Expect News Corp’s Revenues To Decline In Fiscal 2020?

News Corporation‘s (NASDAQ: NWSA) News and Information Services, that derives revenues from the sale of advertising, circulation, and subscriptions, is expected to contribute $4.6 billion to News Corp’s fiscal 2020 (year ending June 2020) revenues, making up 47% of News Corp’s $9.7 billion in revenues for 2020. The News and Information Services contribution is about twice that from Subscription Video Services, where revenue is derived from monthly affiliate fees received from pay-TV providers based on the number of subscribers and advertising.

• NWSA added over $2 billion to its revenue base from fiscal 2017 and 2019, led by sharp growth in the Subscription Video Services and Digital Real Estate Services segments.
• Inorganic growth strategies, such as important business combinations – Foxtel and FOX Sports – along with key acquisitions – Smartline, Hometrack, and Opcity – led to healthy revenue growth in recent years.
• However, revenue is expected to decline by 3% to $9.7 billion in 2020, due to lower print advertising revenue and book sales. Also, a weaker Australian dollar and the soft housing market could negatively impact the company’s revenues.

We have created an interactive dashboard – How Does News Corp Make Money?, where we discuss News Corp’s business model, followed by sections that review past performance and fiscal 2020 expectations for News Corp’s revenue drivers and competitive comparisons with CBS, Netflix, and Disney.

Total Revenues have increased from $8.1 billion in Fiscal 2017 to $10.1 billion in Fiscal 2019 but could decline 3% to $9.7 Billion in Fiscal 2020

Revenue growth of about $1.6 billion between FY 2017 and FY 2020 to be driven by about $1.7 billion from Subscription Video Services, $230 million from Digital Real Estate, $80 million from Book Publishing, and -$450 million from News and Information Services.

(1) Revenue from News and Information Services to decline 9% (about -$450 million) between Fiscal 2017 and 2020, with its share of Total Revenue expected to be about 47% by 2020

• After remaining almost flat in 2018, revenue decreased in 2019, led by currency fluctuation, weakness in the print advertising market, and lower revenues at News America Marketing (which the company is looking to sell).
• Segment revenue is expected to see a further decline in 2020, driven by changing consumer preferences with the advent and growth of digital media.
• News and Information Services contributed 57% of total revenue in 2018. This share is expected to go down to 47% by 2020.

(2) Revenue from Book Publishing to grow 5% (about $82 million) between Fiscal 2017 and 2020, with its share of Total Revenue expected to be about 18% by 2020

• Though revenue increased in FY 2018 due to agreement for J.R.R. Tolkien’s The Lord of the Rings trilogy, it remained almost flat in FY 2019.
• Segment revenue is expected to decline slightly, as consumers are moving toward digital platforms and e-books.
• Book Publishing contributed 19% of total revenue in FY 2018. This share is expected to go down slightly to 18% by 2020.

(3) Revenue from Digital Real Estate to grow 24% (about $227 million) between Fiscal 2017 and 2020, with its share of Total Revenue expected to be about 12% by 2020

• Segment added over $0.2 billion in revenues from FY 2017 to 2019, due to the acquisition of Opcity, market-leading real estate technology platform, and Smartline and Hometrack acquisitions, which are mortgage broker companies.
• Revenue is expected to see marginal growth in the near term (as against sharp rise in 2018), due to the weaker Australian dollar and soft housing market.
• Digital Real Estate services contributed 13% of total revenue in FY 2018. This share is expected to go down slightly to 12% by 2020.

(4) Revenue from Subscription Video Services to grow by about $1.7 billion between Fiscal 2017 and 2020, with its share of Total Revenue expected to be about 23% by 2020

• The segment added over $1.7 billion in revenues in the last two years, benefiting immensely from combining Foxtel Group and FOX Sports. The combined entity, in which NWSA has a 65% share, helps to leverage the two companies’ media platforms and content to improve services for consumers and advertisers.
• However, we expect the revenues to remain flat in 2020, as Foxtel Now streaming service and Foxtel’s broadcast and commercial subscriber saw weak results in the first half of fiscal 2020 so far.
• Subscription Video services contributed 11% of total revenue in FY 2018. This share is expected to go up to 23% by 2020.

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