these newspapers?
—Bloomberg
Tara Lachapelle is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News