The shrinking of Rupert Murdoch’s News Corporation by 1,250 roles after a plunge in profits of almost a third serves as a stark reminder that the billionaire mogul’s abortive attempt to reunite his media empire was built on a mission to protect his weakest publishing assets.Less than three weeks ago Murdoch scrapped his decade-long ambition to reunify News Corp – home to assets including the Sun, Times, the Australian and Wall Street Journal, with the immensely profitable Fox, broadcaster of Fox News and prime NFL games – reluctantly admitting it was “not optimal” after a backlash from investors and his younger son, James.On Thursday, News Corp announced that 5% of its global workforce is to be cut, a move that will result in $130m (£107m) in annual savings, after profits plunged by 30% in the final quarter amid a fall in advertising and a slump in business at its book publishing and digital real estate operations.The unavoidable impact of macroeconomic conditions aside – tech and media businesses from Facebook-parent Meta, Google and Microsoft to Dell and Disney have announced tens of thousands of job cuts – the results will be viewed by some investors as a vindication of opposition to the merger.Investors in Fox, a cash cow that makes more than $3bn in profits annually, had been concerned about being used as a “financial umbrella” to prop up weaker publishing assets that newspaper-loving Rupert is loth to cull.News Corp’s chief executive, Robert Thomson, Rupert’s right-hand man and fellow Australian, said the slump was a blip that was “more ephemeral than eternal”, confidently pointing to the record profit of $1.7bn the company made in its most recent financial year to the end of June.And yet some News Corp investors argue that the business could be worth as much as $23bn, and that its market value is languishing at $12bn because of the drag of underperforming businesses in the portfolio.“Breaking up the News Corp stable is likely to release more value for shareholders in due course,” says Claire Enders, founder of Enders Analysis. “Rupert Murdoch did not have convincing arguments for value add.”Profits in the company’s news media business – the New York Post in the US and newspaper operations in Australia and the UK, which also includes radio operations such as TalkSport and the Piers Morgan-led TalkTV – slumped 47% year-on-year in the final three months of the year. 10-In the UK, where the operations are run by Rebekah Brooks, revenues slumped 10%. Brooks had been angling for a top role if the News Corp/Fox merger had come off.While the company pointed to strong digital revenue growth at the Sun, which is almost back at break even having once been the source of hundreds of millions in profits annually, it also noted another $22m in “higher costs” in the quarter attributed to operations including the expensive running of TalkTV. There, big-name signings include Piers Morgan on a reported £15m a year deal.Soaring newsprint prices also continues to be a huge, and increasing, financial burden with the transition to a digitally led future still some way off – digital revenues still account for just 37% of the total for the division.With Silicon Valley giants such as Google and Facebook under commercial pressure for the first time in tech history, it is unlikely that the hugely lucrative advertising deals trumpeted by News Corp, and other leading publishers, are likely to be renewed on such generous terms.News Corp’s HarperCollins book publishing operation suffered the worst, with profits down 52%.And the digital real estate businesses championed by his elder son, Lachlan, which have been a metronomically reliable source of profits that rocketed during the pandemic-fuelled housing boom, plunged by 28%.“The reforms now under way at our businesses should create a solid platform for future profitability,” said Thomson in a call with investors.Yet amid the carnage of the final quarter Dow Jones, the publisher of the Wall Street Journal and provider of business information services, continues to be a juggernaut pointing the way to a sustainable digital future.Dow Jones was the only division of News Corp to report an increase in revenues in the final quarter and overtook the real estate operation to become the biggest contributor of profits at News Corp.Digital subscriptions at the Wall Street Journal, where the former Sunday Times editor Emma Tucker recently became its first female editor in more than a century, grew by 9% year-on-year to 3.78m. Crucially, 84% of subscribers are digital-only.Analysts estimate that Dow Jones, which Murdoch bought for $5.6bn in 2007, could be worth as much as $10bn if it were hived off.“There will have to be much renewed discipline at News Corp,” says Enders. “We are always sympathetic to protecting plurality (everywhere) but it isn’t an argument the stock market has any time for. There is still time for digital transformation of those titles that can make it.”
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