News Corp. earnings report highlights need for coming corporate crack-up
On a call with Wall Street analysts today, News Corp. chief operating officer Chase Carey said the international media conglomerate's planned split is "our top priority."
And Dave Devoe, News Corp's chief financial officer, said, "We are on plan for the separation to be completed around the end of the current fiscal year," which is in late June. That's one year after News Corp. annouced that it would break itself up into two distinct publicly traded companies—one encompassing television and film assets like Fox News and 20th Century Fox; the other a collection of publishing titles like The Wall Street Journal and HarperCollins.
The company's latest quarterly earnings report, issued this afternoon, paints a clear picture of why News Corp. is so keen on the separation.
News Corp. owes 55 percent of its $1.14 billion year-over-year revenue growth during the third fiscal quarter of 2013 to the company's cable network programming, filmed entertainment and television segment. But the gains were offset by lower revenues in the publishing segment, where quarterly operating income decreased $45 million in the third quarter despite "increased contributions" from its U.K. newspapers, like The Sun and The Times of London.
The company logged an additional $42 million in quarterly losses related to the ongoing scandal that resulted in the 2011 closure of top U.K. tabloid News of the World, down from $63 million during the same period a year earlier, and $25 million in costs related to the pending corporate split, up from $23 million during the previous quarter.
The split is expected to appease shareholders who are frustrated at News Corp's lower-performing publishing properties. In other words, it will relieve the company's cash-cow entertainment brands, soon to be renamed 21st Century Fox, of having to cushion less lucrative assetts on the print- and digital-media side, which will continue to operate under the banner of News Corp.
But it's also expected to put more pressure on the publishing titles to make money. How much longer, the thinking goes, can News Corp. chairman Rupert Murdoch really stomach annual losses of tens of millions of dollars (according to some estimates) on his beloved New York Post, for instance?
Of course that's hardly the only thing Murdoch has to worry about at the moment: Today's results come as he faces renewed calls from shareholders to step down from his role as chairman of News Corp., of which the 82-year-old Australian also serves as chief executive officer.