News Corp CEO fails to dampen Australian sale speculation

(ATF) News Corp CEO Robert Thomson stressed digital real estate, growth at Dow Jones and a potential revaluation of book publisher HarperCollins at a virtual conference on Wednesday December 9. His emphasis will do nothing to dampen speculation that sales of Australian newspapers are on the way.

Thomson was speaking at a virtual conference organized by UBS just over a month after News Corp announced results for its fiscal first quarter (ending on September 30) that highlighted improved performance at the sectors being targeted for growth by one of the two divisions of Rupert Murdoch’s media business.

Since the disposal of most of Murdoch’s entertainment assets to Disney for $71 billion in 2019, what remains of his empire is split between Fox Corp, which includes Fox News, and News Corp.

Fox Corp is the bigger of the two remaining units and has been under scrutiny in the US due to an acrimonious split with President Donald Trump, after he blamed Fox News – among many others – for his recent election loss.

This led to speculation that Trump could aim to start or support a rival to Fox News once he leaves office, affecting the strongest performing division in Murdoch’s two remaining companies.

While the focus in the US was largely on the fate of Fox, shares in News Corp have surged since its most recent quarterly earnings report, with its Nasdaq-listed stock up by over 30% in the last month.

This partly reflects News Corp’s success in persuading investors to focus on the performance at its stronger units – an attempt that has been helped by the decision earlier this year to split Dow Jones from other media assets for reporting purposes.

When News Corp delivered its quarterly results on November 5, chief executive Robert Thomson highlighted the consistent performance of three key divisions. Earnings rose by 45% compared to the same quarter in the year before at both the digital real estate and book publishing segments, while Dow Jones earnings were up by 47%.

Thomson focused on those numbers rather than a 10% fall in overall News Corp revenue to $2.34 billion, which was attributed to the impact of the sale of its News America Marketing coupon unit. News Corp group earnings were up modestly from $221 million in the same quarter in 2019, to $268 million.

The performance of the News Media segment (now without Dow Jones) was a drag on both revenues and earnings, which has led to speculation that it will see either further cost-cutting and/or asset sales.

Aussie tabloids up for sale?

Australian media analysts and commentators have been discussing the possibility of a sale of Murdoch-owned tabloids in the country, including the Herald Sun, the Daily Telegraph and the Courier-Mail.

Thomson did not provide firm clues at his conference appearance on December 9 to indicate that he and Murdoch are planning disposals in Australia.

But one remark may be taken by observers as an indication that they are not being ruled out.

“We honour our past, but we’re not prisoners of our past,” Thomson said, in a reference to the company’s roots in Australian newspapers, which Murdoch used to build his global media empire.

Thomson also pointed out that News Corp has $1.5 billion of cash on its balance sheet, in an apparent effort to demonstrate that it can both afford acquisitions and avoid forced sales. “Our optionality has increased,” he said.

He also attempted to have it both ways when discussing News Corp’s book publishing arm HarperCollins. Thomson described the $2.2 billion price that Bertelsmann recently agreed to pay to acquire Simon & Schuster as “exorbitant”, then went on to argue that this price might well imply a higher valuation for HarperCollins, and therefore for News Corp.

Murdoch-watching is a prime national sport in Australia, where he continues to exercise a disproportionate influence on both politics and culture.

Meanwhile, the details of the implementation of a law in Australia that would force Murdoch’s adversaries Facebook and Google to pay to display news articles could change the value he places on retaining local media assets that are not currently performing well.

But the conference talking points delivered by Murdoch’s lieutenant Robert Thomson will do nothing to dampen speculation that a sale of Australian papers is on the way.