News Corp. used its third quarter investor call as a platform to continue its attack on the two dominant tech platforms whose outsized influence and practices are having a “deleterious effect” on journalism.
Chief Executive Robert Thomson expressed concern about the opaque role of algorithms, the secret, behind-the-scenes calculations that determine what information consumers see. He called for the creation of an Algorithm Review Board to monitor for abuse.
“These algorithms are already potent, but they are destined to be much more formidable, and their abundant potential to skew news and skewer customers needs to be better understood and monitored,” Thomson said. “And an Algorithm Review Board, or ARB, would be particularly useful in the oversight of companies, which have horizontal dominance, and use that leverage to dominate a vertical, such as Amazon with audiobooks and, potentially, Facebook with dating.”
News Corp. has been sparring with Silicon Valley’s tech giants, arguing they exert a choke-hold over news organizations. Just last week, the company filed a complaint with an Australian regulator claiming Google, Facebook and Apple are engaging in anti-competitive practices that are damaging journalism.
In its complaint, News Corp. said Facebook and Google directly influence three-quarters of internet traffic and exert “a strong influence on how readers access and engage with News Corp. Australia’s content.” That’s where the news organization first floated the idea of an algorithm review board.
In the U.S., Murdoch has floated the idea of Facebook and Google paying a cable-TV like carriage fee to legitimate news providers.
During the investor call, Thomson applauded Google for replacing its “first click free” policy, which required publishers to offer three free articles a day before readers would encounter a pay wall. He thanked Google CEO Sundar Pichai helping end a practice that he said punished high-quality journalism.
“It is, however, just a first step on the pathway to provenance,” Thomson said.
Thomson said News Corp. and other publishers have been in discussions with Facebook about the importance role of trusted news organizations in an environment that’s been polluted by fake news and ill-informed, malicious gossip. The world’s dominant social network at least talks a good game, he said, professing “concern about virtue and veracity.”
“We are confident that a renewed focus on provenance and on integrity will benefit our mastheads, our journalism and our advertising clients, who are learning more each day about the potential dangers of digital,” Thomson said. “Challenging these dominant digital platforms is important for our businesses, but also meaningful for the societies in which we operate.”
News Corp. said costs associated with Australian pay TV giant Foxtel’s merger with Fox Sports Australia dragged News Corp.’s earnings into the red in its third quarter.
The company said it wrote own about $1 billion in connection with the deal, which Thomson said would position the company in the rapidly expanding streaming business market, with sports offerings and premium entertainment and news content.
That resulted in a net loss of $1.94 a share or $1.1 billion in the March quarter.
Adjusting for this one-time expense, News Corp. reported per-share earnings of 6 cents, meeting the consensus estimate of analysts surveyed by Thomson Reuters. News Corp. brought in $2.1 billion in revenue for its March quarter, up 6% from a year ago and besting forecasts of $1.99 billion.
Thomson touted growth in News Corp.’s non news businesses, its digital real estate services and book publishing. Growth there helped offset by declines in print advertising and lower revenues from its North American news operations.
“Starting with the fourth quarter, the combination of the digital real estate services and cable TV businesses is expected to account for significantly more than half of our profits,” Thomson said. “The Foxtel-Fox Sports Australia consolidation is also expected to make circulation and subscription revenues the biggest revenue stream for News Corp for the first time. This should give us more protection against the vicissitudes of a volatile advertising market.”
News and Information services reported revenue of nearly $1.3 billion in the quarter, up 2% from a year earlier, thanks to gains in News UK and at Dow Jones. The company reported circulation and subscription revenue gains –and strong digital subscriber growth at The Journal.
Despite these gains, the news segment reported earnings of $85 million, a drop 31% from a year ago — primarily due to higher expenses in the U.K.
Book publishing revenues of $398 million in the quarter, up 6% from a year earlier, thanks to higher sales in general and Christian publishing. News Corp. singled out such titles as The Woman in the Window by A. J. Finn and The Rock, the Road, and the Rabbi by Kathie Lee Gifford.
Digital real estate revenues in the quarter increased to $279 million, up 27% compared to the prior year, primarily due to the continued strong growth at REA Group, a digital advertising company that operates Australia’s leading property websites.
The company, founded by media mogul Rupert Murdoch, holds such major media assets as The Wall Street Journal, The Times of London and Dow Jones and publisher Harper Collins.