News Corp. lost $2.1B on publishing side

Filing with SEC gives possible investors peek at financial challenges

New York TimesDecember 21, 2012 

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 Corp. said its publishing businesses lost $2.1 billion in the fiscal year ending June 30.

The disclosure, filed Friday with the Securities and Exchange Commission, comes 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 Corp. and include such newspapers as 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-TV assets.

The entertainment company, which will be called Fox Group, will include 20th Century Fox studios, Fox Broadcasting, and such cable channels as Fox News and FX. That company has annual revenues 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 News of the World, the British tabloid shut down in July 2011 after revelations of widespread phone hacking. Revenue at the publishing business fell to $8.65 billion in fiscal 2012, from $9.1 billion a year earlier.

The SEC 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 Corp. in the report, will look like financially when the spinoff is complete 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 papers “could damage New News Corp.’s reputation and might impair its ability to conduct its business.”

As civil lawsuits related to phone hacking are filed in Britain, News Corp. 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 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 Corp.,” said Murdoch, who serves as chairman and chief executive of the current combined News Corp.

Fox Sports and Foxtel had revenues of $3.6 billion and $2.5 billion, respectively, in 2012. Those results were not included in the publishing company’s 2012 earnings but will contribute to the new company’s bottom line.

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