News Corp is cutting costs at its Australian and British newspapers after a strong second quarter from its digital real estate business failed to offset lower advertising revenue from the news division.
Total revenue at Rupert Murdoch's media giant fell for a fourth straight quarter and chief executive Robert Thomson said the group was aiming to save money across its mastheads, which include The Australian, The Daily Telegraph and the Herald Sun in Australia.
Revenue from the news division in the three months to December 31 was down 8.1 per cent from the same period in 2014 at US$1.4 billion ($2.1 billion).
Total revenue declined 4.3 per cent to US$2.16 billion, but the company said that would have been a two per cent increase had it not been for fluctuating exchange rates. News declined as a proportion of revenue from 67.4 per cent to 64.8 per cent.
"For our Australian mastheads, it was clearly a difficult quarter in advertising and to that extent we've clearly embarked on a cost-cutting programme," Thomson told investors.
Chief financial officer Bedi A Singh said the savings would be seen in the third quarter, although neither he nor Thomson said whether jobs were at risk.
"We are particularly focused on cost reductions and sharing services around News Corp to streamline operations at the newspapers in Australia and the UK," Thomson said.
Earnings, before interest, tax, depreciation and amortisation (EBITDA) at the newspaper division, which also includes The Times and The Sun in the UK and The New York Post, slipped 27 per cent to US$158 million.
Total EBITDA fell 20.5 per cent to US$280 million from US$352 million in the same quarter in 2014.
Earnings from News Corp's book publishing and cable network units dropped 26 and 28 per cent, respectively.
But some of the declines were offset by a 28 per cent increase in earnings from the digital property listings business to US$73 million.
That includes REA, the company behind realestate.com.au, which lifted first-half profit by 28 per cent to A$121 million ($129 million) in the six months to December 31, and says revenue in its Australian operations rose 22 per cent due to improved property listing products.
Foxtel is in line to show full-year EBITDA growth, with News Corp flagging the amount of content available via its Australian pay-TV service in comparison to streaming services such as Netflix.
"Clearly there's a lot of competition in the market at the moment when you look at Netflix and others, but what you need to understand is that Netflix in the US is very different to Netflix in Australia," Mr Thomson said.
"The Australian offering has quantitatively and qualitatively a far lesser offering.
"You might puckishly call it not Netflix, but 'Notflix'."
News Corp's first half earnings have declined 18.5 per cent compared to the first half of FY15, dropping from US$546 million to US$445 million.
News Corp shares dropped 67 cents, or 3.7 per cent, to $17.34 on the ASX.
News Corp numbers,
• Total revenue down 4.3 per cent to US$2.16 billion ($3.26 billion).
• News revenue down 8.1 per cent to US$1.4 billion.
• Total EBITDA down 20.5 per cent to US$280 million.