The News Corporation (ASX: NWS) share price is plunging today, down 3.76% to $20.45 at the time of writing. It’s a large downwards move for this company’s share price, even if the broader S&P/ASX 200 Index (ASX: XJO) is also having a bad day as well.
So what’s going on with the famous Murdoch-controlled company this week?
What is News Corporation?
News Corp is the media giant owned and co-chaired by former Australian Rupert Murdoch, alongside his son Lachlan. Most Australians would be familiar with News Corp through its tabloid newspapers, The Daily Telegraph, The Herald-Sun and The Courier Mail. A significant stake in online property classifieds company REA Group Ltd (ASX: REA) is also a lucrative asset for News Corp. The company also owns a stake in pay-TV operator Foxtel, as well as in the US newspaper The New York Post and a bevy of UK-based newspapers such as The Sun as well. Significantly, the company also owns the US-based Dow Jones & Company, which publishes the famous investing newspaper The Wall Street Journal, as well as Barron’s magazine.
Why is the News Corp share price plunging today?
The News Corp share price has been on the ascendency for a week or 2 now, ever since the company released its results for the 2020 financial year (as well as for the quarter ending 30 June 2020) early last month. For the first time, News Corp broke down the revenue from its Dow Jones & Company segment, which up until then wasn’t reported separately. Between 6 August and yesterday, News Crop shares were up almost 15%, partly as a result. Such positivity probably stems from the impressive numbers out of the Dow Jones segment. These were up 13% over the quarter ending June 30.
But today’s moves in the News Corp share price are a definite ‘change of mood’ from the market. So what triggered this re-rating? Well, it’s clear investors didn’t really like what they saw in a Dow Jones Investor Day presentation released this morning.
On the whole, it was a very positive report. News Corp outlined how circulation and subscription revenue rose from US$2.7 billion in FY14 to US$3.8 billion in FY20. It also highlighted the strength of its brand compared to its rivals.
A changing media landscape
The only thing that appears to have the potential to spook investors today (in my opinion, anyway) was News Corp outlining how its revenue mix has changed from the 2014 financial year. This includes segments like News Media falling from 53% of total revenue in FY14 to 31% in FY20, as well as subscription video services rising from 6% of revenue in FY14 to 21% in FY20.
Media is one of the industries arguably going through the biggest disruption today, both from an already-present digitalisation trend as well as the ravages of the coronavirus pandemic. Perhaps seeing the vast changes to News Corp’s revenue base in just the past 6 years is behind the sell-off in the News Corp share price today.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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