Rupert Murdoch’s News Corporation has reported a 75% plunge in profits for the financial year ending 30th June 2023, down to £147m million from £598m million the previous year.
However, CEO Robert Thomson remains upbeat about the company’s future prospects, highlighting the “remarkable opportunity” presented by generative AI.
In the company’s latest financial results, News Corp attributed the profit slump mainly to higher international newsprint and sports programming costs, lower book sales, and negative foreign currency fluctuations.
The firm’s News UK division, including newspapers like The Sun and The Times, suffered a decline in print advertising revenue. However, this was partially offset by growth in digital advertising.
Overall earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 15% to $1.42 billion.
But Thomson emphasised the “durability and depth” of News Corp’s revenue streams and its “stringent cost controls” in managing challenging economic conditions.
He suggested inflation easing and signs of stability in housing markets gave “sound reasons for optimism”.
AI Dealings Already Underway
Thomson dedicated a section of his opening remarks on the earnings call to discuss generative AI.
He revealed News Corp is in “active negotiations” with AI and tech firms to establish the value of its unique content and intellectual property for use in AI applications.
This follows a similar deal announced last month between AI startup Anthropic and the Associated Press news agency.
With News Corp having previously secured payments from the likes of Google and Meta for access to its journalism, it is now pursuing compensation from AI companies utilising its content.
While noting the technology’s potential to create new revenue streams and reduce costs, Thomson warned of risks like the creation of sophisticated forgeries if “fake news and deep fakes are a concern”.
He argued the “provenance of the archival base is crucial” in generative AI, emphasising the need for “refreshing daily, weekly, with incremental improvements”.
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Digital Revenue Exceeds Print for First Time
News Corp’s digital revenue accounted for over 50% of total annual revenue for the first time.
Thomson said this momentum was “surely gathering pace in the age of generative AI”. Higher digital subscription revenue in the fourth quarter helped offset an 11.5% decline in advertising.
News Corp’s professional information business, including data platforms like Oil Price Information Service, saw revenue grow by 10%.
Although advertising remains under pressure, peers like New York Times and Fox Corp also indicated ad spend recovering faster than expected.
While profits plunged over the full year, News Corp beat profit estimates for the fourth quarter.
Excluding one-off items, it earned 14 cents per share, exceeding analyst forecasts of 8 cents. Ongoing cost-cutting efforts, such as a 5% headcount reduction, lifted core quarterly earnings by 8% to $341 million.
But total revenue still dropped 9% to $2.43 billion.
Cautious Optimism on Outlook
Summarising the annual results, Thomson highlighted the “durability and depth of our revenue streams”, especially amid turbulent economic conditions.
With signs of easing inflation, plateauing interest rates and improved housing market stability, he expressed “sound reasons for optimism” about coming quarters.
But risks around generative AI were clearly articulated, including the potential for misuse if adequate safeguards aren’t introduced.
While negotiations are underway to establish the value of News Corp’s content, managing issues around fake news, deep fakes, and content provenance will remain crucial.
Although profits fell sharply this year, the rise of generative AI looks set to open up new revenue opportunities.
Combined with more digital subscriber growth, stringent cost control and economic indicators stabilising, News Corp heads into 2023 with cautious optimism. Thomson will be hoping negotiations with AI firms bear fruit while leveraging the technology’s potential across the business.
But content integrity and misinformation risks will require close attention amid this new frontier.
