The coverage of today’s News Corporation results for Q408 is awash with apocalyptic intimations.
But forget about the $8.4bn write-off in asset values for a minute. That’s not a trading loss. It’s a balance sheet phenomenon, triggered by declining share prices and extruded on to the P&L by accounting rules.
Instead, focus on real profits. Here’s what happened YOY to News Corp’s operating income (profit) for the quarter ending 31st December 2008:
- Filmed entertainment: down 72%
- Television: down 92%
- Cable & Satellite: Up 10%
- Magazines: Flat
- Newspapers & information services: Down 10%
- Books: Down 65%
The real trouble inside Murdoch’s empire isn’t yet newspapers (only down 10% in terms of profit) or books (despite the steep decline, it’s a small component of News Corp’s overall business).
Contrary to what you might expect, the real difficulties exist in Hollywood and at Fox Broadcast Network.
News Corp’s operating profit nearly halved YOY during Q4, falling by $600m. Between them, Hollywood and Fox accounted for 85% of the real-world damage to operating profits.
Buried deep inside the release are a few more facts for which Murdoch’s UK employees might be grateful.
BSkyB — 39% owned by News Corp — is swinging emphatically from loss to profit. In 2H08, News Corporation made a profit of $109m on its investment. That’s a lot better than the $129m loss it sustained in 2H07.
Meanwhile, profits at News Corp’s UK operations during Q4 were actually flat YOY in sterling terms.
How come? Circulation revenues were up slightly. Not having to make further investments in print plants also lifted performance.
On the downside, we’re told that ad revenues declined by 10% at the Sun, News of the World, the Times and the Sunday Times.
In the current market, that’s not bad.
By comparison with Fox, where ad revenues are declining by up to 40%, News International looks like a corporate choirboy.
This won’t stop the planned job cuts. But hopefully, it might blunt their worst effects.