News Corp gets bad press with $1.6bn loss

By Rebecca Burn-Callander, managementtoday.co.uk, Thursday, 09 August 2012 12:08PM

The media leviathan has reported dire fourth quarter results, mostly due to the poor performance of News Corp's publishing business, which includes The Sun and The Times.

Rupert Murdoch’s outfit has had a very bad few months: News Corp made a $1.55bn loss for Q4, down from a profit of $683m last year. Streuth!

There are a number of factors gnawing down profits at the group. Firstly, revenues are down, falling 6.7% on last year to hit $8.4bn for the quarter. The publishing business is the runt of the pack, reporting a 48% drop in operating income to $139m. Surprisingly, advertisers in the UK and Australia aren’t so keen to place their brands in News Corp’s titles…

A litigation charge relating to the e-book settlement in Harper Collins has also eaten into earnings, with the eurozone crisis adding additional pressure (Sky Italia is looking rather mangy at the moment). And there’s the cost of launching Amplify, News Corp’s new education unit. This is an expensive new venture – it’s already swallowed up $80m – and is tabled to cost around $180m in operating expenses in the next fiscal year.

Which brings MT neatly on to the number one predator on the balance sheet: a $2.85bn charge for non-cash restructuring and impairment charges. This is the cost of separating News Corp’s publishing and entertaining assets – shareholders are keen to split the two, in order to offload the tainted newspaper business post-Hackgate (if profits don’t suddenly pick up, that is).

Even Rupert Murdoch might rue the day he ever launched News of the World. Not only has the hacking scandal lost him a lucrative BSkyB acquisition, it has also cost the company $224m in related fees and charges, $57m of which has been booked on the last quarter. And the reputational damage is by no means over yet.

Not even growth at News Corp’s cable networks could offset the decline elsewhere in the business. And there is a note of desperation in Murdoch senior’s statement: ‘News Corporation is in a strong operational, strategic and financial position, which should only be enhanced by the proposed separation of the media and entertainment and publishing businesses.’ It needs more than ‘enhancing’ by the looks of things…

This article was first published on managementtoday.co.uk