Juan J. Monroe 
News Corp isn’t that big anymore. Google is worth $946 billion in the stock market and Apple $1.3 trillion while US media mogul Rupert Murdoch presides over a decaying empire. The news is valued by the stock market at $9.5 billion.
We say pee with the tongue firmly planted in the cheek. It’s still huge but it’s shrinking. After posting a $1 billion loss for the March quarter, News and rival Nine continue to flog assets to raise cash.
And he’s still up to his old tricks. While its pundits loudly decry social welfare, its leaders quietly defer to corporate welfare. Just a month ago, News and Nine Entertainment (which now owns Fairfax SMH, The Age and Australian Financial Review newspapers) received a $50 million government grant to keep their regional newspapers afloat.
In yesterday’s The Australian, a News Corp headline, it was revealed that News Corp was already planning to sell these regional titles. “Why don’t we get taxpayers to raise our selling price?” must have been the thought.
There is no doubt, given the media revolution, that Rupert Murdoch now wields political influence far beyond his economic clout in this country. Yet it is surely unsustainable.
His Australian media assets, if UBS’s latest research report is any guide, are probably worthless. It’s true, The Australian, Herald Sun, Daily Telegraph, Foxtel, Courier Mail and Adelaide Advertiser, despite their enormous political influence, are worth nothing financially.
The UBS report, News Corp: How much is the market valuing NWS stem assets?describes Rupert’s traditional media activities as “truncated assets”.
“We estimate that REA (realestate.com.au) represents 74% to 82% of the market value of News Corp… This implies a valuation of $2.59 to $3.77 per share for all other News Corp assets … This could imply that the market is pricing the NWS ‘stub’ (mostly traditional media assets) at around $0.73 to $2.10 per share”.
If you consider, as one fund manager told us, that the real value of these “strain assets” was the Wall Street Journal and the Dow Jones, it would be reasonable to conclude that the Australian media sector is worth nothing all.
UBS expects revenue to fall 10% this year and 13% next from News Corp’s News and Information Services division. On a busted basis, it is valued at just $1 billion (REA at $5.2 billion and Harper Collins at $1.7 billion).
Shares of News have rebounded strongly since the group released its March quarter results a few days ago. It was better than expected, although a waste.
However, he will still have to cut the company’s costs for years to come, if he is to survive. UBS estimates that revenues of $4.9 billion this year are expected to fall to $3.6 billion in four years.
And these are rosy estimates in our view. Rupert’s proliferation of online rivals distribute their content for free via email, Twitter, Facebook and other social media while his newspaper business model relies on cutting down thousands of trees, buying ink , maintaining presses and newsrooms and transporting newspapers across the country on the back of trucks.
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Most newspapers will have to close at some point. They have been losing money for years. Same deal for Nine Entertainment. But it’s a double-edged sword. Even if the newspapers are already loss-making, print ads are worth more than online ads, which means the company will be forced to absorb large revenue cuts from both advertising and circulation.
The result ? Falling sales and declining influence; a media organization even more dependent on a few big advertisers, its survival increasingly dependent on corporations and governments to fund it and deliver story “drops” to drive traffic to its websites.
For mainstream media business, the picture remains as bleak as it did five and ten years ago, when this reporter worked in big city newsrooms and experienced firsthand the destruction wrought by the rise of Internet.
As UBS explains: “News Corp also has exposure to newspapers in Australia, the US and the UK, where print declines are still generally offsetting digital growth; Australian Pay TV, where we believe OTT competition will continue to drive down non-sports ARPU and drive up costs for both sports and non-sports content; and the global book publishing industry, where going digital is driving down revenue per unit…”.
It has long been hoped that online advertising revenue would rise and replace “rivers of gold”, as newspaper advertisements were once called. Yet online advertisements are cheap. They are not bringing in as much as they promised.
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In the wake of the UBS report (which was right with its very short-term “Buy” recommendation, as the stock has jumped 20% since), News announced its March quarter earnings, in fact a loss of 1 billion dollars. due to asset write-downs.
There were tiny rays of light. “News Corp Australia’s digital masthead subscribers – which include the Daily Telegraph, The Herald Sun and The Australian – were up 20.5% from a year ago, from 409,000 to 493,200, according to internal company data,” the rival report said. SMH.
Whether these numbers can be trusted is another matter.
Yet at the critical revenue line, there was a 7% drop. This means costs will continue to be squeezed out of Australian newspapers, already weakened by countless rounds of layoffs of experienced journalists.
“Total profit for News Corp’s global News and Information segment was down 16% to $73 million from a year ago.”
Keep in mind these are pre-Covid numbers. The virus is accelerating the decline. It may have kept people at home from engaging with content online – a short-term boost – but is dealing a savage blow to advertisers and wider economic activity.
Meanwhile, the incursion of new media hammers the public. The combined circulation of the AFR and The Australian is around 130,000 copies, but YouTube sensation and political observer Jordan Shanks, who regularly pounded the mainstream media and the political system, has 406,000 subscribers on his YouTube channel alone. .
Thanks to the plummeting credibility of mainstream media, especially News Corp, millennials don’t care to tune in. Jordan Shanks is clear proof of this.
What does this mean for the Australian media landscape? The implications go far beyond the financial fortunes of two media organizations that now dominate 60% of the country’s press markets. As in politics, mainstream media have a credibility problem that undermines their audience.
However, its political weight remains. The “Canberra Bubble Syndrome”. The audiovisual media, television and radio, have long been politically inspired by newspapers. Politicians and corporate interests are giving up their ‘exclusivities’ to the Canberra bubble. The Bubble wraps the message and the broadcast medium follows. Yet the traditional free-to-air TV model is also under siege.
The decline is terribly slow but inexorable. Great journalists stay in the mainstream media. The problem is their bosses. In a company with declining revenues, cost reduction trumps product integrity. Management is increasingly stacked with unimaginative cost cutters and greasy climbers whose KPIs (incentive payments) are tied to laying off their own workers; in this case journalists who cause too many problems for advertisers and governments.
The catch is that the closer they get to these advertisers and governments, the less their credibility in the community and the less demand for their products. The irony is that Murdoch’s headlines sit behind hard paywalls, diminishing their influence and making it even more imperative that their editors and reporters strike daily “scoop for comment” deals with politicians and others. interest groups.
This does not serve democracy well in Australia. The fact that the media was obsessed with personality politics before the last federal election, busy sucking up talking points from party political strategists as #sportsrorts and a myriad of other forms of mass corruption unfolded rapidly and quite visibly, testifies to the quality of the traditional media in this campaign.
Still, money is a harbinger. Investors value Rupert’s Australian media assets at zero, so unless he and his successors somehow engineer a corporate takeover, News Corp is destined for oblivion, with its grip on the government.
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