News Corporation

Good day and welcome to the News Corp fourth quarter and full fiscal year 2019 conference call. Today's conference is being recorded. Media is invited on a listen-only basis. At this time, I would like to turn the conference over to Mike Florin. Please go ahead, sir.

Thank you very much, Karina. Hello, everyone, and welcome to News Corp's fiscal fourth quarter 2019 earnings call. We issued our earnings press release about an hour ago, and it's now posted on our website at newscorp.com. On the call today are Robert Thompson, Chief Executive, and Susan Panuccio, Chief Financial Officer. We'll open with some prepared remarks, and then we'll be happy to take questions from the investment community. This call may include certain forward-looking information with respect to News Corp's business and strategy. Actual results could differ materially from what is said. News Corp's Form 10-K and Form 10-Q filings identify risks and uncertainties that could cause actual results to differ and contain cautionary statements regarding forward-looking information. Additionally, this call will include certain non-GAAP financial measurements, such as total segment EBITDA, adjusted segment EBITDA, and adjusted EPS. The definitions and GAAP to non-GAAP reconciliations of such measures can be found in our earnings release. With that, I will pass it over to Robert Thompson for some opening comments.

Thanks, Mike. Newscore completed fiscal year 2019 in a strong position. with revenues increasing 12% and profitability rising 16% against the prior year, reflecting not only the consolidation of Foxtel, but also the continued strength and development of core segments of the company, including book publishing and digital real estate services, and substantial progress in the digital transformation of our news and information services businesses. The concerted focus on our primary revenue drivers, including the creation and distribution of premium content, was reflected in audience growth across News Corp's mastheads and digital properties. We are also acutely focused on simplifying the structure of the company and making clear the full value of the sum of our parts. To that end, we recently announced a strategic review of News America Marketing. including a potential sale of the business. We have received material interest and the process is progressing rather well. There is clearly a fundamental shift underway in the content landscape. And one consequence, other than intensifying regulatory scrutiny of big digital, is a gradual transference of value to content creators who, over the past decade, have lost influence and revenue to the digital distributors. With Rupert and Lachlan Murdoch's encouragement, News Corp has been advocating vigorously on behalf of journalists, journalism, and the protection of intellectual property, and that intense, sometimes solitary, advocacy has begun to pay dividends for journalism and, importantly, for our shareholders. We are still at a relatively early stage of this tectonic transformation. but there will surely be an ongoing transfer of value to creators in coming years, which should be of great benefit to News Corp and its investors. We have begun partnering with companies such as Apple and Twitter, which recognize the value of our content, and discussions are underway with other digital companies, though I am not at liberty at this moment to provide more detail. What I can say, is that the terms of trade and the tenor of our talks are now vastly different to even a year ago. In fiscal 2019, the news and information services segment posted higher profitability, which was spurred by the rapid rise of digital paid subscribers. The Wall Street Journal, the Times and Sunday Times, and the Australian all grew subscriber volumes at a healthy rate, with digital now accounting for the majority of their subscribers. There is an emerging subscription sensibility among consumers, which is obviously to our benefit, but we are also conscious of the need to provide ever better service to those subscribers who rightly have high expectations for their digital experience. Dow Jones is a media business that we believe has a distinctive ability to prosper in the digital age. The Wall Street Journal recorded 14% growth in digital-only paid subscribers, who now account for over 69% of the total subscriber base of 2.6 million. Circulation revenue trends at Dow Jones remained robust, rising 7% for the year, well above the rate of the New York Times and others in the industry. Since separation in 2013, Dow Jones consumer circulation revenues have grown more than 40%. And within that category, digital revenues at the Wall Street Journal have expanded by almost 150%. Advertising trends improved in Q4 for the Wall Street Journal. And in July, both print and digital advertising revenue were higher than a year earlier. As we look to the future... we believe that Dow Jones can attract a significantly larger subscription base via direct subscriptions and through content partnerships. We have particular optimism about the international potential of Dow Jones, given the relatively low non-US share, 12% of subscribers today. We are also seeing the increasing ability of the Dow Jones team deploying customized artificial intelligence to sell specialist financial news and data products to professional and wealthy individual subscribers. The Dow Jones professional information business posted revenue growth for the second consecutive year after a period of transition, overcoming currency headwinds. An important driver of that growth has been the risk and compliance business, which grew 24% for the full fiscal year to exceed $130 million of revenues at attractive margins. Impressively, That business has more than quadrupled in size since the separation six years ago. Obviously, companies around the world are focused on maximizing compliance and minimizing risk. So we are confident that there will be continuing growth in that sector. In addition, Dow Jones' world-class news coverage and analysis is now aggregated on the Bloomberg Terminal. significantly extending the reach and impact of Dow Jones' trusted, high-quality journalism and analysis, and enabling us to inform a larger total audience. Over the past fiscal year, along with other new partnership arrangements, Dow Jones NewsWire is now available on more than 300,000 additional terminals. These partnerships make our NewsWires the most widely available professional NewsWire service in the world. In the UK, in constant currency, the Times of London grew print advertising revenues for the second consecutive year. Digital paid subscriptions of the Times and Sunday Times grew 19% to 304,000, while regulatory approval was received this month for the sharing of resources by the Times and Sunday Times. Clearly, the change should result in operation efficiencies, while we will be assiduous in protecting the unique identity of each of those iconic mastheads. Wireless Group posted its highest ratings ever in the April to June period. Chris Evans, the legendary radio broadcaster who joined Wireless Group's Virgin Radio last year, reached 1.1 million listeners a week across the UK during that period. In fact, Virgin Radio continues to be the fastest growing station in the UK, both in reach and listening hours. Meanwhile, TalkSport saw record audience figures with 3.3 million weekly listeners across the network in a quarter. Under Rebecca Brooks' expert leadership, we are ensuring that the peerless broadcast skills at Wireless are being deployed to improve the quality of the audio products elsewhere at News UK to take advantage of rapidly increasing podcast demand. In Australia, a focus on growth paid off with improvement in profitability for the year, driven in part by an increase in digital subscriptions, which now exceed 517,000, up 24% year on year, with the Australian a notably strong performer. At the same time, news.com.au has remained the number one website for 20 consecutive months, well ahead of its rivals. with its monthly unique visitor number topping 10 million and total visitors at over 91 million in June. News Australia is also benefiting from the acceleration of digital advertising, including the expansion of News Extend, the small to medium business solution, and from its cost reduction efforts. We are confident that Michael Miller and his talented team are well positioned to extend that operational success into fiscal 2020. At the New York Post, the cover price was doubled to $2 in metropolitan markets, the first increase in seven years, and one reason for improved financial results at the Post. And the Post's digital network continues to be strong, with audience numbers averaging more than 101 million unique users per month in the quarter, according to Google Analytics. In the subscription video services segment, the combination of Foxtel and Fox Sports was completed in April 2018. And throughout fiscal 2019, the new business has been focused on delivering premium content and experiences to customers and rapidly expanding our streaming services, which have grown markedly over the past year. Foxtel is underpinned by a large and loyal broadcast subscriber base and unique content across sports, entertainment, documentaries, and news. As of the end of the fiscal year, Foxtel's total paid subscribers grew to over 3.1 million, led by the success of our new sports streaming product, Kayo, and continued expansion of Foxtel Now, where the number of its subscribers increased by 36% from the prior year to 446,000 at year end. Kayo, which was launched in November 2018, showed a material acceleration in subscriber additions into year end. with over 330,000 paying subscribers as of June 30, a doubling since last quarter. Worth noting is Kayo's high levels of audience engagement, with 90% of subscribers using it each week, watching an average of 8.5 hours of sports content across an average of six different sports. In total, Our streaming base in Australia has nearly doubled since calendar year end to approximately 777,000. It is notable that the growth in KO subscribers between the third and fourth quarter has actually been accompanied by decline in average churn among sports tier subscribers to Foxtel Broadcast over the same period. We announced in July the integration of Netflix into Foxtel's IQ3 and IQ4 set-top boxes, which, along with a new user interface, creates a unified content discovery experience for our customers and strengthens our position in the market as the preeminent creator and aggregator of the broadest range of programming. At the same time, the consolidation of Foxtel and Fox Sports has obviously provided an opportunity to review our cost base without undermining the quality of service or programming. At Digital Real Estate Services, despite housing market headwinds, both REA and Realtor.com strengthened their competitive position by continuing to innovate and expand audit. Signs of improvement in the U.S. housing market are emerging, with realtor.com traffic at record levels, interest rates declining, buy lead volumes on the rise, and pending home sales rising 2.8% in June. Last November, Tracy Fellows was promoted to president of Global Digital Real Estate, underscoring our company's increasing commitment to the sector, which has been an engine of growth since we separated in 2013. In fact, over that period, segment revenues have tripled through a combination of rapid growth at REA in Australia and acquisitions in the US and Asia. We are in the process of a major transformation at realtor.com, underscored by the recent acquisition of OpCity and guided by our goal of providing consumers with a superior home buying and selling experience. While that acquisition and the migration towards a performance-based model naturally had an impact on revenues and investment last year, it represents a commitment to future growth by increasing the quality of connections between consumers and real estate professionals and heightening our potential to maximize the value of those interactions. We believe a focus on quality connections also increases our ability to generate additional revenue across the home buying and selling experience. from mortgage origination to the inevitable spending done by every family during the profoundly important process of moving home. REA Group continued to significantly outperform the competition, despite the self-listing environment in the second half of the year. For the year, REA extended its lead over domain, generating at least three times as many total visits. The company is continuing to create products that provide genuine value for ambitious agents. A federal election in May in Australia obviously contributed to economic uncertainty, but the political situation has clearly stabilised and the government is taking measures that should stimulate the housing market. We also made good progress in Asia through iProperty, with healthy revenue growth despite fluctuating economic and political conditions. In book publishing, HarperCollins thrived this year with new releases and a strong backlist, fueling a 6% increase in EBITDA, despite a tough comparison with 2018, which had benefited from a one-time lucrative licensing contract for J.R.R. Tolkien's Lord of the Rings. As Tolkien himself wrote, all's well that ends better. That is certainly true of downloadable audio books for which revenues rose 40% for the year. There is patently a fundamental shift in listening habits underway and we expect double digit growth to continue in the current year. Brian Murray and the HarperCollins team are finding new ways to make the most of our content and enhance the profile of our authors. We have just announced a partnership with Sony Pictures Entertainment in Hollywood, and Elizabeth Gabler and her former Fox 2000 team to develop programming and films from the remarkable HarperCollins catalogue. We have also announced an agreement through our Harlequin imprint with Bell Media in Canada to produce movies from Harlequin's extensive library of more than 30,000 titles. The most successful book of the year was a standout hit from our Christian division by best-selling author Rachel Hollis. whose debut and follow-up books, Girl, Wash Your Face and Girls, Stop Apologizing, together shipped more than five million units during the year. We also saw great success with David Walliams, including Ice Monster and World's Worst Teachers, and Mark Manson had continuing success with his sequel to The Subtle Art of Not Giving an Expletive with Everything is Expletive. With that valorized book title, I will hand the call over to Susan for an unvarnished account of our fourth quarter and full year performance.

Thank you, Robert. Before I review this year and quarter's financial results, I wanted to highlight five themes from this past fiscal year where we've made significant progress. Firstly, we are making notable progress in stabilising the news and information services segment and ended our fiscal year on a positive note. Our digital paid subscriber base continues to grow while we continue to focus on streamlining our print cost base and investing in new revenue streams. Importantly, the segment posted higher profitability this year with improvement across our key news publishing business units, the first time we have seen this improvement since the company separated. We will remain focused on these areas in the coming year and we are optimistic we can build on the current year's success. Secondly, the team at Foxtel have made steady progress on its over-the-top offerings, including the successful launch of Kayo in November and further improvements to its premium broadcast products. Foxtel returned to volume growth, ending the year at the highest closing paid subscriber base since separation. And now, with the core platforms enhanced, they are focused on improving the path to revenue and profit growth. The performance in our book publishing segment this year underscores the value of premium content and the advantage of a global distribution network, posting record profitability, even while facing a very challenging prior year comparable. Given the rapid rise of downloadable audio books and the explosion in demand for premium content globally, we continue to explore ways that HarperCollins can further leverage its highly valued content into other media. As Robert mentioned, recent examples of this effort are our announced partnerships with Sony Pictures Entertainment and also with Bell Media in Canada for our Harlequin division. These are deals with minimal capital outlay which have the potential to monetize content more broadly. Our businesses in the digital real estate services segment made strategic acquisitions, expanded their product offerings, and continue to capture audience share amid a challenging global housing market. We feel positive about our pace of innovation and investment and believe the segment is well positioned going into fiscal 2020. And finally, we continue to actively look at our portfolio. In June, we announced that News America Marketing is undergoing a strategic review, including actively exploring a sale, and that process is ongoing. With that, I would now like to discuss our financial results. For the full year fiscal 2019, total revenues were $10.1 billion, a 12% increase compared to the prior year. Reported results of fiscal 2019 include the consolidation of Foxtel. On an adjusted basis, which excludes the impact of the Foxtel consolidation, significant currency headwinds and other items as disclosed in the press release, revenues rose 1%. Total segment EBITDA for the year was $1.24 billion compared to $1.1 billion in the prior year, a 16% increase over the prior year period. Adjusted total segment EBITDA for the year rose 4%. Full year diluted earnings per share were $0.26 compared to a loss of $2.60 in the prior year, primarily driven by the absence of the non-cash impairment charges and write-downs of $1.2 billion recognised in fiscal 2018. Adjusted earnings per share for the year were 46 cents versus 44 cents in the prior year. Free cash flow available to the company for the year was $213 million, which included a step up in capital expenditures related to the consolidation of Foxtel. And now to the quarterly financial details. We reported fiscal 2019 fourth quarter total revenues of approximately $2.5 billion, down 8% versus the prior year. due in part to the $105 million impact from continued currency headwinds. Adjusted revenues declined 5%. Total segment EBITDA for the quarter was $269 million compared to $314 million in the prior year, down 14%. Adjusted segment EBITDA declined 8%. For the quarter, loss per share was 9 cents compared to a loss of 64 cents a year ago, with the improvement mainly due to the absence of the write-off of the Fox Sports Australia channel distribution agreement last year. Adjusted earnings per share were $0.07 compared to $0.08 in the prior year. Turning now to the individual operating segments. In news and information services, revenues for the quarter were over $1.2 billion down approximately 5% versus the prior year. Currency had a $40 million or 3% negative impact and was responsible for the majority of the decline. Digital revenues for Dow Jones and the newspaper mastheads represented 37% of combined revenues. Approximately 33% of the segment's revenues were digital, up from 30% in the prior year. Advertising revenues for the segment were down 8% in the quarter versus the prior year with approximately $18 million or 2% due to negative currency fluctuations. Circulation and subscription revenues were flat versus the prior year despite a $17 million or 3% negative impact from foreign currency. Segment EBITDA for the quarter was $108 million, up 14% over the prior year and a very strong improvement from the last two quarters, primarily driven by News America marketing but also benefiting from positive contributions from Dow Jones and News UK. I will now talk through some segment highlights. At Dow Jones, consumer circulation revenues in the fourth quarter remained robust, growing 7% for the fourth consecutive quarter, benefiting from 14% growth in digital-only paid subscribers at the Wall Street Journal to over 1.8 million, as well as subscription price increases. Digital paid subscribers accounted for over 69% of total subscribers at the Wall Street Journal, which is up from over 64% last year. Total subscribers in the quarter for Dow Jones consumer products, which also includes Barron's and Financial News in the UK, reached approximately 3.3 million, again posting record levels. Of that, digital-only subscribers rose 20% versus the prior year to 2.2 million subscribers. Over the same period, Barron's expanded its total subscriber base to 579,000, a 16% year-over-year increase. Within the professional information business, risk and compliance grew 23% in the quarter compared to the prior year, and as expected, exceeded $139 million in revenues this year. We continue to expect significant growth ahead as we expand our product range. Overall, our professional information business grew 2% this quarter. Advertising revenues at Dow Jones in the quarter were flat, a notable improvement from last quarter, led by an improvement in digital advertising as we had anticipated. For the quarter, digital advertising accounted for 40% of total Dow Jones advertising compared to 39% last year. Elsewhere across our news portfolio, advertising conditions were overall relatively stable with last quarter. Advertising revenues at News Australia and News UK declined 8% and 7% respectively, yet both were down only 1% in local currency compared to the prior year, benefiting from higher digital advertising revenues. Pleasingly, The Times in the UK grew print advertising revenues in local currency for the seventh consecutive quarter. On circulation, our digital subscribers around the globe are growing at an impressive rate. Digital subscribers rose 19% to 304,000 at the Times and the Sunday Times, and they also have approximately 5 million registered users, which is both a source of subscriber acquisition and an advertising opportunity as we continue to leverage our increasing audience scale. At News Australia, paid digital subscribers rose over 24% year over year to more than 517,000, which includes 146,000 digital and bundle subscribers at The Australian. The increase in digital subscriptions, along with cover price increases at News UK and News Australia, allowed both markets to mitigate print volume declines and currency headwinds. Finally, at News America Marketing, revenues fell 6%, driven by continued weakness in freestanding insert products, but partially offset by in-store product growth. Cost initiatives helped NAM contribute higher profitability in the quarter. Turning to the subscription video services segment, revenues for the quarter were $536 million, down 12%, versus $610 million a year ago, of which $44 million, or 7%, was due to the negative impact from foreign currency. Broadcast revenue trends were relatively similar to the prior quarter, with the revenue decline driven by a lower broadcast subscriber base and changes to the broadcast subscriber package mix. The revenue decline was partially offset by increased revenue contributions from Foxtel Now and Kayo. Segment EBITDA in the quarter was $85 million, down 12% with the prior year. From the fourth quarter, we are now comparing like for like as we completed the Foxtel consolidation in the fourth quarter of fiscal 2018. Turning to the KPIs, Foxtel's closing paid subscriber base rose to over 3.1 million as of June 30th, with volume growing 12% versus the prior year. Growth was driven by CAO, strong adoption of Foxtel Now, and the inclusion of commercial subscribers of Fox Sports Australia. Of that subscriber base, approximately 2.4 million of the total closing subscribers were broadcast and commercial subscribers, and the remainder consisted of KO and Foxtel and our subscriptions. We are making steady progress on our OTT strategy, with KO paying subscribers at 331,000 as of June 30, up over 120,000 since our last date on May 8, and more than double since the third quarter, driven by the Cricket World Cup and the expansion of our distribution channels. Including trialists, the total KO subscriber base reached approximately 382,000. Pleasingly, thus far, KO is not causing a material churn in the Foxtel broadcast customer base, with an estimated 5% of Foxtel disconnection since KO's launch being driven by existing customers moving to KO. Foxtel now also performs strongly, with total paying subscribers reaching 446,000 as of June 30, up 36% from last year. While this is down from the May 8th update due to the conclusion of the Game of Thrones, Foxtel has been focused on retention and overall the product has exceeded our expectations. In the aggregate, Foxtel has a strong and growing base of OTT subscribers, which in total reached 842,000 subscribers at June 30, of which approximately 777,000 were paying subscribers, accounting for 25% of Foxtel's total paying subscriber base. and is reflective of Foxtel's strategy to monetise existing rights via multiple platforms. In the fourth quarter, broadcast churn was 14.7% versus 12.5% in the prior year, reflective of a 300 basis point improvement from the third quarter. The outcome in the fourth quarter reflects early successes from leveraging data and analytics to reduce churn despite price increases. In addition, the team are focused on stabilising broadcast ARPU, which was more than 78 Australian dollars in the fourth quarter, down 1% versus last year. Capital expenditures related to Foxtel were approximately 300 million US dollars for fiscal 2019, which is lower than what we had anticipated, and we expect sizable declines in fiscal 2020. Approximately 65% of the capex was subscriber related. Finally, we issued Foxtel and $200 million Australian dollar shareholder loan in May at a variable interest rate of approximately 9% as we continue to work with banks on refinancing upcoming maturities. At Book Publishing, as expected, we faced an unusually strong prior year comparison, with the prior year including a one-time revenue contribution of $28 million for the Tolkien sub-licence to Amazon and the release of Magnolia Table by Joanna Gaines. Revenues for the quarter decreased 14% to $419 million due to the fact, as I just noted, as well as approximately $18 million of negative impact from the new revenue recognition standard. Segment EBITDA fell to $44 million from $72 million, with the biggest factor impacting profitability being the absence of the token deal from the prior year. Notwithstanding the fourth quarter results, HarperCollins has had a very strong year and outperformed our own expectations. HarperCollins posted high digital revenues for the quarter and the fiscal year led by the continued expansion of downloadable audio, which accounts for approximately one third of digital sales today. They will also look to further capitalize on momentum and the depth of their backlist to generate longer term incremental revenues as they have done via the new deals with Sony and Bell Media. At the digital real estate services segment, revenues were down 5% to $283 million, primarily related to currency headwinds of $13 million. On an adjusted basis, revenues were flat. REA group revenues were down 6% and up 1% in local currency, as higher yield and increased debt penetration was offset by an overall 19% year-over-year decline in new listing volume during the quarter. which was notably weaker than the third quarter, and full year rates of 9% and 8% declined respectively. Please refer to REA's earnings release and their conference call following this call for additional details and comments on their outlook. Move revenues rose 3% to $123 million versus the prior year, with real estate revenues growing 8%. The increase in real estate revenues, which represented 77% of total revenues, reflect higher yield per lead a slight improvement in buy lead volume and the acquisition of Op City. While lead volumes remain subdued, the business did see an improvement in run rates in June, which should build momentum for this coming fiscal year. As I mentioned last quarter, we began live testing a performance-based only model in over a dozen markets starting on May 1st to analyse the impact and scalability of the platform. Early results have been promising, with improvements in engagement and meeting rates, which we expect will drive higher conversion rates. During fiscal 2020, we will continue to allocate lead flow to Op City, although we expect that in most markets we will be offering both our existing Connection Plus products along with the Op City Concierge model. We have, as mentioned last quarter, begun to reallocate resources within the realtor.com teams to better position and streamline the business for this year and beyond. On audience, we saw an acceleration versus the third quarter growth rate in average monthly unique users at realtor.com to a record 72 million for the quarter, rising 14% versus the prior year, together with a notable pickup in engagement. Segment EBITDA fell 15% to $84 million, similar to the third quarter rate. The decline was driven by higher investment in Op City and the $5 million negative impact from currency. On an adjusted basis, segment EBITDA decreased 7%. I would now like to mention a few themes for the fiscal 2020 year. At News and Information Services, while advertising visibility remains limited, the revenue mix is becoming less dependent on print and we are encouraged by the pace of global uptake of paid digital subscribers. In fact, excluding NAM, the majority of the segment's revenues would be circulation or subscriptions revenue. So far, the advertising trends are similar to slightly better in the current quarter and we continue to remain vigilant on cost. while reinvesting in our digital offerings. Overall, our expectation is to show further stability in the segment, and it is pleasing that we finish the year with some strength. We do note the first quarter will face a challenging comparison due to the $48 million benefit in the prior year related to News UK's exit of the gaming partnership with Tadcorp. In subscription video services, overall cost increases should be modest in fiscal 2020, absent currency fluctuations. We will have one additional quarter of domestic cricket rights, totaling approximately 20 million US dollars, before lapping the rights and some additional OTT expenses as we drive further penetration. This will be in conjunction with our continued efforts to seek cost efficiencies. We also expect a non-cash impact of approximately 30 to 35 million dollars in fiscal 2020 related to a change in amortisation methodology for certain entertainment programming. We expect CapEx in Foxtel to decline by approximately 20% compared to fiscal 2019, and overall expect higher cash generation from the business. In book publishing, we will face some tougher comparisons for the fiscal year given the outperformance in fiscal 2019. However, we are confident with our slate of titles which will be headlined by new releases from Reed Drummond, AJ Finn, Daniel Silver and David Wellams in the UK, among others, along with expected continued growth in downloadable audiobooks. Fiscal first quarter releases include Daniel Silver's The New Girl and Patchett's The Dutch House, as well as a tie-in edition of Gareth Stein's The Art of Racing in the Rain, which will hit the movie theatres this weekend. At Digital Real Estate Services, despite a challenging listings market in Australia, REA should benefit from higher debt penetration and higher pricing. Please refer to REA's call for a more detailed outlook. At Realtor for Fiscal 2020, we anticipate both higher revenue and higher profit contributions by further expanding the Op City Concierge model, returning the non-listing-based advertising back to growth and leveraging the recent cost initiatives. With that, let me hand it over to the operator for Q&A.

Thank you very much. If you'd like to ask a question on today's call, please press star 1 on your telephone keypad. If you're listening today using a speakerphone, please pick up your handset and ensure your mute function is off before pressing the corresponding digits. Once again, please press star 1 at this time to ask a question. And we'll take our first question from Encho Rakowski with Credit Suisse. Please go ahead.

Hi, Robert. Hi, Susan. A couple of brief questions for me. The first one is around costs within news and info services. So in the quarter, you had – it seemed like you had pretty good cost assignments given that EBITDA grew on lower revenues. Can you talk to the extent to which that was cost reductions within news and American marketing as opposed to – the other segments within news and info services. And I'm just interested, particularly the extent to which those cost reductions can continue into FY20. And then on News American Marketing, you've given us a brief update on the sale process. Could you give us an indication of the likely timing that you're looking at? And are you looking at mainly trade or financial buyers?

Hi Ange, it's Susan here. Maybe I'll take the first question and hand over to Robert for the second question. Just in relation to the cost, they declined 7% but down 4% on an adjusted basis. So across the division, Dow Jones costs were up but we would expect that to be up given the subscriber growth and the investment that we have in the PIB business and risk and compliance. Across the other businesses in the UK and Australia, cost did decline and within NAM clearly cost declined by around 12% year on year. We are expecting to see costs continue to increase across the UK and Australia. We have been quite vocal about that over the past couple of years. The teams across the UK and Australia are very focused on cost reduction and continue to look at ways that they can innovate and drive costs, particularly out of the back office and some of the distribution chains. And we would also expect to continue to see Dow Jones invest in that business going forward. But I would say, though, that overall we do balance the cost reductions with investment, even within the UK and Australia, because it's important that we can support that digital growth coming through in the businesses.

Thanks, Susan. And, Jo, obviously at this moment it's a little difficult to be absolutely specific about the identity of the bidders, other than to say that there are quite a few. But more broadly, we understand that the company's use score, that is, is complex, but it's not properly valued. And so we have begun. a process of simplification that will be ongoing. The first most tangible sign of that is the sale process at NAMM. That company itself has changed character over the past few years and become more valuable because of its in-store and digital growth and a little less relevant to news cause core businesses. So it made sense to do that strategic review and there is material interest in the company.

Thank you, Encho. Karina, we'll take our next question, please.

Thank you. Well, next here from Kane Hannon with Global, I'm sorry, Goldman Sachs. Please go ahead.

Good morning, guys. Just on the Foxtel OTT strategy, I think in the past you've said you would only launch an entertainment SVOD if you were happy with KO's performance. I suppose just given that growth you've reported in the quarter, could you give us a bit of an update around your plans if they exist for an entertainment SVOD? And then just on the NAM business, could you give us a sense of, I suppose, the EBITDA margins that business makes, and I suppose how you're thinking about using any potential proceeds from that transaction?

Okay. Again, a little difficult to be specific, but the fundamental principle applies that if we thought KO was successful, then we would proceed with the new product. What we are seeing at KO is success, and fundamentally, what we're seeing is a real growth in the number of Australians prepared to pay for premium programming. And there is little more premium than exclusive sports rights. The old story about Foxtel was that it maxed out on subscribers, that there were a strictly limited number of Australians prepared to pay for content and that we'd hit that limit. Frankly, that's clearly not the case. And the doubling of KO subscribers has actually been accompanied by a fall during the same period by the rate of churn among sports tier subscribers on broadcast. That is a significant trend and an indication of the success of CAIA.

And Kane, just in relation to News American Marketing, we don't disclose the margins in relation to that business. But what I can say is we do disclose the revenue, and so that's obviously in the release. At this stage, we... are obviously exploring the options, as Robert said, in relation to the strategic review, and that does include exploring the sale, but we're not going to comment further until that process has been concluded as to what we may do with the cash proceeds.

Thank you, Kane. Karina, we'll take our next question, please.

Thank you. We'll hear next from Craig Hubber with Hubber Research Partners. Please go ahead.

Yes, hi. Thank you. I guess two quick questions. Robert, Susan, what's changed in your mind, in your board's mind, to potentially put News America marketing up for sale now? I mean, why now for that? And then also, Susan, can you give us a little more clarity on how we should think about the cost for Foxtel for fiscal 2020 above and beyond what you've already said? Thank you.

Craig, as I said a little earlier, we understand that the company's complex, that the valuation that we get for what is really a remarkable collection of assets is not fully realized in the in the share price, and so we have begun this process of simplification. And the most obvious outcome at this stage of that is the decision to conduct the strategic review of NAM, and that is well underway.

I think, Craig, I'd just also add to that that One of the things that we've been thinking about is how to allow a greater focus on News Corp's primary pillars, including the creation and distribution of premium content and the digital real estate segments. So just in addition to the comments that Robert said. Just in relation to your second question in relation to Foxtel and the cost base. So as we think about next year, clearly the current year, fiscal 2019, is a big investment year for Foxtel. We're fairly clear about that and transparent, particularly in relation to the cricket rights. But if we cast our mind forward to next financial year, We will expect to have one additional quarter of cricket rights, so about 20 million US dollars. We will no doubt have some continued investment in OTT as we scale those products and depending on the marketing activities around that. But more importantly, as I mentioned in my comments, we'll have this non-cash impact in related to the programming amortization change, which is about 30 to 35 million dollars. So that will impact on the results. Outside of that, we expect the cost base to be relatively constant, notwithstanding the variable nature of it due to subscribers.

Thank you, Craig. Karina, we'll take our next question, please.

Thank you. We'll next hear from Brian Hahn with Morningstar. Please go ahead.

Oh, hi, Robert. I have one question for you. I noticed that Fox recently invested in an online lending company called Credible, I think. And it looked like something that perhaps Newscorp could also have been interested in as, you know, part of your digitalization strategy. So my question is, Have there been situations where News Corp and Fox compete for an acquisition? And if so, how do you guys decide who's going to take the first dip and who's going to back off?

Brian, we look after News Corp. All I would say about that Fox acquisition is that clearly Fox News and Fox Business News are great proselytizers of products And that particular company has a very broad range of financial products aimed at consumers. So I wouldn't be surprised at all that it was a Fox acquisition. But we are separate companies and we ourselves are always reviewing our portfolio.

Operator, what... Any more questions, Karina?

As a reminder, that's star one. If you'd like to ask a question on today's call, we'll pause for just a brief moment. And it appears we have no further questions at this time. I'd like to turn the call back over to Mr. Florin for any additional or closing remarks.

Great. Thank you, Karina, and thank you for all participating. We look forward to talking to you soon. Have a great rest of the day. Take care.

Once again, that does conclude today's conference. Thank you for your participation. You may now disconnect your phone lines.