News Corporation

Good day and welcome to the News Corp 3Q Fiscal 2020 Conference Call. Today's conference is being recorded. We'll be on a listen-only basis at this time. I would like to turn the conference over to Mike Florence, Senior Vice President and Head of Investor Relations. Please go ahead.

Thank you very much, Chloe. Hello, everyone, and welcome to News Corp's Fiscal Third Quarter 2020 Earnings Call. We issued our earnings press release about a half 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've all been 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'll pass over to Robert Thompson for some opening comments.

Thanks, Mike. We are operating in a different difficult time, so this will be a rather different distant experience. Before the business of the day, I sincerely hope that all on this call, each of our investors, our business partners and their families are safe during this exacting era. Every business and family is facing challenges and our thoughts in particular are for those who are suffering under the curse of COVID-19 and have had to deal with complications from this dreaded disease. For our company, the safety of our employees has obviously been paramount. And many of our journalists have displayed much courage in recent months, including reporting from Wuhan during the intense first phase of what has become a pandemic. I would also like to honour Anthony Cosi, who passed at a relatively young age, by which time he had already become a legendary sports photographer for the New York Post. As noted in our 8K filing with the SEC last month, we expected a broad impact on our business from the pandemic's inevitable economic consequences. We were affected somewhat in Q3 and those effects will likely be significantly more pronounced in the fourth quarter. As we expect this impact to continue in the near term, significant cost reductions have been implemented across the company and additional steps will be taken in coming months. These cuts are designed to deal with the short-term exigencies and to reposition the company for long-term growth. There will obviously be an impact on executive compensation. For many senior executives, bonuses are the largest component of their cash compensation, and these will be reduced by at least 20%. The cuts will be led by our executive chairman, Rupert Murdoch, who is voluntarily foregoing his entire cash bonus for the current fiscal year. And as chief executive, I will forgo 75% of my annual cash bonus. In addition, our board of directors have decided to reduce their cash compensation. These significant cost reductions of all kinds across the company will clearly have a positive impact on our total segment EBITDA and our cash position and help mitigate some of the effects of the pandemic. We obviously leave open the possibility of further compensation cuts next fiscal year, depending on the ongoing impact of the crisis. Turning now to the third quarter results for fiscal year 2020. Our revenues declined 8% to $2.3 billion, including a $78 million or 3% impact from adverse currency movements. Total segment EBITDA was down, although only 2%, to $242 million. It is worth highlighting that operationally, adjusting for currencies, acquisitions and disposals and other items mentioned in our release, our adjusted revenues were down 4%, but our adjusted total segment EBITDA rose 1%. Reported results also include a $1.1 billion non-cash write-down, mostly attributable to Foxtel. At the news and information services segment, the sale of News America marketing has formally closed. This is a significant step in terms of enhancing shareholder value and part of the continuing simplification of our company. A thorough re-evaluation of our assets continues and a strategic review of our community and regional newspapers in Australia is at an advanced stage. We are also reviewing ways to improve transparency in our segment disclosure. which will enable investors to better appreciate the inherent value in and the growth potential of Dow Jones, which we believe is the best business news and analysis brand in the world. We are working towards making that company's potential more obvious and to highlighting its various strengths, certainly relative to other business brands and, for example, to the New York Times. Speaking of demand for premium content, as you know, we have entered into valuable partnerships with Apple and Facebook for use of our world-class journalism. Clearly, there are harbingers of positive change with Google, where the CEO, Sundar Pichai, has shown a more enlightened and socially empathetic attitude to journalism. In the past, some in Silicon Valley sought to create a system of petty patronage through faux philanthropic handouts and sententious sops. seemingly designed to institutionalize a mendicant media. Enlightened executives at Google patently seek more meaningful changes to a dysfunctional ecosystem. The terms of trade in the digital world are certainly changing. The regulatory pressure is also intensifying as, two weeks ago, the Australian government announced the introduction of a mandatory code that would require the larger digital companies to pay for content, and to adjust their algorithms to give additional weight to original news. It is absolutely crucial that more be understood about the character, the power, and the potential manipulation of algorithms and data. A recent Wall Street Journal report on Amazon's business practices showed the potential danger of companies having a dominant horizontal marketplace and selling their own products in segment verticals. In essence, exploiting proprietary marketplace data and competing with and potentially undermining their clients. In the third quarter, news and information services improved in profitability for the second straight quarter with 15% growth in segment EBITDA. Dow Jones recorded a particularly strong performance as digital paid subscriptions rose 20% year on year to more than 2.5 million average daily subs at quarter end. The Wall Street Journal's digital paid subs were up 15% to more than 2 million, also a record. In recent days, the journal has shown further acceleration, with total subscriptions reaching approximately 3 million for the first time, including 2.2 million digital only. Overall, at the end of April, digital subscriptions rose over 20% year on year. Digital advertising at Dow Jones rose 25% year over year, despite the challenges we faced with ad sales later in March. This is in strikingly marked contrast to the performance of the New York Times, where digital ad revenue actually declined 8%. I should repeat those figures for the purpose of clarity. Digital advertising rose 25% at Dow Jones, and it fell 8% at the New York Times. Dow Jones' profit contribution improved and was a significant contributor to segment EBITDA growth, while EBITDA slumped 15% at the New York Times. We announced earlier this week that the head of the Barron's Group, Elmar Latour, will replace Will Lewis as CEO from the middle of this month. Will certainly leaves Dow Jones in fine fettle and with enormous capacity for future growth. Speaking of Barron's, subscriptions rose 14% year over year, and over the past four years under Elmar's leadership, the digital audience at Barron's Group Brands has quadrupled. During the quarter, the Wall Street Journal Digital Network broke records and hit 196 million unique users in March, up 155% versus the prior year. Traffic was particularly strong at MarketWatch in March. where users more than tripled to 90 million compared to the prior year. The professional information business reported a 5% increase in revenues, with risk and compliance once again demonstrating strength, rising 18% year-over-year. Elsewhere in the segment, newspaper digital subscriptions at News Corp Australia were up 24% year-over-year, rising to more than 613,000 a quarter, and with two-thirds of subscriptions at The Australian now digital-only. At News UK, the Sun reached 164 million global unique visitors in March, representing a 17% increase over December, according to Google Analytics. While at The Times and Sunday Times, digital subscriptions grew 21% year-over-year to 345,000 and now account for nearly 60% of the base. Meanwhile, the New York Post's advertising revenues in the quarter rose 19%, and the Post Digital Network had 169 million average monthly unique visitors, according to Google Analytics, up from 107 million in Q2. Turning now to book publishing, revenue declines moderated HarperCollins in the quarter compared to the first half, while segment EBITDA grew year over year, despite very difficult comparisons. As more people have moved to work and study from home, we've seen a revival in e-book sales. We are particularly pleased with early sales for Joanna Gaines' Magnolia Table Volume 2, which already sits atop the US bestseller lists. Digital real estate was showing solid progress through January and February, but began experiencing pandemic-related declines in March. Business at REA and Realtor.com will depend on the reopening of the Australian and U.S. economies, but traffic to both sides remains encouraging, and Realtor.com is outperforming the traffic trends of its house-flipping competitor, according to the March Comscore data. In the subscription video services segment, KO subscriptions rose to 444,000 in Q3, including Trialist, which was more than double the prior year. and CAO also showed strong growth over the prior quarter. That figure has obviously been adversely affected in recent weeks by the suspension of sports in Australia, as we disclosed in the earnings release. We are in serious negotiations with the major sports over a fundamental reset of rights costs. Susan will discuss the possible accounting impacts shortly. In coming weeks, we plan to launch our entertainment streaming product and expect that there will be strong demand, given the power of our media portfolio's marketing platform and the nascent demand in Australia. We're also very excited by the multi-year deal with WarnerMedia announced this week. That means Foxtel will be the exclusive home in Australia for HBO, the soon-to-launch HBO Max, and other WarnerMedia hits. Let me now turn to the lingering impact of COVID-19. which began to have an effect towards third quarter's end, but clearly will be a major factor in our Q4 results, as we signaled in our 8K filing last month. I would first like to commend our leaders and our employees around the globe as we rapidly and successfully moved approximately 90% of our workforce, around 25,000 people, into a work from home environment. Looking at the longer term, we have clear plans for addressing the immediate challenges we face and for emerging vigorously on the other side of this crisis. This will not be done by random cost cutting but by strategic decisions about the business we need to fashion for a profitable future. That strategy is informed by a candid assessment of our capabilities and deficiencies and a clear sense that the business environment will be very different when the world finally returns to the new abnormal. It is worth noting at this crucial time that News Corp continues to have a strong balance sheet. As of March 31st, we have $1.4 billion in cash and cash equivalents, and in addition, we have access to a $750 million corporate revolving credit facility, which remains unruined. That bedrock of financial stability will help us weather the Category 5 storm, as will the power of our brands and the energy and the creativity of our people. The headwinds will buffet the company in the short term, but I am extremely positive about our prospects for delivering long-term growth and increasing shareholder value. Now, for more particulars on our results in this quarter, I turn to Susan Paniccia.

Thank you, Robert. Turning to the financials, fiscal 2020 third quarter total revenues were approximately $2.3 billion down 8% versus the prior year and total segment EBITDA was $242 million down 2% versus the prior year. Currency headwinds negatively impacted revenues and total segment EBITDA by 3% and 6% respectively. On an adjusted basis which excludes the impact of acquisitions, divestitures and currency fluctuations and the other items disclosed in our release, revenues fell 4% and total segment EBITDA increased 1%. For the quarter, we reported losses per share of $1.24 as compared to earnings per share of 2 cents in the prior year. The loss includes $1.1 billion of non-cash impairment charges primarily related to a write-down of goodwill and tangible assets at Foxtel and the reclassification of News America marketing to assets held for sale. Adjusted earnings per share were $0.03 in the quarter compared to $0.04 in the prior year. Before going into the quarterly detail, I will add to Robert's comments on the COVID-19 pandemic, which is expected to have a significant impact on near-term operating results. Immediate cost actions are underway. Variable costs have obviously been reduced with a heightened focus on the reduction of discretionary spend and non-essential capex, together with a thorough review of all headcount requirements. We are accelerating plans to reduce costs across the business in the medium term, particularly at our news and information services segment. These initiatives include, but are not limited to, global shared services to centralise our back office functions, a thorough review of our property and office footprints, and reviewing our printing operations around the globe whereby we have already announced the printing suspension of 60 community newspapers in Australia. Finally, in relation to company-wide liquidity, it is important to note the only debt exposures we have are at our non-100% owned subsidiaries Foxtel and REA and these are non-recalls to News Corp. We are not anticipating any covenant issues at Foxtel over the next 12 months and we have no plans to provide any additional shareholder funding. With that as a backdrop, I will now discuss the quarterly results for the individual operating segments. In news and information services, revenues for the quarter were over $1.1 billion, down 8% versus the prior year. On an adjusted basis, revenues declined 5%. Advertising revenues fell 14%, with declines most notably at News America Marketing and in News Australia, while circulation and subscription revenue grew 1%. Currency negatively impacted segment revenues by 2%. Results were also impacted by $14 million from the outbreak of COVID-19. Digital revenues for Dow Jones and the newspaper mastheads represented 42% of their combined revenues, up from 36% in the prior year. Segment EBITDA for the quarter was $75 million, up 15% from $65 million in the prior year, benefiting from increased contributions at Dow Jones, improvements at the New York Post, and the absence of losses from Unruly, partially offset by lower contribution from NAM. At Dow Jones, consumer circulation revenues grew a healthy 4%, reflecting a 20% growth in digital paid subscribers across Dow Jones consumer products, including a 15% growth in digital-only paid subscribers at the Wall Street Journal. Total Wall Street Journal subscribers exceeded 2.8 million in the quarter, an 8% increase from the prior year, which is an acceleration from the second quarter's growth rate. Professional information business revenues accounted for 29% of Dow Jones revenues this quarter, growing 5% to $114 million, reflecting an 18% growth in risk and compliance revenues. Advertising revenues at Dow Jones fell 2% this quarter, but as Robert mentioned, we saw a sharp acceleration in digital advertising revenues, posting 25% year-over-year growth. Digital advertising represented 47% of Dow Jones advertising revenues. Overall, Dow Jones had revenue growth of 5% and another quarter of positive contribution to segment EBITDA growth. Elsewhere, advertising revenues at News UK fell 10% on a reported basis and 8% in local currency, weaker than the past two quarters despite strength in digital. Trends at News Australia have remained very challenging with advertising revenues down 20% on a reported basis and 30% down in local currency. Finally, at News American Marketing, revenues fell 16%. Turning to the subscription video services segment, revenues for the quarter were $462 million, down 14%, versus $539 million in the prior year, or down 7% in local currency. The revenue decline was primarily driven by lower broadcast subscribers. Broadcast subscriber trends were relatively similar to the prior quarter, with COVID-19 restrictions in Australia coming into place in the last week of the quarter. Foxtel also faced lower advertising revenues, reflective of the overall TV marketplace. Segment EBITDA in the quarter was $68 million, down 31% from the prior year, driven by the revenue decline, partially offset by renegotiated license fees and the timing of sports rights and the production costs due to COVID-19-related suspensions. Overall costs were down 11% on a reported basis. Foxtel's closing paid subscriber base was approximately 2.93 million as of March 31st, reflecting a 1% year-over-year growth driven by KO subscribers. Through quarter end, KO's total subscriber base, including trialists, increased to 444,000, up from 199,000 last year. In fact, we reached over 470,000 total KO subscribers by March 22nd, the start of the winter sports season. However, subscribers have declined in recent weeks with the suspension of the NRL and AFL seasons as well as rugby, motorsports and other international sporting codes like the NBA. KO viewers remained highly engaged during the quarter and we expect an uptick in subscribers that will clearly depend on the quality and quantity of NRL and AFL games once they have resumed. As of May 2nd, there were more than 272,000 paying KO subscribers. We have been beta testing Foxtel's new drama and entertainment streaming service, and we expect to launch commercially in the coming weeks, and we're very pleased to announce the WarnerMedia deal to support the launch. In the third quarter, broadcast churn improved for the first time in almost two years to 17.5%, which was 20 basis points lower versus the prior year. Broadcast ARPU remained relatively stable at $79 Australian dollars. At book publishing, HarperCollins had a strong quarter with revenues down 2% to $412 million and segment EBITDA up 4% to $55 million, despite a very tough comparison against the prior year, which had segment EBITDA growth of 29%. We saw improvement performance in general books, children's and in the UK. Digital sales grew 3% year over year to 23% of consumer revenue, which included improvements in downloadable audiobooks. At the digital real estate services segment, revenues decreased 4% to $261 million due to the negative impact from foreign currency fluctuations. On an adjusted basis, revenues were flat. Segment EBITDA rose 1% to $74 million or 9% on an adjusted basis. REA group revenues fell 5%. However, without the $12 million foreign currency impact, REA grew modestly in local currency. This is an improvement from the first half performance, benefiting from renewed growth in financial services. Australian listing volume declines moderated to down 7%, which reflects mid-single-digit growth in Metro Melbourne and Sydney. REA also saw strong traffic metrics achieving record levels in visits and audience during the quarter. However, COVID-19-related government policies and restrictions, including bans on open home inspections and in-person auctions, have led to reduced listing volumes in recent weeks. In response to the impacts from the pandemic, REA has implemented a number of relief packages to support its customers including short-term pricing concessions and changes to listing products to provide greater flexibility for customers. Please refer to REA's earnings release and their conference call immediately following this call for more details. Move revenues declined 2% to $180 million with real estate revenues relatively flat. Traffic remained strong with unique users in the quarter up 6% to 68 million. Prior to the COVID-19 pandemic, Move was on a solid growth trajectory in January and February with improved growth in traffic and leads and was on pace to deliver strong second half revenues. However, by mid-March, similar to RE8 and other digital real estate portals, those trends reversed. In response to the pandemic, Realtor instituted billing relief. initiative in late March for its customers, which was subsequently extended into May with some modification to the offer. The initiative, together with other COVID-19 related impacts, reduced third quarter revenues by an estimated $6 million. I would now like to talk about some of the themes in the upcoming quarter. Forecasting has been challenging, so I will discuss what we have seen in April and frame the relevant risks. At News and Information Services, we expect advertising and single copy sale revenues in the segment to be adversely affected as a result of widespread business closures and social distancing measures. For a framework, advertising revenues excluding News America marketing represented approximately 34% of segment revenues in the third quarter. In April, advertising revenues at Dow Jones was down more than 20% with digital down modestly. Advertising revenues at Australia and the UK were down more than 45% on a reported basis, or around 40% in local currency. As I mentioned earlier, we are taking aggressive cost action to mitigate these revenue declines within the segment. At the same time, we have also continued to see strong growth in digital subscribers across the key properties in April, including over 20% year-on-year growth in digital-only subscribers of the Wall Street Journal. In the third quarter, approximately 75% of Dow Jones revenues were subscription-based, providing much more visibility and stability. Digital revenues accounted for 68% of Dow Jones revenues, and digital paid subscribers accounted for 73% of the Wall Street Journal subscriber base. In subscription video services, we anticipate an increase in broadcast churn with the suspension of the NRL and AFL seasons. For April, broadcast churn has been fairly stable although we have seen lower sports tier and KO subscribers as you would expect. Closures of pubs and clubs and lower occupancy at hotels throughout Australia are also expected to adversely impact commercial subscription revenues together with a downturn in advertising revenue. The team at Foxtel has implemented several initiatives including opening up additional entertainment content to all subscribers and providing Foxtel broadband customers with unlimited data allowances for streaming. As for sports rights accounting, Foxtel amortises event-based sports like Formula One, which have no dedicated channels, upon the occurrence of the events. Consequently, the third quarter included about US$9 million of costs that were deferred due to events cancelled or postponed. Channel-based sports rights such as the AFL, NRL and domestic cricket are expensed on a straight-line basis over the year. The third quarter included a full amount of rights fees for all three of those sports. In the event that the NRL and AFL do not resume their season in the fourth quarter, we would plan to defer those costs until the sports resume. All the sports-based contracts have different terms and conditions and we are currently in discussions with the leagues around the best way to move forward and to value the season that remains. As a framework, the quarterly costs between the AFL and NRL prior to the suspensions were 95 million Australian dollars or approximately 60 million US dollars. In addition, we also expect an approximately $10 million impact from the accelerated entertainment amortization in the fourth quarter. In book publishing, as the retail market adjusted to stay-at-home restrictions by closing a number of bricks-and-mortar stores, HarperCollins saw strong growth in online sales with e-books returning to growth. Our release slate is largely intact, and as Robert mentioned, one of our top books for the year, Joanna Gaines' Magnolia Table Volume 2, is selling very well. At Digital Real Estate Services, as noted in their release, REA anticipates a challenging listing environment given the government's social distancing measures with April new buy listings falling 33%. Realtor is facing lower real estate transactions but encouragingly lead volume and unique users have shown improvements in recent weeks. Both companies have taken proactive relief measures to extend credit to their respective customers with discounts or other similar measures which will have an adverse impact on revenues. CapEx for the year is expected to come down significantly to around $435 million compared to $572 million last year, which includes a 35% to 40% decline at Foxtel, an update on our initial guidance of approximately 20% year-on-year reduction. Finally, a word about our tax rate. From a P&L perspective, we expect an unusually high tax rate for the full year due to certain operating losses in foreign jurisdictions that we are unable to take deductions against. This is a P&L impact, not a cash impact. As I mentioned, these are unique times, but we believe with our strong liquidity position, market-leading brands, our emphasis on digital transformation, as well as a more aggressive focus on cost measures, News Corp is well positioned to weather the current crisis. With that, let me hand it over to the operator for Q&A.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions.

Thank you.

We'll take our first question from Alexia Quadrani from JP Morgan.

Thank you very much. Can you elaborate on the strength in the digital advertising you highlighted in the quarter at the Wall Street Journal? It sounded like in April it softened a little bit, but it still seems like it's coming in probably better than what we're seeing in the industry. I'm wondering if it was specific to certain verticals that continue to be strengthened through your product mix. And then just to follow up on the makeup of the strong growth in digital subscribers also at the Journal, is it international, domestic, anything different? maybe younger, or is it pretty much just more of the same that you've been seeing for a while?

Well, thanks, Lex. In terms of who the subscribers are, obviously we have had strong growth in U.S. subscriptions, and I think the thing to remember about Wall Street Journal subscriptions is that once you have a subscriber, you also have an opportunity to upsell. So we've particularly seen growth, for example, in subscriptions coming from Market Watch to the Journal and from Market Watch to Barron's, as well as that from the Journal to Barron's. And then for the more specialist Wall Street Journal subscribers, there's an opportunity to sell them, to upsell them to our premium business products, which obviously have a higher yield. In terms of advertising, clearly traffic has been particularly strong. There had been, as you may well be aware, some concerns early in the COVID crisis about blocking of ads related to COVID crisis coverage. Gradually that problem has diminished and so we are noticing that the amount of advertising we're getting is matching, not quite, but to some extent, the significant increases in traffic we've had across the Wall Street Journal and Market Watch. We noticed that tech advertising has increased, that custom advertising is also on the rise, and to a certain extent, programmatic. But I think for our business, quite frankly, it's an extraordinary opportunity because big clients are coming straight to the Wall Street Journal, and to our other publishing houses around the world. And they want to deal directly with us rather than necessarily through an advertising agency. And while this is, at the moment, a short-term phenomenon, there are indications that this may very well become a long-term trend.

I think, Alexi, the only other thing that I would add to that is the other pleasing thing that we've seen is the average age is broadening out, and so we did have an average age of around 60, and it's now around 47 as a consequence of the subscribers coming in, so that's pleasing as well.

And if I could further compliment Susan by saying that what we've noticed, for example, among Wall Street Journal readers on Apple News+, is that historically there have been, shall we say, a disproportionate number of men reading the Wall Street Journal, The breakdown is around 75% male, 25% female. Just at this moment, the readership of the Wall Street Journal on the Apple News Plus site is majority women, minority men.

Thank you, Alexia. Chloe, we'll take our next question, please.

Absolutely. The next question comes from Enshil Raykasa. Ricky from Credit Suisse, please go ahead.

Hi, Robert. Hi, Susan. A couple from me. Just the first one, you've obviously mentioned the sports rights deals and you've given us a good framework on what happens on a quarterly basis, but just interested whether you see this as an opportunity to renegotiate some of those deals sports rides, deals longer term. Do you think there can genuinely be any longer term savings? And do you think that's warranted given some of the fairly high costs? So interested in your thoughts on that issue. And secondly, are you able to quantify the potential impact of the relief measures that move in Q4? And do you expect that they'll continue to remain in place beyond May? Thank you.

First of all, on sports rights, obviously it's inappropriate to go into detail at this stage, but there obviously needs to be a fundamental reset. The idea that things will suddenly return to normal this season is absurd. It's not just the quantity of games, it's the quality of the experience, and that has obviously been diminished. And that reset has to apply longer term to rights in Australia. In essence, there is a new reset reality.

And Encho, just in relation to your question on move, we haven't given that for Q4, but what I can say is we implemented the measures on the 19th of March in relation to move, and the impact of that in Q3 was 6 million. So you can use that as a proxy for your run rate. And we haven't made any announcement as to any further extension in May as yet.

Thank you, Encho. Chloe, we'll pick our next question, please.

Absolutely. The next question comes from Greg Huber from Huber Research Partners.

Thank you. Hi. On the newspaper side in Australia, on the cost-cutting side, there's a lot, a decent amount has been written out there about your newspapers, some of them down there, you're shutting down the hard copy version and going digital only and stuff. Can you just talk a little bit further about that? I'm curious, what percentage of your print subs down there? What do you have shut down that are moving to online only as the business model, for example, in that market? I mean, just like only 10, 15, 20% of the subs down there. I mean, how significant is it? That's my first question. And then my second question is, I guess on the newspaper side as well, just generally, do you think you have a lot more costs you can take out of the US for Wall Street Journal, Dow Jones, UK and Australia? Do you think you have a lot more costs you can take out in reaction to this virus situation? Thank you.

I'll take the second question first, Craig. We're constantly reviewing costs and that is costs in headquarters where there have been significant reductions in recent days and right through where we're looking for efficiencies in tech spend, we're looking for the efficiencies that come from the closer coordination that really has been underway in recent years. It's not a new phenomenon but it gives us an opportunity to look across businesses and very, very closely, measure at different cost levels and respond appropriately. What we're not going to do is cut costs in a way that undermines the editorial integrity of the leading news organisation in the world.

Craig, just in relation to the mastheads down in Australia, so the mastheads that we've ceased printing at the moment were community mastheads which are not subscription related so they're advertising related products and as Robert mentioned we are undertaking a detailed strategic view of the entire regional community portfolio down in Australia so the regional mastheads will have subs attached to them but not the communities and then just to supplement on the cost side, I agree and echo with Robert's points but we do believe that across all our businesses on a global scale, particularly when we think about our backup functions, that we do have some significant opportunities that we can unlock. We have been actively working on those measures over the course of the last 12 months, particularly looking at tech, but we do believe that there's a lot more opportunities we can do as we broaden the scope of that as we move forward.

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

Absolutely. And as a reminder, participants, you may press star 1 to ask a question. Our next question comes from Brian Hahn from Morningstar.

Oh, hi, Robert. Does the current environment help the simplification program that you have going for News Corp? Or does it make it actually more complicated, especially for... And also, Susan, the impairment charge taken at Foxtel, was that more driven by changes in assumptions related to the traditional Foxtel business, or have your views for KO and Foxtel now also changed?

Brian, clearly the simplification was a pre-existing program, but to a certain extent, you may well be correct in that various things have been expedited during this period of crisis. What I would like to say specifically around simplification is that clearly we're pleased that the NAM transaction has progressed. Actually, we had full faith that Charles Bank, who have pre-existing specialist expertise in that area, will be able to make a significant success of the business. And you can tell from the tenor of our comments about Australia that there is obviously a strategic review of our print holdings well underway. So our simplification process is far from finished. And part of that is that we're very keen to highlight the value inherent in, for example, Dow Jones, which reported vastly superior numbers to those of the New York Times, but whose figures are not fully obvious in the current news and information services segments. Now if you think of the journey in recent years, the sale of Amplify, the early sale of the local media group at Dow Jones, the NAM sale and on the other side of the ledger, the acquisition of Realtor, the purchase of Harlequin, we are a rather different, more specialised company than we were a few years ago.

And Brian, just in relation to your question on Foxtel and the impairment, Now, we do look at this from a DCF perspective and also from a market multiple perspective. And clearly, there's been an impact that's adversely affected our trends, resulting in lower expected forecast subscribers. And the impact of COVID-19 is expected to have clearly an adverse impact on advertising OTT to customers and commercial subscription revenues in the near term. So when we combine all of those, we thought it was appropriate to take an impairment on Fox Talk.

Okay. That's it. Chloe, are there any more questions?

There are no further questions at this time, and I'd like to turn the conference back over to you. Thank you.

Great. Well, thank you, Chloe, and thank you for all participating. Have a great day, and most importantly, stay safe. We'll talk to you soon.

This concludes today's call. Thank you for your participation. You may now disconnect.