The view from 40,000 feet: Hard going in the news business... and radio too

News Corp is still facing advertising challenges but subscriptions are growing; more on McGill's Prime exit; and a tough path for Jo Stanley's Broad Radio

Welcome to Unmade, mostly written onboard flight EK1, somewhere between Dubai and London.

I’d never seen border control out of Sydney Airport look so quiet. For a couple of minutes I was the only passenger in that giant hall.

It will take a while to get back into those old travelling routines. In the lounge, there was an audible whimper, followed by a muttered swearword, from the businessman at the next table when he realised he’d left his laptop at security.

Yet even in the early hours of the morning, Dubai Airport felt as busy as ever. The UAE has just kicked off its World Expo, postponed from 2020. Far more than I anticipated, it felt like I was rejoining a world that has been getting on with things without us. You should see the promotional videos featuring Chris Hemsworth dancing with weird robots. It must have been a well paid gig.

Another experience I’d forgotten was that of turbulence. We hit it just as a generously poured glass of red wine was placed in front of me. With it threatening to slosh everywhere, I was forced to throw it back, feeling like a Scout on a roller coaster.

Anyway, happy National Chaos Never Dies Day.

Today’s edition ties up a few loose ends from recent days, including last week’s News Corp quarterly financials, the sudden exit of Prime’s chairman, and attempts to launch a new online radio network for older women.


News, not at the core?

Let’s start with News Corp’s latest quarterly update, which followed on just a few days after the company’s annual report, but offers an additional three months of earnings details, covering July, August and September.

I presume that the company’s global CEO, Robert ‘Dr Seuss’ Thomson outsourced the commentary to his chief financial officer Susan Panuccio, because the language of the update lacked its usual heavy use of alliteration.

One thing to note is that shareholders have been enjoying the ride this year. Although it slipped a little yesterday, the company’s share price is currently tracking close to an all time high since Rupert Murdoch split the company into News Corp and 21st Century Fox back in 2013. It’s currently got a market capitalisation of more than US$14bn.

Although it’s a global company and reports in US dollars, News Corp’s main news operations are concentrated on Australia, the UK and the US. 

For another quarter, the company’s news division made the smallest contribution to its profits. July’s Sydney lockdown, followed by Melbourne a month or so later, both dragged down the company’s newspaper advertising revenue. The Sydney and Melbourne flagships of The Daily Telegraph and the Herald Sun would have been worst hit. 

The division scraped to a profit of $34m on a turnover of $576m. It was an improvement on the same quarter a year before, which during the height of the pandemic slumped to a $22m loss.

But one thing that has changed since then is that the money from the ACCC’s shakedown of Google and Facebook has now started to flow. Without that cash, the quarter would have looked far worse - I wonder whether the news division would have been loss making.

Still, there was more steady progress in digital subscriptions - up from 685,000 digital subscribers to 850,000. That’s impressive, and beating the performance of the company’s UK broadsheets. My guess is that locally The Australian is delivering the most digital subscribers.

It’s also worth noting that News Corp is still in the business of news in some of its other divisions. Its Dow Jones division includes the Wall Street Journal, and saw profits improve from $72m last year to $95m this time round, on a turnover of $444m.

Of most strategic importance to the company right now is the performance of its subscription video segment, which is the Foxtel Group. News Corp owns two-thirds, with Telstra holding the rest. Hopes of getting Foxtel to an IPO (and clearing its debts) rely on the growth story of its streaming services.

Revenues for the video segment were almost flat, with $496m a year ago becoming $510m in the quarter just gone. But profit for the quarter grew far more noticeably - up from $78m to $114m. 

There isn’t enough data in the update to completely understand the jump, but my best guess is that it represents further churn in its lower tier Foxtel broadcast subscribers, and speedy take up in sports streaming service Kayo and entertainment service Binge. In particular, Kayo - which does not lock in monthly subscribers -  was at a low point last year because so much sport had been cancelled.

What the update volunteers is that 1.8m video subscribers are for Foxtel’s broadcast services and 2.1m are for Binge, Kayo and the Foxtel Now streaming service.

Notably, Foxtel Now went backwards - down from 298,000 paying subscribers to 227,000. That’s a hefty fall but explained, I suspect, by a rational decision by subscribers to switch to the cheaper Binge and Kayo.

The opening price for Foxtel Now is $25 per month, but the full package is $129. Binge’s entry level price is $10 while Kayo is $25.

Binge grew from 290,000 to 802,000 during the same period.

Kayo grew from 644,000 to 1.1m.

There’s one other number to keep an eye on in future updates - the company’s cashflow position went backwards, despite overall profits growing from $268m to $410m. Thanks to what it labelled as capital expenditure, the company went from a quarter that put $65m in the bank a year ago, to one where it went backwards by $25m.

If not a red light, then with debt levels quite high, that looks like a flashing amber indicator.

McGill’s mysterious exit from Prime Media

Yesterday’s Sydney Morning Herald threw a little more light on the unusual exit of Prime Media’s chairman Ian McGill after just eight months at the helm.

My first thought at the timing, just a few days before the takeover by Seven West Media was announced, was that he’d been unhappy with the deal and had quit on some sort of matter of principle.

Not so, says Zoe Samios in the SMH, reporting that Prime’s biggest shareholder Antony Catalano demanded McGill’s head after discussing something about the communications between McGill and SWM.

“Multiple sources familiar with the situation said the resignation was the result of an argument between McGill and Catalano, where the latter accused the former of lying about Prime’s earnings and a discussion he was alleged to have had with Seven about its value. In a meeting on October 27, Catalano threatened to spill the board if McGill did not resign, claiming he was the reason a deal had not yet been agreed. Board director Cass O’Connor, who also in the meeting, was installed as chair.”

Like so much in this industry, it reminders me of a Succession plotline. (Warning: Minor season two spoiler ahead…)

Remember how PGM’s CEO Rhea Jarrell got herself fired by the Pierce family when they realised she had been giving Logan Roy the inside track on his takeover bid?

The article also floats the possibility of the Seven-Prime deal being a stepping stone to bringing HT&E (owner of Australian Radio Network) and SWM together.

The more I think about it, the more it occurs to me that the logical mega merger would be between Seven, HT&E and private equity owned outdoor firm QMS. It would be an incredibly complex deal to pull off, but the planets do seem to be aligning.

Broad Radio

This morning will see the release of the metro radio ratings for the penultimate time this year

I’ll be recording some podcast analysis a couple of hours from now.

Meanwhile, this week saw former Fox and Gold presenter Jo Stanley discuss with the Australian Financial Review her plans for Broad Radio.

It’s a radio station targeting older women. It sounds a lot like the rationale for the Vega network which died expensively in 2010.

At the moment, Stanley has been doing a live show streamed on social media including YouTube and Facebook.

It’s a project that’s hard to see a route to profitability.

Without access to broadcast licences, finding the sort of audience size that advertisers would demand would require wholesale behaviour change by listening audiences. Live streamed listening is still small. For instance, the stream of the most recent show in YouTube shows just 28 plays.

And Stanley would then find herself playing in the same space occupied by podcasters, who are already targeting every conceivable niche.

She acknowledged to the AFR that she’s struggled to explain the business rationale to investors.

The project does sound more like a hobby than a business.


If you’ve got thoughts on any of the above, please do drop me a line to letters@unmade.media.

If you missed it on Friday, I also uploaded the second chapter of the audio edition of my book, Media Unmade. You can add the private feed to the Unmade podcast to the app of your choice via the post.

Unmade - by Tim Burrowes
Media Unmade: The New Adventures of Lachlan Murdoch
Listen now (56 min) | In this edition of the Unmade podcast, we share Chapter Two of the audio version my book Media Unmade. The text version of the book is published by Hardie Grant and is available from bookshops and online. Today’s chapter opens in February 2010 at a party in Sydney thrown by Nova shortly after the arrival of new boss Lachlan Murdoch…
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Time for me to let you go about your day.

The radio ratings will drop shortly, and I’ll be recording that podcast in a couple of hours. I won’t spoil the surprise on who my guest is. Suffice to say, it’s somebody who knows what they’re talking about.

And later this week, I’ll also be looking more closely at the list of Australia’s top 50 chief marketing officers, created by the website CMO. I have some thoughts.

If you have a colleague who might benefit from signing up to Unmade, please do let them know. Our growth comes through word of mouth, and you can help with that.

Have a great day.

Toodlepip…

Tim Burrowes

Proprietor - Unmade