News Corp. (
) competes with other media conglomerates like Disney (
), CBS (
), Time Warner (
), Viacom (
) and New York Times (NYT) in the media and entertainment
Newspapers (Wall Street Journal, New York Post, The Times, and
others) account for close to 15% of News Corp's stock value by our
analysis. The Wall Street Journal (WSJ) in particular has a strong,
loyal, educated and affluent user base in the U.S. and globally.
The premier business & financial newspaper is taking steps
toward the digital platform, given the declining U.S. newspaper
national print advertising market and increasing consumption of
news & analysis from the Internet spurring growth in both
online & mobile ads.
News Corp. is making the right moves of late. It recently
launched a digital magazine, Daily, designed specifically for the
iPad, and is also recording higher paid subscription through mobile
devices and tablets. While we anticipate WSJ's advertising revenues
will increase to $2.8 billion by the end of our forecast period,
Trefis members predict the ad revenues will reach $3.15
We currently have a
Trefis price estimate of $23.21 for News Corp's
, about 35% above the current market price of $17.25.
WSJ Stands Still Despite Economic Downturn, Declining
Print Ad Market
News Corp's ad revenue growth was significantly subdued in
2007-2008 due to the economic downturn. Coupled with this, the U.S.
newspaper national print advertising market has also declined
steadily - from $7.5 billion in 2006 to $6 billion in 2008.
However, WSJ has been able to hold its ground despite these
headwinds. According to the Audit Bureau of Circulations, while
overall circulation of newspapers in the U.S. has declined, the
Wall Street Journal was actually able to increase its distribution
by almost 2% during the six months ended Sept 30, 2010.
WSJ enjoys strong market position and high credibility among
serious, educated financial news subscribers. In addition, WSJ's
subscriber base is affluent. According to a report, the average
annual income of an employed WSJ subscriber is more than $200,000,
and about 56% of these subscribers represented top management in
their respective firms.
News Corp to Benefit Significantly from its Move to
News Corp is trying to keep pace with competitors such as Time
Warner, which has moved to offering subscriptions to its magazines
like Sport Illustrated and People on connected devices. News Corp
recently launched a digital magazine "The Daily," specifically
designed for Apple's (AAPL) iPad and is optimized for
tablet viewing. This offering includes two subscription plans
(weekly and yearly), interactive pictures with 360 degree images,
sharing of information on social networking sites and recording of
audio comments. (See:
News Corp Launches Digital Magazine, but Stock
Still Depends on "Old Media"
We believe that the shift to online platform will benefit News
Corp immensely in the future. According to PricewaterhouseCoopers'
Global Entertainment and Media Outlook for 2010 to 2014, the
Internet is set to overtake newspapers as the second-largest U.S.
advertising medium by revenue behind television. The report also
forecasts that the online ad business is expected to reach $34.4
billion in 2014 from $24.2 billion in 2009, and that mobile
advertising market in North America will increase 4 times from $414
million in 2009 to $1.6 billion in 2014.
News Corp is definitely doing the right thing by digitizing its
content, given the increasing broadband penetration and rising
consumption of online news. Making news available through several
media like mobile devices and tablets means more advertising
revenues for the news media conglomerate. WSJ recently announced
that it added 200,000 paid subscribers through mobile devices like
the iPad and the Kindle. Subscribers have to pay $4 a week to read
WSJ on their iPad. Assuming that half of these subscribers are iPad
users, News Corp should be making more than $1.5 million a month
only from WSJ subscription on the iPad. A larger number of
mobile-device subscribers also means a vast potential of online
advertising revenues for WSJ.
complete analysis for News Corp's stock is here