News Corp Stock Jumps 6% on Cost Cutting Efforts Despite Revenue Declines
Shares of Wall Street Journal and MarketWatch owner News Corp. rose 6.5% in morning trading after the news and book publisher posted a slight decline in revenue for its fiscal third quarter as the advertising market softened, but reported progress on cost-cutting measures it said would save $160 million this year.
Shares gained $1.02, or 6%, to $17.85, in morning trading after earlier reaching as high as $18.68. News Corp. shares closed Thursday at $16.83, down 9% since the start of the year.
The New York-based company, which also owns the New York Post, a host of British and Australian newspapers including the Sun and the Times of London, Harper Collins Publishers and realtor.com, said revenue for the three months ending March 31 fell 2% to $2.45 billion, from $2.49 billion in the year-ago quarter.
Net income plunged to $59 million, or 9 cents per share, from $104 million, or 14 cents per share, last year.
Revenue declined across all of the company’s units except Dow Jones, which houses the namesake business newswire and other professional information businesses, along with The Journal and its other market-focused publications. The company said the acquisitions of the Oil Price Information Service (OPIS) and Chemical Market Analytics (CMA) last year helped drive revenue gains for the unit.
“In a period in which advertising was clearly insipid in certain parts of the world, our core non-advertising revenue has been particularly robust,” CEO Robert Thompson said in a statement.
While Dow Jones saw a 9% increase in revenue to $529 million, its newspapers saw a 3% decline to $563 million. Meanwhile, its digital real estate services saw a 13% drop to $363 million amid the softening housing markets in the U.S. and Australia, and its publishing arm reported flat revenue.
Advertising revenues dove 14%, including a 17% decline in digital and 8% drop in print advertising, which the company attributed to continued weakness in the technology and finance categories. Digital advertising accounted for 59% of total advertising revenue in the quarter, compared to 62% in the last year, News Corp. said.
Thompson said during the conference call discussing the results that there was an increase in advertising demand in April.
“Dare I say, the failure of Silicon Valley Bank has been a catalyst for other U.S. financial institutions to try to reassure customers and highlight their own solidity,” he said. “And The Wall Street Journal, Barron’s and MarketWatch are vital platforms for any financial firm aspiring to bolster its credentials.”
Total subscriptions to The Wall Street Journal rose 5% to nearly 3.9 million, while digital-only subscriptions rose 9% to 3.3 million, representing 85% of the total. Barron’s saw a 12% jump in subscriptions to 1.1 million.
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News Corp’s subscription-video-services unit, which includes Australian pay-television provider Foxtel, posted a 3.4% drop in revenue to $77 million. The company blamed the decline on currency fluctuations stating that on an adjusted basis, revenue for the division rose 2% and declined 14% in segment earnings despite topping 3 million streaming subscribers in the quarter.
Thomson said the “success story” in the report came from The Sun, which saw total page views in the quarter leap 94% year-over-year, reaching close to 1 billion views. Notably, he added, The Sun’s U.S. digital advertising revenues now exceed those of the British platform.
Investors Friday were likely trading on Thompson’s comments that company’s cost-cutting efforts “will yield at least $160 million in annualized savings by the end of this calendar year.” That includes a 5% headcount reduction across businesses, along with “strictly scrutinizing spending across all categories and expect further savings as we strive for efficiency and efficacy,” Thompson said during the call.
He added that the efforts are “beginning to gain traction.”
Thompson also took the opportunity to discuss the potential impacts of artificial intelligence on the news business.
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“There has been much discussion, some of it was enlightened, some not so, about the potential impact of generative AI, and there is no doubt that it will profoundly affect the media business,” the CEO said. “Candidly, generative AI may pose a challenge to our intellectual property and to the future of journalism.”
But he warned that this new technology faces and creates new challenges.
“As those who’ve experimented with ChatGPT will be aware, the answers are only as insightful and factual as the source material and are more retrospective than contemporary,” Thompson said. “Given those precepts, we see three areas in which our content will be used by generative AI creators, whose products will be enhanced by our IP for which we should be compensated.”
“Firstly, our content will inevitably be used as has already been exploited to train AI engines,” he said. “Secondly, specific examples of our content will be surfaced in response to users’ AI queries. And thirdly and crucially, our content will certainly be aggregated and synthesized and those answers monetized by other parties. We expect our fair share of that monetization.”
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“Generative AI cannot be degenerative AI,” Thompson continued. “The digital debate over content and journalism has evolved significantly in the past few years. And we appreciate the social and commercial commitment of our partners at Google, Apple, Microsoft and Meta. The A in AI cannot be ambiguity nor can the I represent ignorance. Integrity would be more apt.”
During the question-and-answer portion of the call, Thompson expanded on how AI will impact the business.
“We’re obviously at an early stage of the evolution of generative AI, it will have a profound impact,” he said. “In recent months, HarperCollins Japan has been using sophisticated programs to create images for manga stories by transforming a sketch or a photo or just inputting words through a separate generative AI programs. We use an image from our library to create complete manga scenes, obviously saving a lot of time and transforming potentially the character of that business.”
“But it’s not only going to have an impact on content, it will clearly have a profound impact on the management of the business, whether customer service or billing or whatever,” he continued. “I mean, one contradiction of any business is that the more you customize, the harder and more expensive it is to scale. And that contradiction can be overcome with AI. I think as the well-known management consultant Socrates observed, ‘The secret of change is to focus all of your energy not on fighting the old, but building the new.'”
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