News Corporation

and welcome to the News Corp 1Q Fiscal 2021 Conference Call. Today's conference is being recorded. Media will be on a listen-only basis. At this time, I would like to turn the conference over to Mike Thorne, Senior Vice President and Head of Investor Relations. Please go ahead.

Thank you very much, Allie. Hello, everyone, and welcome to News Corp's Fiscal Second Quarter 2021 Earnings Call. We issued our earnings press release about 30 minutes 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 identifies 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.

Thank you, Mike. Across this country and around the world, in so many places for so many people, these past few months have been characterised by considerable upheaval, with social, political, financial and health-related tribulations and turmoil deeply, profoundly affecting many families, economies and communities. I trust that all on this call, and your families, have been weathering the storm safely and sagely. In the midst of this tumult, which has been a severe stress test for individuals and businesses and countries, I am gratified to report that News Corp has navigated the turbulence and, to be candid, significantly, very significantly increased profitability. We noted three months ago that the first quarter was particularly robust, and so I am pleased to report that our second quarter results were even more robust. And this burgeoning is a tribute to the efforts and the commitment and the professionalism of all our employees and to the enduring value of the company's culture created by Rupert Murdoch. In fact, the second quarter of fiscal year 2021 was the most profitable quarter since the new News Corp was launched more than seven years ago, and there were other significant records established. We have the largest profits for Dow Jones since the acquisition of the company in December 2007. while we reported a 77% rise in EBITDA at subscription video services, where, at Foxtel, streaming customers hit an historic high, and we also benefited from lower costs. Additional real estate services, MOVE, accounted for approximately 80% of that segment's EBITDA growth. And history was made when the New York Post reported a profit for the quarter and for the year to date. That is the first profit in modern times, at the very least, for what was a chronic loss-making masthead founded in 1801 by Alexander Hamilton. In short, digital real estate services, book publishing, and Dow Jones all performed powerfully in Q2, collectively generating segment EBITDA growth of close to 40%. Their continuing expansion highlights the profound potential of the company to increase profits and generate value for our shareholders far into the future. These resilient results are founded on a long-term strategic shift in the company's assets, determined digitization, and a relentless discipline on costs. We were adamant that we would not be victims of digital dystopia, but that we would contribute to fashioning a more fruitful future for content creators, and we are seeing the results of that resolve. It is fair to say that regulators globally have joined the digital dots. In the second quarter, every segment in Newscore showed marked operating improvements and contributed meaningfully to our profitability. we continue to see increased cooperation across the company, with valuable digital lessons and insights that each business rigorously applied for the benefit of all and to the benefit of shareholders. While overall revenues at over $2.4 billion declined 3% year-on-year, that was fundamentally due to the sale of News America Marketing in 2020. On an adjusted basis, a more genuine like-for-like comparison, revenues rose 2%, despite the pernicious consequences of COVID-19. Segment EBITDA for the quarter was $497 million, the highest of any quarter since our reincarnation in 2013. Year over year, that represents profitability growth of 40%, while our free cash flow available to Newscore for the half rose by $373 million. A pandemic is indeed a stress test, and Newscore is surely passing that test. At the digital real estate services segment, moves revenue growth was 28%, and that came despite restrictions in certain states on inspections and thus sales. Having been an ardent supporter of the acquisition of Move, it is worth noting that we believe the net cost of this company, including the substantial settlement we ultimately received from Zillow in our trade secret lawsuit against them, is only a fraction of its current value. Net-net, we paid considerably less than $1 billion for Move in 2014. We believe it is worth vastly more today. And how much will it be worth in five years as the digitization of sales in the world's largest property market continues apace. At the time of our acquisition, a realtor.com was a struggling third place platform with modest profitability and fewer than 30 million monthly users. There was some tight tuck-tucking about the acquisition but we were absolutely clear that our media platforms and growing digital expertise plus our experience with RIA in Australia would enable us to transform the company. In the first half of this fiscal year, Realtor has contributed more to our profit growth than the brilliant beacon that is REA in Australia. So how much is Realtor worth now? How much is Newscore worth? I will let you do the math. To help you do that math, a few specifics. Realtor traffic has now outgrown Zillow for 19 of the past 21 months, according to Comscore, including the last 11 months in a row. According to our internal metrics, average unique monthly users in the second quarter were 37% higher than the prior year, and we reached each month, on average, 80 million people. Just to give you a sense of the site's scale and loyalty, we had 8.7 total billion page views in the second quarter, more than one page for every person on our planet, and that number does not include photo galleries of houses. Multiply the number of visitors by the images in those galleries and you get a sense of the scale of the intense interaction by users. Traffic has continued to grow since the quarter's end, with unique users reaching a record 94 million for the month of January. During Q2, Move expanded in the rental market through its acquisition of Avail, an online property management platform that focuses on do-it-yourself landlords and tenants. This is significant given the fact that DIY landlords own and manage about three-quarters of rentals in the U.S. And a rental market, according to the U.S. Census Bureau data, is a $500 billion per year business. So the addressable market is appreciable and appreciated. Also in Q2, Realtor.com launched an advertising partnership with Rocket Mortgage while continuing to build an even more seamless process for consumers wishing to qualify for mortgages to purchase a home. In January, Realtor announced a partnership with Qualia to provide simplified digital home closings allowing for greater online collaboration between agents and their clients. Let us be very clear. Buying a home is by far the largest investment that most families will make and the purchase around that acquisition, whether it be securing a mortgage or selling with electricity or broadband provider, are necessary and valuable adjacencies. The home purchase is at the very center of that cluster of commerce and realtors are at the very center of that purchase. From a macro perspective, The overall housing market in the U.S. not only has proven to be resilient during a time of crisis, it has demonstrated tangible strength with many positive signs of activity, even with listing volumes at a historic low. With mortgage rates at a minimum and families expanding their search for better, larger homes in new locations, there is reason to be optimistic about the trajectory of the sector. Resilience and optimism also characterize the housing market in Australia, where the emergence from lockdowns in the quarter has led to significant signs of recovery. Australia is still a growing economy, and it will continue to benefit from its location in the world's fastest-growing region. The deep ties with Asia, including India, give it a distinct advantage, along with its reliable legal procedures and stable, coherent, cogent political systems. We believe it is still a country that is far from maximising its potential and the growth opportunities are pronounced. In the second quarter, REA acquired a controlling interest in Alara Technologies, making it the majority owner of a large and growing Indian digital real estate portal, including Housing.com and PropTiger.com. As measured by audience, Alara runs India's fastest growing digital real estate business and India itself is one of the world's fastest growing economies. So the possibilities are profound. We are, under Tracy Fellows' leadership, by many measures, the world's largest digital property company and we are acutely focused on the countries that we believe have the largest digital property potential. Meanwhile, HarperCollins had one of its most lucrative quarters with double digit growth across every category. There were many successful new releases while the backlist bolstered both revenue and profitability as did our continued growth in digital. Brian Murray and the team are at a relatively early stage of the development of audio boards and the proliferation of audio devices for the home will only increase the demand for our content. I'm not sure that all investors have yet comprehended the full value of that digital opportunity. As for the resonant titles in a successful catalogue, there was Didn't You See That Coming by Rachel Hollis, The Happy In A Hurry Cookbook by Steve Doocy, The Greatest Secret by Rhonda Byrne, Frontier Follies by Reed Drummond, and the continuing strong demand for Magnolia Table by Joanna Gaines. And then, in January, there was Bridgerton. We have the series of nine Bridgerton books by Julia Quinn, which are prospering given the popularity of the eponymous series, for which a new series has recently been announced. In all, revenues at HarperCollins ascended 23% in the quarter, and segment EBITDA surged 65% over the prior year. Dow Jones also set records this quarter, including having his highest absolute EBITDA since News Corp acquired the company in late 2007, with segment EBITDA up 43%, while the New York Times eked out a 1% increase. Digital advertising expanded 29%, the highest quarter in Dow Jones history, while digital advertising at the New York Times fell by 2%. Print was challenged during a pandemic period in which distribution was compromised. But overall advertising was down just 4%, comparing dramatically with the New York Times, where it slumped 19%. In our professional information business, risk and compliance continues record of extraordinary expansion, with year-over-year revenue growth accelerating to 21%. Q2 marks risk and compliance 22nd consecutive quarter of double-digit revenue growth year-over-year. Given international tension, with both the US and China imposing controls on companies, and with a new administration in the US inclined to tougher regulation, how bright are the prospects for risk and compliance? If anyone on this call works for a company that is not yet a client, I'd suggest that you remedy that dereliction. Traffic and subscribers across Dow Jones properties are surging and Elmar and the team are determined to make the most of the opportunity. WSJ digital only subscriptions were up 28% and MarketWatch also had a successful digital subscription launch in Q2. We have always insisted that our strategy is to upsell at Dow Jones given our non-parade portfolio. And so it's worth noting that more than 70% of those MarketWatch subscribers chose a bundle that included a subscription to Barron's. As for traffic, average monthly unique users across the Dow Jones Digital Network were up 48% in the quarter, reaching 127 million, driven by 64% growth at both the Wall Street Journal and Barron's. In subscription video services, our strategy to reshape the Foxtel Group as a next generation subscription business is clearly gaining traction with total closing paid subscriptions increasing 12% and setting a new record of over 3.31 million. OGC now accounts for 40% of Foxtel's paying subscriber base with more than 1.3 million streaming subscribers. The actual growth rate in streaming subscribers was over 90%, driven by the strength of Binge, which launched last May, and the continued expansion of Kayo. In the past, there has been scepticism about whether we could transition from our reliance on traditional broadcasts, but those concerns have proven unfounded, and Foxtel is now accompanied with a diverse portfolio and much momentum. I would like to repeat that EBITDA at the subscription video services segment for the quarter rose 77% on the same quarter last year. And for the first half segment, EBITDA was 34% higher. Growth has been crucial for that success. But we have a leadership team at Foxtel steered ably by Siobhan McKenna and Patrick Delaney that has been absolutely focused on reviewing every aspect of the company's performance and diligently reducing costs where appropriate. That insight, foresight and discipline have contributed to the transformation of the company and given us a powerful platform and much optionality for the future. We have now secured long-term rights to the three most popular sports in the country, Aussie rules, rugby league and cricket, which had outstanding success in the summer with the tour of the triumphant Indian team. Record after record was set on a cricket pitch and on the screen, whether the traditional screen or a digital device. And that multi-platform future is now secure with both Australian rules and rugby, thanks to our partners at Telstra. Over 3 million life past customers will have the opportunity to transition to K over the coming months so that they can watch their teams when they want to watch, how they want to watch, where they want to watch and on whatever device they want to watch. This is a monumental moment for Foxton. Our news media segment also contributed meaningfully to news cause profitability this quarter with digital ad growth in the UK and at the New York Post. indeed indicated that the New York Post was on a path towards profitability, and it certainly achieved that goal in the second quarter. Our task now is to ensure its long-term profitability, given the challenges in that sector. Digital ad growth at the Post was 64% up year over year. For the quarter, digital advertising accounted for nearly 90% of the total. Page views at the Post were up 37%. It was also a quarter in which the Post recorded a significant victory for all media, for the freedom of the press, by standing resolute and principled against censorship imposed by Twitter. Ultimately, Twitter realised it had made an egregious mistake and thankfully reversed its decision. Our journalists are not lapdogs with laptops. Our journalists are not stenographers. Our journalists are not woke. Our journalists are awake to their profound responsibilities. In Australia, We were fortunately ahead of the curve in transitioning many of our local and regional print properties to digital platforms, which helped them weather the storm of lockdown. Our Australian leadership under Michael Miller was disciplined in reducing costs and yet remained ambitious for our news platforms during this time of transition for journalism. And Rebecca Brooks showed real leadership in the UK across our vastness, like the Sun and the Times, in our emerging digital businesses, and at wireless, our radio network, which reached nearly 5 million listeners. In both Australia and the UK, we are using our skills in video and audio to enhance our traditional platforms. And that is clear at Times Radio, which is an extension of a newspaper founded in London in 1785. On these calls, I have often referenced the ongoing debate with what is loosely called big digital. I personally regard that moniker as a euphemism. We are in a pivotal moment of those discussions in Australia, where new regulations and new terms of trade will be introduced. But that debate now extends across the globe. There is not a single serious digital regulator anywhere in the world who is not examining the opacity of algorithms, the integrity of personal data, the social value of professional journalism, and the dysfunctional digital ad markets. This has been an imperative for New School for far more than a decade. I gave evidence to the House of Lords in London on this very subject in 2007. And it has been an imperative because we truly care about the social value of journalism and we believe that the social value has a commercial value. This enduring often solitary campaign would not have been successful without the fervent support of Rupert and Lachlan Murdoch and the New School Board. We expect... that the new tech topography will benefit our company's financial fortunes. That is for certain. And it will also have a material impact in not only the countries in which we operate, but in every country. An ambitious, inspired young woman starting a digital news site in Nigeria or in Birmingham, England or Birmingham, Alabama now has a far better, a far, far better chance of sustainable success. Finally, I want to thank all who have contributed to the singular success of News Corp in this historic quarter. That would be all our employees who have contributed each day in courageous, compassionate ways. I salute those individuals for what they have done and for what they continue to do for the company and for their communities. Thank you. While the macro environment remains unpredictable, our goal is to ensure that Newscore is best positioned for long-term success and that our value is absolutely appreciated by investors. And now I hand you to Susan Pediccio for some wise words.

Thank you, Robert. Fiscal 2021 second quarter total revenues were over $2.4 billion, a decline of 3% versus the prior year, while total segment EBITDA was $497 million, up 40% year-over-year, reflecting strong performances across all of our peer reportable segments, driven by a combination of improved operating trends and cost reductions. This was the highest quarterly segment EBITDA since the company was formed in 2013. On an adjusted basis which excludes the impact from acquisitions and divestitures, most notably the sale of News American Marketing in the fourth quarter of fiscal 2020 as well as currency fluctuations and other items disclosed in our release, revenues rose 2% while total segment EBITDA grew 39%. Net income for the quarter was $261 million compared to $103 million in the prior year. For the quarter, we reported diluted earnings per share of $0.39 as compared to $0.14 in the prior year. Adjusted EPS was $0.34 in the quarter compared with $0.18 in the prior year. Turning now to the operating segments, digital real estate services segment revenues were $339 million, an increase of 15% compared to the prior year, which is more than double the rate in the first quarter, driven by another record quarterly performance for MOVE. On an adjusted basis, revenues increased 11%. Statement EBITDA rose 20% to $142 million or 19% on an adjusted basis despite higher assessment spending which was in contrast to the first quarter. Results also included $6 million of costs associated with moves acquisition of Avail and the Alara transaction at REA. Moves operating results accounted for over 75% of segment revenue growth and approximately 80% of segment user data growth this quarter. Moves revenues accelerated to $155 million, a 28% year-over-year increase, with real estate revenues rising 30%. As Robert mentioned, realtor.com traffic reached 80 million average monthly unique users, reflecting an increase of 37% year-over-year, with growth in December accelerating to 44%. Monthly average lead volume remained very strong, growing over 30%. Like the first quarter, we saw strong growth in the performance-based referral model which accounted for approximately 30% of total move revenues in the quarter, benefiting from the growth in lead volume, higher home prices and real estate transaction closes. Not only did we see an acceleration in the revenue growth of the referral model this quarter compared to the prior quarter but we also saw growth in Connection Plus, our traditional lead generation product driven by strong customer demand enabling improved pricing and higher sell through. As our referral revenues are recognised upon transaction closures, only around 20% of the associated revenues from leads generated in this quarter are reflected in the results. This provides a strong pipeline through the balance of the year assuming continued favourable housing conditions. These results are very encouraging and we remain focused on expanding our addressable market through the integration of key ancillary services including our Rocket Mortgage Partnership. MOVE contributed $19 million to the segment EBITDA growth this quarter versus the prior year, driven by the strong top line growth. As we had previously indicated, we are increasing our investment levels in real estate given the rapid performance in leave volume and further expansion into adjacencies. Revenues at REA Group rose 6% to $184 million, reflecting a $12 million or 7% benefit from currency fluctuations. COVID-19 restrictions eased during the quarter, including the removal of property inspection restrictions in Melbourne. Residential listings for the quarter rose 10%. including 25% growth in Metro Melbourne and 13% growth in Sydney. And new developer project launches increased 12% on the prior year. REA's results benefited from growth in residential debt revenues, which was offset by declines in commercial and Asia. It also is worth remembering that as a consequence of COVID, REA did not implement a price increase in July. Please refer to REA's earnings release and their conference call following this call for more details. Turning to subscription video services segment, revenues for the quarter were $511 million, up 2% versus the prior year, and included a $33 million or 7% positive impact from currency fluctuations. Adjusted revenues were down 5%, an improvement on the Q1 decline of 7%, benefiting from moderating broadcast subscription revenue declines and the expansion of OTT revenues. Foxtel's closing paid subscriber base reached over 3.3 million as of December 31, up 12% year-over-year, with OTT expanding to over 1.3 million paying subscribers, close to double the prior year's number, with KO reaching 624,000 and Binge at 431,000 paying subscribers. KO subscribers declined slightly quarter over quarter due to seasonality but the decline was much less pronounced than last year as the business successfully managed the transition from winter to spring and summer sporting codes underpinned by the exclusive cricket content. Residential broadcast subscribers declined about 11% to approximately 1.8 million, relatively consistent with last quarter. Commercial subscribers declined 18% year-over-year to 218,000 with the trend improving sequentially having bottomed out at 86,000 in the fourth quarter of fiscal 2020 as a consequence of the pandemic. Broadcast churn was somewhat elevated at 17.5% versus 16% in the prior year impacted by a strategy to reduce promotional offers which resulted in the roll-off of lower ARPU subscribers. The financial benefit is reflected in a 3% increase in ARPU to almost 80 Australian dollars. Segment EBITDA improved 77% to $124 million. The continuing cost transformation at Foxtel, designed to right-size the cost base, was the driver of profitability. Total cost declined approximately 10%, including $35 million of lower sports programming rights and production costs, which was primarily driven by savings from renegotiated sports rights. partially offset by the $20 million negative impact related to the deferral of these costs from the fourth quarter of fiscal 2020. Expenses also benefited from lower entertainment programming costs and lower overheads. Some of the cost benefits are timing related which will reverse later in the year. I will touch on these later. Moving on to Dow Jones, Dow Jones delivered its highest revenue quarter since separation in 2013 and its highest segment EBITDA quarter since News Corp's acquisition in 2007. Revenues for the quarter were $446 million, up 4% compared to the prior year with digital revenues accounting for 70% of total revenues this quarter, up 6 percentage points from the prior year. Circulation revenues rose 8% due to growth in digital circulation revenues partially offset by lower single copy and amenity print volume still impacted by COVID-19. As Robert mentioned, Dow Jones again achieved record subscriptions in the quarter, with average subscriptions to its consumer products for the quarter exceeding 4 million, up 18% from the prior year, and off that, digital-only subscriptions were over 3 million, up 29% year-over-year. For the Wall Street Journal, there were 3.2 million average subscriptions for the quarter, up nearly 19% from the prior year, with digital-only subscriptions growing 28% to nearly 2.5 million. Revenues from Dow Jones Risk and Compliance grew 21%, which was a faster growth rate than the past three quarters. Overall, professional information business revenues rose 4%. Advertising revenues which accounted for 26% of revenues this quarter declined just 4% to $115 million, a marked improvement from the 17% decline last quarter. As Robert mentioned, we had another record quarter for digital advertising with 29% growth and digital accounting for 58% of advertising revenues for the second quarter. We saw growth in all categories, particularly in technology. Print advertising revenues declined 29% year over year which was an improvement from the 39% decline in the first quarter. Dow Jones segment EBITDA for the quarter rose 43% to $109 million with margins expanding to over 24% and up almost 7 percentage points versus the prior year. Costs declined almost 5% this quarter due to lower print volumes and other discretionary savings. At book publishing, HarperCollins posted 23% revenue growth to $544 million and a 65% segment EBITDA growth to $104 million, marking the best quarterly performance in its history. Revenue growth was strong across all categories with double-digit gains. Robert mentioned the depth of the front list this quarter which included strong performances from numerous authors including Rachel Hollis, Rhonda Byrne, Ree Drummond, Joanna Gaines and David Mullins among others. Similar to what we saw in the past two quarters, we are continuing to benefit from a strong rebound in e-books with overall digital sales up 15% year-over-year. E-book sales increased 21% year-over-year with gains in all categories while downloadable audio books increased 10% year-over-year. We've continued to see higher online sales and in particularly benefited from strong orders from Amazon and other e-commerce platforms during the holiday season. But perhaps more importantly, we are seeing very strong consumption levels, likely benefiting from stay-at-home measures and a continuous flow of new content. Revenues increased at low double digits across the backlist, notwithstanding they contributed 55% of sales this quarter, down from 58% last year due to the larger mix of the front list titles. HarperCollins again demonstrated strong operating leverage despite a 16% increase in costs in part due to royalties and higher production expenses related to the successful top-line performance. Margins improved by almost 5 percentage points. Turning to news media, despite ongoing challenges, we remained focused on right-sizing the cost base and moving towards digital, helped by a moderation in advertising revenue trends. Revenues for the quarter were $573 million down 29% versus the prior year of which the impact from the divestment of News America marketing accounted for the majority of the decline. On an adjusted basis which excludes the impact from the divestment of NAN and Unruly and the other items mentioned in our release, revenues declined 9% which is an improvement from the 16% decline in the first quarter. The decline also reflects $34 million or 4% negative impact from the closure or transition to digital of certain regional and community newspapers in Australia. Circulation and subscription revenues rose 5% with a $9 million or 4% benefit from currency fluctuations, strong digital paid subscriber growth and cover price increases offset lower newsstand sales related to COVID-19. Overall, the year-over-year trends in local currency were better with both the UK and Australia compared to the first quarter. Circulation revenues accounted for 45% of total segment revenues and were slightly higher than advertising this quarter as the mix of revenues become more reoccurring and predictable. Advertising revenue fell $231 million or 48% on a reported basis of which $191 million or 40% was from the sale of News America marketing and $28 million or 6% was related to the negative impact from the closure or transition to digital of certain regional community titles in Australia. The remainder of the decline was due to the overall weakness in the print advertising market On a positive note, the New York Post continued to outperform with advertising revenues up 23% and as Robert mentioned, digital advertising up 64%. In fact, digital revenues at the New York Post exceeded 50% of total revenues this quarter and overall the New York Post had its highest digital revenues since 2013. Segment EBITDA for the quarter was $66 million stacked with the prior year despite the $22 million one-time benefit in the prior year related to a settlement of certain warranty related claims in the UK and the absence of the modest contribution from News American Marketing. Adjusted segment EBITDA increased 5% which included a $5 million positive contribution from the New York Post. I would now like to talk about some themes in the upcoming quarter and the second half. Overall, we expect to see some slowdown in the second half results, with forecasting remaining particularly challenging given the ongoing global COVID-19 pandemic. At Digital Real Estate Services, as REA noted, national residential listings in Australia for January were flat to the prior year. Results will reflect a small loss related to the consolidation of Alara Technologies in the second half. Please refer to REA's press release and earnings call for more details. At Move, we remain encouraged by the traffic and lead volume trends which are expected to drive higher revenues in the second half despite the historically low listing volumes across the industry. We expect these higher revenues to fund at least $40 million of additional reinvestments in the second half compared to the prior year in areas such as brand marketing and product development as we focus on gaining market share and expanding into adjacencies. In subscription video services, we have seen broadcast churn continue to increase due to the ongoing focus on ARPU and seasonal trends with the end of winter sports. However, CAO has remained resilient and our OTT subscriber growth, led by Bing, remains strong. We expect EBITDA results in the second half to be more challenged due in part to the lapping of the prior year cost savings. As a reminder, fiscal 2020 fourth quarter results included a $70 million cost benefit due to the deferral of sports rights and production costs related to COVID-19. We now expect full year overall cost declines, given the better than expected revenue performance, to be more modest than we had initially expected, with a net reduction of less than $100 million Australian dollars. This includes approximately $80 million of higher sports costs in the second half of fiscal 2021, particularly in the fourth quarter compared to the prior year period. At Dow Jones, overall revenue trends remain favourable compared to the prior year, including strong digital advertising growth. As we look to the rest of the year, we continue to expect to reinvest in the business as we focus on driving revenue growth through its digital assets and expect second half expenses to increase modestly compared to the prior year. In addition, third quarter will face a more difficult digital advertising growth comparison. In book publishing, overall industry trends remain favourable, but we continue to monitor closely the sustainability of recent consumer spending patterns, such as the increase in free time for consumers to read and the increase in the average number of books purchased. The second half comparables will be tougher, particularly in the fourth quarter, given the material outperformance last year and as we lapped some of the initial benefits at the outset of COVID-19. At News Media, the ongoing national lockdown in the UK and domestic travel restrictions in Australia continue to put pressure on print circulation, especially weekday newsstand sales, and are also creating increased uncertainty on advertising spend across most categories. Cost declines in the second half are expected to moderate from the first half rate as we lapse some COVID-19 saving initiatives, as well as the divestment of News America marketing and the closure or digital transition of some of our newspapers in Australia in the fourth quarter. In our other segment for the second half, we expect at least a $50 million increase in costs driven by a combination of higher equity comp related to the stock price performance and the absence of the bonus reductions across the senior executive team in the prior year in response to COVID-19, as well as additional costs related to the implementation of the global shared services initiative. With that, let me hand it over to the operator for Q&A.

Thank you. And 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 mute function is turned off to allow your signal to reach our equipment. If you find your question has been answered, you may remove yourself by pressing star 2. As a reminder, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. And we'll go ahead and take our first question from Alexia Quadrini from JP Morgan. Please go ahead.

Hi, this is Zou Pan on for Alexia. Thanks for taking our question. Digital advertising at Dow Jones continues to outperform some of your peers. And I'm wondering if there's any further color you can give on why you think you're doing relatively quite well on that front. Is there a vertical skew or specific advertising products driving the outperformance? And then just on Foxtel, you know, with better results at the segment due to the streaming products, what indicators or trends are you looking for to determine the next steps for that asset? Thank you.

Well, first of all, Dow Jones, we have a great team at Dow Jones. Josh Finch-Gomel, Chief Revenue Officer, has done a sterling job in developing our digital ad expertise. And that's across WSJ.com, MarketWatch, Barron's and beyond. And the increase is... been across categories, but also in new categories in custom advertising. And it's clear that if you want not just a safe space, but a space that is brand enhancing and an audience that's the most influential in the world, and dare I say it, rather well-heeled, then Dow Jones has comparative advantages. Just one broader point to bear in mind with the imminent death of the cookie, our vast audience in the US for example will be particularly valuable and Dow Jones is a significant component in that. When you add together the uniques across our US businesses and this is not de-duping as you can tell from the number but we have close to 350 million monthly uniques. So that's an advertising audience that's important for Dow Jones but for all our properties.

I think just to add to Robert's comments, we also under Josh who leads the sales team at Dow Jones have been very focused over the past 18 months on improving our ad tech capabilities, upskilling the sales force and improving yield management which we now believe we're starting to see the benefit of in addition to obviously the audience growth. Just in relation to the second question for Foxtel. When we think about the trends that we're looking at and the next steps for the assets, well, clearly OTT will be an ongoing focus for us in that business, as well as the facility in Broadcast, as the team focus on the management of the base subscribers within Broadcast. And they are clearly focused on costs as well. They've done a tremendous job in the first half or really over the last 10 months since COVID started in taking out some of the underlying costs of the business, the renegotiation costs. sports and entertainment contracts. But we'll be particularly looking forward to the growth within the OTT properties.

And to complement Susan's comments, let's consider how the Foxtel narrative has changed. The questions we were being asked a couple of quarters ago were whether we would need to put extra capital into Foxtel and then we were asked whether some SPAC wanted to buy out more speculation than speculation. And the truth is that the successful development of the business has given us real options And our immediate task and the team's task is to keep driving the business, to keep striving. We've obviously made a fairly successful migration to streaming up 90% year on year. And we obviously have – it's with KO and Binge. And we obviously have more work ahead. But the path to the future is certainly paved with possibility.

Thank you, Zilu. Thanks, Zilu. Ali, we'll take our next question, please.

You bet. We'll go ahead and hear from Kane Hannan from Goldman Sachs. Please go ahead.

Morning, guys. Congratulations on the result. Just two for me. Firstly, just the move revenue outlook. You're talking about $40 million of incremental investment. You're seeing strong traffic growth. You won't have the agent concessions in the fourth quarter. Do you think it's possible that that revenue growth continues to accelerate in the second half? Or just how should we think about the revenue trends? And then secondly... Just on the global shared services initiative, I think it was $100 million bucket you were talking about as a full year result. Just given some of these increasing investment you were talking to in the second half, just interested how we should be thinking about that program in FY22 and whether there's any change to those sorts of targets.

I might take those questions and Robert can add and supplement as he will. Just in relation to the sustainability of MOOC growth, we remain very confident in the growth of the business and are encouraged by the traffic and the lead volumes as we talked about in our pre-prepared remarks, notwithstanding the industry listening volumes remain at historically low levels. We do expect with the revenue growth that costs will increase and I think the interesting thing to note when we think about the results of this quarter versus the first quarter, actually the costs increased this quarter and so it was really top line revenue growth that was dropping down to the bottom line. So we do think that the revenue growth will continue and we do want to scale up those costs in the reinvestment areas that I mentioned, marketing and product development. Just in relation to shared services, we did quote $100 million for financial year 22. We're still holding that number at this stage notwithstanding the cost work that we've done across the business. We do still think that there are enormous opportunities but it will require obviously a lot of work and reconfiguration of our systems in order to unlock those savings but at this stage the guidance is still $100 million for financial year 22.

Just to supplement Susan's thoughts. particularly on Move, clearly we have to be somewhat cautious in the second half of the year simply because of the complications of COVID. There's a lack of visibility for many of our businesses, and you can see that reflected in our words today. We're certainly taking nothing for granted despite the excellence of the Q2 results. But at Move, The signs are positive, at least in January. David and the team at Realtor, with January normally a slower month, unique users rose 37% to 94 million, and the lead volume remained robust. Those are indicators, but we are taking nothing for granted.

Thanks, Scott. Thank you, Kane. Allie, we'll take our next question, please.

Yes. Next, we'll hear from Ensho Rakofsky from Credit Suisse. Please go ahead.

Hi Robert, hi Susan. I've got a couple. Firstly, within news media, obviously significant cost reductions in the quarter. I'm just interested in whether you can make any comments about the extent to which those cost reductions are permanent. You obviously indicated that print circulation may be challenged in future quarters, so I don't know if that just results in lower print costs which may come back down the track. and whether you in fact see further opportunities for cost reductions within that division. And then second question is around SVS. Following the announcement of the Telstra LivePass users transitioning to KO, Do you have a sense for how many of those circa 3 million users do you expect will transition and do you have any projections you're willing to share around how many of those you'd expect to hold on to after that promotional period is over?

Andrew, maybe if I start with your first question just in relation to news media. Obviously there's been a lot of cost work that's been done and you're right. Some of that is obviously volume related and some of that will scale up and down depending on how those businesses trade in light of COVID. But there are also significant permanent cost reductions that the teams have been working on. We've had significant reduction in headcount that came through in the back end of last fiscal year that is obviously flowing through here. But we do have a lot of costs that have come out in the overhead space as well. Now some of that naturally will come back in as the businesses open up but we would also hope that some of that may be permanent as we change the ways that we work going forward. We also had in the back end of last year significant reductions in marketing expenditure within news media. We would expect to see some of that start to come back in but not necessarily the levels that we've seen. So I think a balance of both as we work forward and I do think actually that there are still permanent cost reduction opportunities that the businesses are working on within that segment. A lot of that is to do with the restructuring of the business and the reconfiguration and the teams are actively working on that.

And as for the transition from live pass to CAO, this is obviously an extraordinary opportunity for Foxtel and our partners at Telstra will be doing everything they can to encourage their users to make that migration. There are around a total of 3.2 million live pass members. For those who are interested in Aussie rules or rugby or football, any of the many sports on KO, this is an extraordinary opportunity to be able to watch a world-class streaming operation at work. And those who have used KO and have experienced its ability to not only show one game but many games simultaneously, that experience is definitely compelling. And so we believe that A very large number of live pass subscribers will make that migration, but it's so early in the process that at the moment we don't want to put numbers out there. But with the imminent start of the winter sports seasons in Australia, I think you'll soon see the metrics in coming months and we'll be able to update you next quarter.

And I think, Andrew, the only other thing to add to that would be that as we think about this exciting opportunity that Foxtel now has, it will scale clearly more from year one, given the introductory offers. So, whilst we would expect subscriber numbers to pick up, we'd expect the actual impact on revenue and EBITDA to be more back-ended from year one onwards.

Got it. That's very useful. Maybe just a very quick follow-up. Do you know if there's much overlap at the moment between the existing CAO subspace and the LifePath users?

It's relatively small, Andrew. Well below 80%. Thank you.

Thank you, Andrew. Allie, we'll take our next question, please.

Thank you. We'll now hear from Craig Huber from Huber Research Partners. Please go ahead.

Thank you. Susan, I wanted to hear a little bit further about the costs within your subscription video services just in the remaining part of the year, maybe as we think up the next fiscal year. Anything out of the ordinary there you want to call out further that you haven't already touched on?

I guess probably the easiest way to maybe frame the cost in the second half is I expect them to be broadly in line with the cost for the first half, which is net of any of the movements that we've obviously talked about with the deferrals of sports rights. With the remainder, we are reminded that the full year cost will absorb approximately $156 million Australian dollars of additional costs year on year due to the deferrals of those sports costs. So I think that the underlying cost work that as I said the Foxtel team has done is starting to pay dividends but clearly we've got this double up of sports rights in the current year. But the frame I would say broadly speaking in line with the first half.

And my follow-on question, if I could quickly ask, if you think about the next fiscal year, is there any large sports programming contracts up for renewal that might have a significant jump, which take into account our models, the next fiscal year?

No, we've obviously just executed the renewals of the AFL and NRLs. We have those deferred out to now 2024 and 2027, and we're not expecting in the next financial year significant step-ups from an overall basis.

Great. Thank you.

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

It appears we have no further questions. That does conclude our question and answer session for today. I would now like to turn over to our speakers for any additional closing remarks.

Well, thank you very much, Allie, and thank you all for participating. We look forward to talking to you soon. Have a great day and stay safe. Take care.

And with that, that does conclude today's call. Thank you for your participation. You may now disconnect.