Potential investors got a glimpse of the financial challenges that Rupert Murdoch’s soon-to-be spun-off publishing company could face. In a regulatory filing, News Corporation said its publishing businesses lost $2.1 billion in the fiscal year that ended June 30.
The disclosure was filed to the Securities and Exchange Commission on Friday, as the media conglomerate prepares to split its publishing assets from its more lucrative entertainment segments. The new, stand-alone company will retain the name News Corporation and include newspapers like The Wall Street Journal, The New York Post and The Times of London; the HarperCollins book publisher; and a handful of fast-growing Australian pay-television assets.
The entertainment company, which will be called the Fox Group, will include 20th Century Fox studios, Fox Broadcasting and cable channels like Fox News and FX. That company has annual revenue of more than $23 billion.
The losses in the publishing business came largely from $2.8 billion in impairment and restructuring charges, mostly related to the closure of The News of the World tabloid in Britain, which was shut down in July 2011 after revelations of widespread phone hacking. Revenue at the publishing business fell to $8.65 billion in fiscal year 2012, from $9.1 billion a year earlier.
The S.E.C. Form 10 filing moves the company closer toward the split and gives shareholders a better idea of what the stand-alone publishing company, called “New News Corporation” in the report, will look like financially when the spinoff is completed in mid-2013.
The company warned investors that “newspaper and advertising circulation revenues have been declining, reflecting general trends in the newspaper industry.” In addition to industrywide headwinds, the company said illegal activity at its British newspapers “could damage New News Corporation’s reputation and might impair its ability to conduct its business.”
As additional civil lawsuits related to phone hacking are filed in Britain, News Corporation said it “is not able to predict the ultimate outcome or cost associated with these investigations.”
The fallout from the phone hacking scandal, and an investor base that increasingly expressed disapproval of the newspaper business, prompted Mr. Murdoch to announce the split of his $60 billion media conglomerate in June.
“The filing of the Form 10 is another important step forward in the evolution of our company and in the establishment of two independent global leaders in Fox Group and the new News Corporation,” said Mr. Murdoch, who serves as chairman and chief executive of the combined News Corporation.
Earlier this month Mr. Murdoch said Robert Thomson, a confidant and the former managing editor at The Wall Street Journal, would serve as chief executive of the new News Corporation. Mr. Murdoch will continue to serve as chairman of both companies and chief executive of the Fox Group.
In his new role Mr. Thomson, 51, will have a base salary of $2 million with a performance-based $2 million bonus, according to the filing.
In addition to hundreds of newspapers on several continents, the publishing company will also include Australia’s RealEstate.com.au; Fox Sports in Australia; 50 percent of Foxtel, the No. 1 pay-TV provider in Australia; and 44 percent of Sky Network Television in New Zealand. Analysts expect those businesses to drive profits and support some of the weaker newspapers.
Fox Sports had revenue of $3.6 billion and Foxtel of $2.5 billion in 2012. Those results were not included in the publishing company’s 2012 earnings, but will contribute to the new company’s bottom line.
Article source: http://mediadecoder.blogs.nytimes.com/2012/12/21/in-filing-news-corp-says-publishing-business-showed-2-1-billion-loss/?partner=rss&emc=rss
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