NEWS CORP Q4 FY2024 earnings call

• Gratitude: Acknowledged efforts in freeing Evan Gershkovich.
• Fourth quarter results: Revenues $2.6 billion (+6% Y/Y), profitability $380 million (+11% Y/Y), fourth quarter record.
• Core pillars: Book Publishing, Digital Real Estate Services, Dow Jones driving growth.
• AI partnership: Landmark agreement with OpenAI for professional journalism and provenance.
• Legal actions: Considering legal steps against Gen AI aggregators and advertising bias.
• Foxtel: External interest in Foxtel, reviewing potential transactions while believing in Foxtel's potential.
• Digital Real Estate: REA and REA India growth; realtor.com preparing for housing recovery.
• Dow Jones: B2B strength, 158k digital subscribers added, content licensing with LSEG.
• HarperCollins: Strong quarter with 15% revenue growth, segment EBITDA up over 250%, audiobooks surpass e-books.
• Subscription Video Services: Streaming growth, record paid streaming subscribers, Foxtel broadcast ARPU up 6%, low churn.
• News Media: News UK improved, New York Post profitable, digital audience growth, ongoing restructuring in Australia.

Digital Real Estate Services

• Segment revenues: $448 million, up 21% year-over-year on reported and adjusted basis.
• Segment EBITDA: $135 million, up 25% year-over-year; adjusted segment EBITDA grew 28%. REA had strong growth with 37% revenue increase, REA India also saw growth; Move's revenues down 2% but diversifying revenue base.

Subscription Video Services

• Revenues: $506 million, up 1% year-over-year; adjusted revenues up 2%. Streaming revenues 32% of circulation/subscription revenues (vs 29% prior year). Foxtel Group had nearly 4.7 million closing paid subscribers, record paid streaming subscribers at 3.2 million (+5% year-over-year).

Dow Jones

• Revenues: $566 million, up 4% year-over-year; digital revenue 81% of total. B2B strength with 14% growth at Energy and 12% at Risk & Compliance; added 158,000 digital subscribers; content licensing deal with LSEG.

Book Publishing (HarperCollins)

• Revenues: $512 million, up 15% year-over-year. Segment EBITDA improved over 250% to $57 million. Backlist contributed 62% of consumer revenues; digital sales up 12%, audiobooks (+28%) surpassed e-books for the first time.

News Media

• Mixed performance. News UK improved, News Corp Australia challenged. Revenues: $545 million, down 5% year-over-year. Segment EBITDA: $28 million, down 38% due to challenges at News Australia.

• Fiscal 2025 outlook: Digital Real Estate expects Australian new buy listings growth, REA benefits from price increases; Subscription Video Services plans to scale streaming, monitor sports rights costs; Dow Jones focuses on B2B growth, circulations, and cost efficiencies; Book Publishing expects profit improvements but normalized comparisons; News Media focuses on digital transition, cost efficiencies, and OpenAI partnership revenues.
• CapEx: Moderately higher in 2025 due to digital reinvestment in growth pillars.

• Gen AI aggregators: Legal actions against predatory content aggregators.
• Advertising industry bias: Impact on advertisers and audience access; considering legal options.
• Regulatory and process complexities: Uncertainties around Foxtel strategic review and company simplification process.

Q: On the Foxtel third-party interest, can you say anything about the nature of the transaction that's being contemplated? And are you engaged with 1 or multiple parties? And how does the potential interest here complicate the thinking or maybe even the timeline behind the broader process of the strategic review?

A: Robert Thomson says there are various processes in motion, evaluating overture, has full faith in Foxtel's potential, review continues.

Q: On the OpenAI deal, any more color or things you can talk about around that deal that would help us? Particularly, how much of that value in the deal was around the back catalog, which may not need to be renewed in 5 years' time versus for the ongoing content production?

A: Robert Thomson says impact is tangible, meaningful, working on profitable products with OpenAI, can't go into precise details.

Q: On the Foxtel transaction, assuming some sort of Foxtel transaction goes ahead, do you still expect to be able to recoup all of the Foxtel shareholder loans? And if you can remind us how much is still outstanding. And what do you think is the most likely identity of the buyer that ends up coming through?

A: Susan Panuccio says shareholder loans are just shy of $600 million outstanding; Robert Thomson says process is full and fair, external interest is vote of confidence.

Q: You guys have been investing in Move for some time now, yet the traffic numbers for realtor.com continued to be pretty stagnant. So will there be any changes in the kind of investments you'll be making in Move?

A: Robert Thomson talks about tech improvements, market revival anticipation; Susan Panuccio says will keep investing, cost increases modest.

Q: Just on the Foxtel maybe just on the operational side. Robert, you made some comments about the improvement in Foxtel thus far. I guess when I think about the Investor Day in 2021, there were sort of three major aspirational targets, subscribers, revenue, sort of CapEx targets, things like -- sort of hit 2024, and we're just a little bit short of those targets. I guess I'm clear to hear if there's any update in terms of how you're thinking about those new targets either from a commentative perspective or from a timeline perspective, particularly in light of the strategic review?

A: Robert Thomson says ambitions undaunted, streaming growth; Susan Panuccio says landscape changed, streaming subs at all-time high, CapEx coming down.

Q: On cost as well coming into FY '25. I mean I think this year, we've seen pretty strong cost control across the business. Just wondering how we should be thinking about the cost momentum into '25?

A: Susan Panuccio talks about cost cadence varying by segment, REALTOR reinvestment, News Media cost savings, Dow Jones mid-single digit cost increase, HarperCollins margin consistency.

Q: How is signing the OpenAI deal impact your negotiations with other Gen AI companies? And my second question is, both you and Susan in the press release discussed the divisions -- the three divisions that are the pillars of growth, it makes one thing when we have the other two divisions. Now Foxtel may take care of itself. And I don't know if Rupert and Lachlan are on the call, but I know that News Media is sort of the genesis of the company. But you see the -- it'd be simpler and the company will be growing quicker without those two divisions? So just your thoughts on those two questions.

A: Robert Thomson says prefer to woo rather than sue; Susan Panuccio talks about News Media's role in portfolio complementarity, content value.

Q: I just wanted to ask you if I asking you in prior calls about the simplifying the company, obviously, almost nine months to the day, you made the formal public announcement of looking at the process of simplifying the company we're here nine months later. When I asked you three months ago, you sort of hinted that part of the holdup here with on the regulatory side of things and stuff. I guess my question, honestly, is why was that not anticipated? And also, why would -- did you guys go public with your thoughts that you want to simplify the company nine months? I suppose to just wait longer here and do more homework in the background. Because you talked about before, you have -- you did a lot of work on this before you made the public announcement, and we're still sitting on nine months later. I know a lot of investors are quite eager to see a simplification of the company here, and so we're sitting here nine months into it. It doesn't sound like it's around the quarter. I don't know that for sure, but I guess my question is how much longer is this going to -- the process is going to take? I know it's a complicated company , but is it just simple just the regulatory side of things is what slowing this whole thing down?

A: Robert Thomson says process is ongoing, no specific date, much effort going on, process coincides with Foxtel review.