This is the second diary I have written concerning the troubles at News Corp with the first published back in November when the news leaked out that Rupert Murdoch was in trouble.
Today we gain a clearer picture of the condition of News Corp and the money it is losing.
"Grim", to borrow Rupert Murdoch's adjective, about sums it up. News Corp capped off a miserable week for media companies, with Time Warner and Disney posting disappointing numbers. Admittedly, in reporting a $6.4bn second fiscal quarter net loss, News Corp had some particular problems. A $2.8bn writedown to goodwill acquired through 2007's $5.6bn deal to buy Dow Jones hurt results, along with $5.6bn of other writedowns - primarily to the value of broadcasting licences.
Back in November it was reported that News Corp was anticipated to lose up to 30% in the fiscal second quarter on declining ad revenue and viewership of its affiliates in the United States. Today we learn via the Financial times that the loss of revenues at News Corp were worse than expected.
News Corp on Thursday night forecast a worse than expected 30 per cent drop in operating income this year and unveiled a $6.4bn quarterly loss, in the starkest sign yet of the accelerating advertising and consumer spending downturn shaking the media sector’s biggest names.
Back in May of 2007 News Corp stock was trading at $25 a share as it acquired the Wall Street Journal. In November when I wrote my previous diary the stock suffered a drop of almost 30% in one day in some markets from $13.00 to $8 and change. As of yesterday's close it was trading at $7.45. Now we get a clearer idea of what is going on as News Corp is forced to write down what is knows as "goodwill" or the value it places on the intangible value of a firm that is acquired that is believed to be worth more than was paid for it. In this case, as ad revenues continue to fall old Rupert was forced to concede that he grossly overpaid for the Journal while also writing down the value of his FOX television affiliates..
Rupert Murdoch’s media group took an $8.4bn non-cash writedown to reflect the deteriorating outlook for its television channels and Dow Jones, the Wall Street Journal publisher it acquired for $5.6bn in 2007.
The impairment charge included a $4.6bn writedown of its broadcast licences and a $3.6bn writedown of goodwill in its newspaper group.
Rupert was questioned on the potential that he may still be in the market to acquire the New York Times. His response signals that he has indeed heard what many of here have been saying about him.
Asked whether he coveted the New York Times, he replied that he had "no desire to be an even bigger public enemy or target" by buying America’s most prestigious daily newspaper.
As we learned back in November, Rupert was closing many of his printing operations and consolidating many of the "back office" operations at many of his papers. One thing is certain, rupert plans to continue to cut costs across his businesses.
Mr Murdoch said he was implementing "rigorous cost-cutting across all operations". The group had already taken $100m from Dow Jones’ costs since buying it and cut almost $400m from Fox.
Many observers are now wondering if things have grown so tough that Rupert may be forced to cut the news staff and operations at the Journal as things continue to deteriorate.
As mush as I dislike many of the things Rupert Murdoch has done to American journalism I am reminded that many of the folks that are getting downsized and squeezed at News Corp are just regular folks looking to keep their heads above water and today's news signals that times are getting harder all over.
News Corp is expected to trim jobs at its London and New York newspapers in the coming weeks, company insiders say, as a steep decline in print advertising has forced sharp cost reductions on the news business.
News International, whose papers include The Times, Sunday Times and The Sun, is in the final stages of an efficiency review conducted by the Boston Consulting Group and could cut up to 50 jobs, or some 2.5 per cent of its staff, although new posts may be created.
The Wall Street Journal, which has avoided deep cuts in the newsroom – considered the lifeblood of the organisation – is expected to lose about 25 positions, or 3 per cent of editorial jobs, through attrition, voluntary redundancies and possible compulsory redundancies.
One of the amazing things about Rupert has been his willingness to soak up losses and retain staff at favored papers. We also learned recently that this is also changing.
They are symbolic, however, because Rupert Murdoch’s News Corp has historically spared his favourite properties in spite of heavy losses at some titles. Lachlan Murdoch, his elder son, once admitted that the New York Post lost about $40m a year.
Regardless of the once hoped for foot into the elite print media that the purchase of the Wall Street Journal was to provide with promises of a bolstered reporting staff to broaden its political coverage, the Journal's headcount has remained stable since its purchase in 2007. Now News Corp is freezing salaries on top of considering cutting headcount.
In January, Les Hinton, Dow Jones chief executive, told staff in a memo that the group planned to freeze salaries in response to the economic downturn, in the hope that this would "mitigate future possible job cuts".
Mr Murdoch, who has sought to bolster the paper’s political coverage, has aimed to transform the Wall Street Journal from a business paper of record to a national rival to The New York Times.
Well, it appears that both the Times & the Journal are falling on tough economic times and as much as I would love to see Rupert go down in flames these are truly extraordinary times in the world of mass media and journalism.