News Corp’s digital media business has “evolved” away from its reliance on the “volatile” digital advertising market, its chief executive Robert Thomson told investors.
Good thing, because the company’s ad revenue continues to shrink, according to its Q1 2025 earnings released Thursday (it operates on a different financial calendar than most).
News Corp’s Dow Jones division, which also includes The Wall Street Journal and Barron’s, reported a $6 million decrease in ad revenue for the quarter, a 7% year-over-year drop. That includes a 5% YOY dip in digital ad revenue. Dow Jones’ total Q1 ad revenue was $85 million.
And the News Media division, which includes the New York Post, News Corp Australia and News UK, pulled in $10 million less in ad revenue for the quarter, a 5% YOY decrease. Total ad revenue for News Media was $193 million.
What’s behind the decreases?
For one, advertiser reticence to spend during election season contributed to softness in the financial and tech sectors, Thomson said. The company also saw lower programmatic sales in the quarter.
But the larger effect might be “the blatant biases of ad agencies and ad associations,” which are “boycotting certain media properties” due to “personal political prejudices,” Thomson said.
Blasting brand safety
“The ad heavens are certainly not in equilibrium,” he added, suggesting that agencies and their clients aren’t as aligned as they should be.
Ad agencies’ apparent preference for news publishers that “mistake virtue signaling for virtue” causes them to deny their brand clients reach among News Corp’s audiences, Thomson said.
Plus, at least one of News Corp’s properties in its News Media division, The US Sun, was “bruised by sudden, capricious algorithm changes,” Thomson said, which prompted the company to institute layoffs. Recent platform changes by Google and Meta contributed to The US Sun’s traffic falling by two-thirds, from 95.4 million monthly visits in April 2023 to 34.1 million in August 2024, according to reporting by the Press Gazette.
However, the decreases in ad revenue across both Dow Jones and News Media weren’t cause for concern, he said, since both divisions have seen advertising’s share of revenue shrink over the past decade.
Ads accounted for 38% of Dow Jones’ revenue in 2014, but only 15% of its revenue this quarter. Over the same period, advertising’s share of News Media’s revenue shrank from 35% to 7%.
TV is in better shape. In contrast to News Corp’s digital publishing brands, Foxtel – the Australian cable TV and streaming division that is reportedly up for sale – actually saw its ad revenue increase. Streaming ad revenues, which represent 40% of Foxtel’s total ad revenue, were up 45% YOY, driven primarily by demand for its Kayo sports streaming service.
AI deals
Instead of ads, News Corp’s media business is becoming more reliant on licensing data to generative AI platforms and ramping up paid subscriptions.
Dow Jones’ overall revenues were up $15 million for the quarter, a 3% YOY increase driven by AI licensing and B2B subscription products, including AI-based tools News Corp has developed in partnership with Google.
A good chunk of that extra $15 million likely came from News Corp’s content licensing deal with OpenAI, announced in May. The Wall Street Journal reported that the deal could be worth $250 million over five years.
Thomson declined to offer a detailed AI revenue split when prompted by an investor, citing confidentiality agreements.
He did, however, add that News Corp is suing “the perplexing Perplexity” for allegedly scraping its content without a licensing deal in place.
Subscriptions
Meanwhile, Dow Jones’ subscription revenue increased $23 million, or 5% YOY, for a total of $459 million. That accounts for more than 80% of its total revenue.
But that figure includes revenue from B2B services subscriptions, too. Circulation of Dow Jones publications only increased 1% YOY, with growth in digital subscriptions offset by losses in print circulation.
Dow Jones’ digital-only subscriptions totaled 5.3 million for the quarter, up 15% YOY. Digital-only subscriptions for The Wall Street Journal accounted for 3.8 million of that total, up 10%.
That puts Dow Jones at about half The New York Times’ subscriber count of 11 million (which includes digital-only subscribers and 620,000 print subscribers, who also get digital subscriptions).
However, while subscriptions are trending in the right direction for Dow Jones, things look less encouraging on the News Media side. News Media’s subscription revenue was down $4 million, or 1% YOY.
Looking ahead, News Corp is seeing strong revenue growth from subscription bundles, said CFO Susan Panuccio. Bundling drove 31% of the quarter’s growth in digital subscription revenue, as new subscribers stepped up from the promotional rates they signed up for in the past year to higher payment tiers.
As more of those promotional offers expire, the company expects users switching to higher subscription prices will drive revenue growth for the remainder of 2024.
Update 11/8/24: News Corp clarified that The Wall Street Journal’s subscriber count is part of Dow Jones’ total subscriber count, not a separate pool of subscribers. We also clarified the digital-only subscriber comparison between Dow Jones and The New York Times.
