Murdoch’s publishing arm loses $2.1 billion
News Corp. filings blame write-downs, a drop in newspaper ad sales and legal costs.
Rupert Murdoch’s publishing empire, which includes the Wall Street Journal, would have recorded a $2.08-billion loss during the last fiscal year if it had been a stand-alone company.
The loss was attributed to write-downs in the value of publishing titles as well as declines in newspaper advertising and legal expenses stemming from the phone hacking scandal at News Corp.’s British newspapers.
News Corp. made the disclosure in regulatory filings Friday as it prepares to cleave itself into two separate publicly traded companies: the new News Corp., which will include newspapers and HarperCollins book publishing; and the Fox Group, which will boast the lucrative television properties, including Fox, Fox News Channel, regional sports networks and the 20th Century Fox movie studio.
Friday’s filing underscores the monumental challenges facing Murdoch
and Robert Thomson, who is stepping down as editorin-chief of Dow Jones and managing editor of the Journal to become chief executive of the new publishing company. Their mission will be to fortify the print business so that it will survive and thrive in the digital age.
Until now, Murdoch’s newspapers have been buffered from the ravages of the revenue declines decimating smaller newspaper companies. Murdoch’s print holdings made up part of a huge conglomerate that draws most of its profit from its sprawling television operations.
Going forward, Murdoch’s papers will not have that advantage.
The breakup of News Corp., announced in June, is expected to be completed next summer. Current investors will get shares in both companies.
Friday’s filing provided a snapshot of the financial health of News Corp.’s publishing business. If it had been a stand-alone company, the publishing unit would have generated $8.65 billion in revenue for fiscal 2012, down from $9.09 billion in fiscal 2011. The net loss in the last fiscal year followed a $678-million profit for fiscal 2011.
News Corp. had previously disclosed the non-cash impairment charges without shedding much light on which newspapers were particularly hard hit. The company said it recorded goodwill write-downs and impairment charges totaling $2.6 billion during its fiscal fourth quarter, which ended June 30.
“These impairment charges were primarily the result of adverse trends affecting several businesses in News Corp.’s News and Information Services segment, including secular declines in the economic environment in Australia,” Friday’s filing said.
News Corp. has print operations on four continents. It is heavily invested in Murdoch’s native Australia, where it owns national, re- gional and dozens of community newspapers.
“Australia in particular has experienced weakness in newspaper advertising ref lecting a combination of a softening economy and declines in paid circulation,” the filing said.
Newspapers are struggling amid shifting reader habits, migration to the Internet and a drop in advertising dollars. Newspapers in the U.S. collected nearly $21 billion in advertising last year, but that’s down more than 50% from 2006.
News Corp. plans to make acquisitions for the publishing entity, the filing said, without illuminating. The 81-year-old mogul is interested in buying the Los Angeles Times, and reportedly has expressed interest in the Simon & Schuster book publishing business owned by CBS Corp.
Thomson, 51, will make a base salary of $2 million annually in his new position as chief executive of the new publishing company. The Australian native also will be entitled to an annual bonus, with the target amount of $2 million.
Murdoch will serve as chairman and chief executive of the Fox Group as well as executive chairman of the new News Corp. His compensation hasn’t been decided, according to the document.
“We expect that his overall compensation for both roles will increase modestly compared to his current total compensation,” the filing said.
Murdoch collected $30 million during News Corp.’s last fiscal year, a 10% cut from the previous year. His compensation was clipped because of the phone hacking scandal in Britain.
Also on Friday, British actor Hugh Grant, one of the targets of the phone hacking at the now-defunct News of the World tabloid, said in a Twitter message that he had settled his lawsuit with News Corp. for an undisclosed sum. “Just in time for Christmas, Rupert,” Grant tweeted.