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News Corp. Finds Footing as ‘Divergent’ Propels Book Division

May 08, 2014

News Corp. Finds Footing as ‘Divergent’ Propels Book Division

Shailene Woodley in "Divergent." Photographer: Jaap Buitendijk/Summit Entertainment/Everett Collection

News Corp., Rupert Murdoch’s publishing company, is finding its footing as a separate business, with stronger profits from book publishing helping combat the downturn in the ad market.

Profit, excluding some items, was 11 cents a share in the fiscal third quarter, surpassing (NWSA:US) the 3 cents (NWSA:US) analysts estimated on average, according to data compiled by Bloomberg. The company reported $2.08 billion in revenue for the period, which ended March 31. Analysts projected $2.06 billion.

Like many publishers, Chief Executive Officer Robert Thomson is working to transform the company’s print properties into a digital business as well as expand into markets around the globe. In addition to online acquisitions, News Corp. has also sought assets in foreign markets, such as its pending purchase of romance publisher Harlequin Enterprises, which has a foothold in 11 countries and expertise in translations.

Earnings in the book-publishing division rose (NWSA:US) 83 percent to $53 million, leaving out interest, tax, depreciation and amortization, aided by higher e-book sales and the continued popularity of the “Divergent” series.

In “Divergent,” the first book in novelist Veronica Roth’s series, a young woman named Tris lives in a society where people are classified on their virtues such as bravery and intelligence. Tris learns she’s part of a group seen as dangerous and targeted for annihilation. Lions Gate Entertainment Corp. released a film based on the book this year and two movie sequels are planned. New York-based News Corp. sold 8 million “Divergent” books in the quarter.

Digital Profits

E-books rose 46 percent from a year earlier to represent 26 percent of publishing revenue. The digital copies are cheaper to produce than traditional books, helping boost profits.

“No doubt book publishing is transforming successfully to digital sales,” Thomson said on a conference call yesterday following the earnings report.

The news division continued to struggle. Ebitda slid 12 percent to $146 million as advertising revenue weakened. Across all divisions, ad sales fell 9 percent to $952 million.

The company named William Lewis as the new CEO of its Dow Jones division, which includes the Wall Street Journal. Lewis, most recently News Corp.’s chief creative officer, had been interim CEO of the division since January. His predecessor Lex Fenwick was ousted following the tepid reception of a revamped subscription service, a person with knowledge of the matter said at the time.

Shares of News Corp., which also owns the New York Post, climbed (NWSA:US) 1.1 percent to $17.30 in late trading yesterday following the earnings report.

Fox Breakup

Net income fell to $48 million, or 8 cents a share, from $323 million, or 56 cents, a year earlier, when the company had a one-time gain. The adjusted earnings figure left out charges such as restructuring and legal matters in the U.K. newspaper business.

On the conference call, Thomson characterized the quarter’s result as a sign of “significant progress” for the new company, while adding that the advertising market remains unpredictable.

Chairman Murdoch broke off News Corp. at the end of June from his more profitable entertainment businesses that include Fox Broadcasting and cable network Fox News. In addition to owning newspapers, News Corp. held on to an Australian TV business, which includes a 50 percent stake in pay-TV company Foxtel, as well as education startup Amplify and a controlling stake in REA Group, which provides online real-estate listings in Australia.

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. in providing financial news and services.

To contact the reporter on this story: Edmund Lee in New York at elee310@bloomberg.net

To contact the editors responsible for this story: Sarah Rabil at srabil@bloomberg.net Crayton Harrison, Anne Reifenberg


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  • NWSA
    (News Corp)
    • $15.48 USD
    • -0.13
    • -0.84%
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