BOTW: Foxtel's streaming numbers fall as News Corp makes job cuts; the Twitter algorithm finally snaps; A big drop on the Unmade Index
BOTW: Foxtel's streaming numbers fall as News Corp makes job cuts; the Twitter algorithm finally snaps; A big drop on the Unmade Index
Welcome to Best of the Week, the first half of which was written at the Movenpick in Hobart on Friday, in a room free of annoying distractions like a view (or indeed a proper desk). It’s been an interesting case of expectation…
… versus reality…
Still, at least the wee orange stool was present.
I was in Hobart for a couple of days of meetings and Wrest Point’s 50th birthday party last night. It was quite the bash, which made the second half tougher to write this morning.
Actually, I have no idea what the medal was for. But Anthony Callea deserved one. As someone who got to Australia after his discovery on Australian Idol in 2004, I hadn’t realised what a fantastic voice he has.
Today: News Corp’s rough quarter; Elon finally breaks Twitter and a bruising session for ASX media stocks.
Wind turns for News Corp
Being dual listed in New York and Sydney, News Corp usually kicks off ASX results season, which begins properly next week.
Yesterday morning’s announcement from News Corp has set a tone for a media industry entering a tough period. Along with the financial results update, there was a seperate announcement of layoffs - about 5% of the company’s global workforce, or 1,250 positions. It should save the company about $130m a year.
Compared to the level of global job cuts at the big tech players, and at Disney this week, it could have been worse.
Indeed it has been worse. Back when News Ltd (as it was then) under Kim Williams made a big rounds of cuts in 2012, the company didn’t publicly share the number of people going. It was actually about 10% of the local workforce, or 1600 people that time round.
It probably wasn’t so much the result for the quarter which will concern the market, as the briefing from CEO Robert Thomson which followed. During the investor call he revealed that the market decelerated further as Christmas approached. This current quarter is likely to be worse, was his signal. That won’t just be a News Corp problem, it will be a media industry problem.
The company’s global EBITDA profits for the quarter were down by 30% compared to the same quarter a year before, to US$409m. Revenue fell by 7% from US$2.7bn to US$2.5bn. Across the half, profits fell by 24% and revenue by 4%.
The falls for the company were particularly drastic in the company’s news media division. In the main that division consists of the Australian news operation (including the city mastheads of The Telegraph, the Courier Mail and the Herald Sun, plus The Australian) and the British operation including The Times and The Sun, along with the New York Post.
News media profits fell by 47% to $59m, while revenues fell by 9%.
However, it’s worth adding a little context. News Corp’s situation is not as drastic as those headline numbers might suggest. Some of the fall is because the company reports in US currency, so the weak Australian dollar and UK pound makes the number look worse. (Thanks, Liz Truss.)
And the quarter a year ago the numbers are being compared to represented a bounceback after Covid so they’d had a jump.
Since the 2020 financial year when Dow Jones was split out of the news media division, we’ve seen far worse for the company’s news division.
Helped by Christmas retail advertising, News Corp’s second quarter - the one reported yesterday - is typically the strongest of the year. That was still true.
Unfortunately the next two quarters are usually the toughest. In a slowing economy, that’s going to be hard work.
There were also numbers for Foxtel Group. Again the investor call was worth hearing, not least because Thomson remains bullish about the company’s transition from subscription broadcast to a streaming player. Foxtel has gone from a “complicated situation” to a “genuine opportunity”, Thomson said on the call. “And we will be opportunistic with that opportunity.”
News Corp owns two-third of Foxtel, with Telstra the minority shareholder. When the IPO window reopens, that may well be the opportunistic opportunity in question. Foxtel is navigating the transition from the relatively easy cash generation of satellite TV to the tighter margins of streaming as well as any in the world.
Having expensively retained AFL, NRL and cricket, sport platform Kayo’s prospects are solid, albeit with a much higher cost base ahead, as the new deals kick in.
And if the government’s plan to enforce production quotas on streaming players deters Warner Bros Discovery from launching locally, that could help Foxtel and Binge retain the HBO content deal after all.
HBO’s House of the Dragon helped Binge continue its growth last quarter, up to an impressive 1.375m paying subscribers - a high point for the service. Kayo fell for a second quarter, to 1,126,000 subscribers. With the new NRL and AFL seasons both kicking off again next month, this quarter should see Kayo grow again.
The company stopped sharing its subscriber numbers for news platform Flash in this week’s update. Flash is the light blue line bumping along the bottom of the graph above. It only reached 15,000 subscribers last time round.
However, there is an indicator that Foxtel Group’s streaming subscriber growth may be reaching its upper limits. For the first time since the launch of Binge ten quarters ago, the company’s overall number of paying streaming subscribers has fallen.
However, a football-fuelled bounceback in Kayo numbers this quarter will likely take the overall streaming subscriber number back into growth.
Meanwhile (with the one exception of the worst quarter of the pandemic) revenue for the Foxtel Group is at an all time low of $462m for the quarter.
However, by pushing up prices, Foxtel has managed to maintain profits. The last quarter’s $90m profit is down on Q1’s $111m, but it’s up on the quarter last year’s $86m.
Overall, the picture for News Corp is of a company managing its way through a lot of headwinds. It’s not the only one. Next week we’ll begin to find out how the competitors are doing.
Leading the charge in retail media
Cat McGinn, the curator of RE:Made - Retail Media Unmade writes:
There are now less than three weeks to go until Unmade runs APAC’s first dedicated retail media event. RE:Made - Retail Media Unmade takes place on March 2. You may have heard us mention it.
The full program will be announced next week.
In the mean time, I can tell you today about our opening panel.
‘Leading the Charge’ will feature Teresa Aprile, CEO and co-founder of Brandcrush, Graham Christie, CEO and co-founder of the Changing the Game Academy, Bel Harper - executive group director for product strategy at Ooh Media, and Adam Skinner, COO of CitrusAd.
Brandcrush is a retail media technology which helps streamline all in-store, out-of-store and online media activations. Before launching Brandcrush, Teresa spent two decades developing leading business growth strategies in both FMCG and B2B industries.
Meanwhile, Graham Christie specialises in business transformation. He’s the co-author of the business book Changing the Game.
Bel Harper is a 25-year veteran of the out of home industry. At the end of last year, Ooh Media launched its retail media play, Reooh.
And Adam Skinner helps lead the Queensland headquartered CitrusAd which provides the technology to turns online retailer websites into targeted, revenue generating digital advertising platforms.
The panel will set the scene for the day, focusing on the key considerations needed to transform businesses, for both retailers and suppliers, in order to capitalise on the exploding retail media opportunities.
Tickets are on sale now. And look out for our big announcement next week
Twitter’s spiral
After some overdone predictions that Twitter would die quickly once Elon Musk fired most of the engineers, we saw more evidence this week that it is instead dying slowly.
For a few weeks now the algorithm has been getting worse. My average time for each session on the platform before I lose interest has halved. The local tweets that would interest me and that I used to see are no longer being surfaced whether I follow people or not, overwhelmed by inflammatory rightwing, anti-vax and transphobic commentary, with an algorithm which now tilts towards US-centric politics over local content.
Twitter has become buggier and slower. And this week it seized up entirely for several hours. There was some excellent behind-the-scenes reporting by Platformer yesterday, which is worth a read.
Platformer reports that Elon Musk fired an engineer because his own tweets aren’t getting the visibility they used to, and the engineer dared to suggest it was because people were losing interest in his antics. How on brand.
Campaign of the Week: QVB World Pride
As regular readers will know, in each edition of BOTW, our friends at Little Black Book Online highlight the most interesting marketing campaign of the week
LBB Australia reporter Delmar Terblanche writes:
"World Pride approaches, centred down under. Cities all across the nation are celebrating in their own way, and Sydney is absolutely no exception.
In an absolutely delightful twist of wordplay, the QVB has been renamed in honour of pioneers of LGBTQ+ rights throughout the 20th century. Interviews with the subjects accompany an installation smack dab in the middle of the building, which features portraits of these honoured folk, suspended from the ceiling. It's a touching reminder of an oft-neglected history, and a celebration of an altogether different kind of 'queen'.
You can see the full details of the TBWA\Fabric project at LBB Online
A red day for the Unmade Index
It was a brutal day on the Unmade Index of ASX-listed media and marketing companies, with a fall of 4.16%, one of the biggest drops since the index began more than a year ago.
The drop took the index back below the 700-point barrier and came on a day when the wider share market was mostly flat.
The change in sentiment was likely triggered by News Corp’s disappointing quarterly earnings as the start of the day. News Corp stocks fell 6.88% yesterday.
Nine, which has most in common with News Corp with exposure to news publishing, streaming and television, fell by 5.88%.
Time to let you enjoy your weekend. By the time you get this I’ll be enjoying something delicious from an amazing bakery at Battery Point. And then I’ve an appointment with every roadworks red light between Hobart and the other end of the island. It’ll be a long drive.
Abe Udy and I will be back on Monday with Start the Week.
See you then.
Toodlepip...
Tim Burrowes
Publisher - Unmade
tim@unmade.media