February 5, 2016 Last Updated 7:19 am

News Corp reports falling revenue in newspaper and book divisions, net income halved in latest earnings report

Morning Brief: eBook sales fall in the UK for the first time as the biggest book publishers raised prices on digital, but as in the US, misinterpret the numbers

News Corp reported its Q2 earnings yesterday afternoon, a very busy day for media news, and reported that revenue fell in both its newspaper and book publishing divisions. Only in real estate services, a segment boosted by last year’s acquisition of Move Inc., owner of realtor.com.

News & Information Services revenue fell 8 percent in the quarter, while Book Publishing revenue fell 5 percent. Both segments are now down for the first six months of News Corp’s fiscal year. Digital Real Estate Services revenues grew 35 percent. But, in the end, net income for the quarter was halved.

News Corp newspapersLike the other major book publishers News Corp reported declining eBook sales, a trend many feel was caused when the big five publishers raised prices on their digital books.

“Revenues in the quarter decreased $23 million, or 5%, compared to the prior year, due to lower e-book sales, negative foreign currency fluctuations and lower revenues from the Divergent series, partially offset by strong sales in General Books resulting from the popularity of The Pioneer Woman Cooks: Dinnertime by Ree Drummond. Digital sales represented 16% of consumer revenues for the quarter,” the company reported.

The News category not only includes print newspaper advertising, but the company’s News America Marketing division, which sells in-store advertising and marketing products. It, too, reported down sales.

But digital was a bright spot, with digital advertising revenues, including at Dow Jones, grew. Digital now accounted for approximately one-third of advertising revenues in the quarter at the division

Like other publishers, News Corp has implement some cost cutting measures.

“We are actively focused on costs. In this past quarter, we implemented a cost reduction program across most of the businesses, which will begin to show benefits this quarter. News.com.au maintained its lead as the number one news portal in Australia. It has become a valuable platform to drive revenues, delivering around 52 million extra visits to our sites last year,” Chief Executive Robert Thomson said in the investor conference call.

“In the UK we are also assiduously reducing costs at our mastheads while renewing direct relationships with advertisers to maximize revenue. We are delighted with the integration of Unruly, the social and viral ad platform we recently acquired.”

The company also pointed to currency fluctuations and a slowing world economy as effecting the company’s performance.

“Macro-economic conditions in most of our markets have not been auspicious, and foreign exchange fluctuations have been particularly volatile, but we believe in the enduring value of our prestigious brands and the sound logic of our digital strategy,” Thomson said.

Note: News Corp is the result of a split in the old company which created two media giants: News Corp for newspaper, books and marketing, and 21st Century Fox for broadcast, film and the like. Unlike many other newspaper companies that were soon off, News Corp is more diversified than, say, Tribune Publishing or Gannett. More importantly, their first major acquisition following their spin off was not another like property but Move Inc. which further diversified the company and is now the bright spot in this quarter’s earnings report.

Last week The Bookseller reported that eBook sales in the UK had fallen for the first time, and like in the US, industry observers are offering up a rather cringe-worthy interpretation of the numbers: digital has peaked, and we told you so.

eBooks-340“For those who predicted the death of the physical book and digital dominating the market by the end of this decade, the print and digital sales figures (see below) from the Big Five for 2015 might force a reassessment,” the trade journal said in its story.

“Somewhat smugly, The Bookseller predicted 2015’s e-book decline in these very pages back in 2013—and endured ire (much of it in digital form, unsurprisingly) at the time. We were attempting to be objective about e-books, acknowledging that they were (and are) an exciting, vital part of the industry—but that they were also just another format, and one that was (and is) in its relative infancy.”

Readers of the trade journal are having none of it, of course, pointing to the fact that the big publishers have raised prices on their eBooks and more and more of the market is being represented by Amazon and other outlets including self-publishers.

“With “for the Big Five” being the key phrase,” wrote one commenter. “Last year I bought much fewer ebooks from them. I even refused this month to preorder the lastest Stephen King. I have done that for some fave authors… until now. No more. Those prices for books that I can’t loan, resell, or trade–now way! The ebook prices went past my comfort zone.”

Photo above: eBook Reader by goXunuReviews used under Creative Commons Attribution 2.0 Generic

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