News Corporation

Welcome to News Corp's third quarter fiscal 2023 earnings conference call. Today's conference is being recorded. Media will be allowed on a listen-only basis. At this time, I would like to turn the conference over to Michael Florin, Senior Vice President and Head of Investor Relations. Please go ahead.

Thank you very much, Operator. Hello, everyone, and welcome to News Corp's fiscal third quarter 2023 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 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 the earnings release for the applicable periods posted on our website. With that, I'll pass it over to Robert Thompson for some opening comments.

Thank you, Mike. Before discussing our results for the third quarter of fiscal year 2023, it is particularly important to begin by noting that today marks the 44th day in captivity for Wall Street Journal reporter Evan Gershkovich, who was wrongfully, willfully detained in Russia. I would like to express our thanks in that of Elmar Latour, Emma Tucker and all at Dow Jones for the unstinting support shown for Evan and his family by the US and many other governments, media companies, journalism organisations and concerned, principled people around the world. We trust that justice and common sense will prevail and that Evan will soon be released. Turning now to the third quarter results. We began to see meaningful improvements compared to the prior quarter, with certain macro and sectoral trends more positive, and our cost-cutting program beginning to gain traction. For context, these earnings follow record revenues and profitability in fiscal 2022, and we have been confronting the challenges of foreign exchange volatility, a surge in interest rates, persistent inflation and ongoing supply chain disruptions. Our results demonstrate the fundamental differences in the character of News Corp compared with other media companies. In a period in which advertising activity was clearly insipid in certain parts of the world, our core non-advertising revenue was particularly robust, highlighted by a 38% increase in revenues at the Dow Jones Professional Information business. For the quarter, total revenues were over $2.4 billion, down only 2% year over year, as compared to the 7% decline in Q2. Adjusted revenues, excluding our acquisitions and distinctly unfavourable forex movements, equalled those of last year. Meanwhile, profitability was $320 million, down 11% despite a tough prior year comparison and the just articulated external pressures. As for the company-wide cost reduction drive, we are well advanced in taking the difficult but necessary step of reducing headcount by 5%, which is now expected to yield more than $160 million in annualised savings by the end of this calendar year. In addition, we are strictly scrutinising spending across all categories and expect further savings as we strive for efficiency and efficacy. There has been much discussion, some of it enlightened, some not so, about the potential impact of generative AI, and there is no doubt that it will profoundly affect the media business. Candidly, generative AI may pose a challenge to our intellectual property and to the future of journalism. As those who have experimented with ChatGPT will be aware, the answers are only as insightful and factual as the source material and are more retrospective than contemporary. Given those precepts, we see three areas in which our content will be used by generative AI creators whose products will be enhanced by our IP for which we should be compensated. Firstly, our content will inevitably be used, as has already been exploited, to train AI engines. Secondly, Specific examples of our content will be surfaced in response to users' AI queries. And thirdly, and crucially, our content will certainly be aggregated and synthesized, and those answers monetized by other parties. We expect our fair share of that monetization. Generative AI cannot be degenerative AI. The digital debate over content and journalism has evolved significantly in the past few years, and we appreciate the social and commercial commitment of our partners at Google, Apple, Microsoft and Meta. The A in AI cannot be ambiguity, nor can the I represent ignorance. Integrity would be more apt. Which brings us to Dow Jones, among the world's foremost and most trusted purveyors of business news, data, and analysis. The third quarter reflected its robust revenue generation, even in testing economic times. And as I mentioned, was highlighted by the burgeoning of our professional information business, which reported a 38% surge in revenues, including a 16% rise at our risk and compliance business. And that number was negatively affected by Forex fluctuations. Dow Jones has certainly benefited from the acquisitions of Opus and CMA, which continued their high-margin growth in recent months. We will be expanding their product offerings over the next year, with particular emphasis on renewables and carbon metrics, and we are confident of many years of strong growth ahead. Digital revenues accounted for 79% of all revenues at Dow Jones, a significant increase from the 60% level during fiscal 2018. Aside from the professional information business, digital subscriptions continued to grow, up 9% to 3.3 million at the Wall Street Journal and up 10% to 4.3 million at Dow Jones as a whole, with total subscriptions now at 5.1 million, despite print subscriptions obviously being under some pressure. The strong performance overall came despite an insipid ad market in the US, with continued weakness in tech advertising, though we did see an improvement in demand in April, so the auguries have improved. Dare I say, the failure of Silicon Valley Bank has been a catalyst for other US financial institutions to try to reassure customers and highlight their own solidity, and the Wall Street Journal, Barron's, and Market Watch are vital platforms for any financial firm aspiring to bolster its credentials. In Australia, Foxtel Group continues to build on its streaming success. Streaming now accounts for two-thirds of the total Foxtel subscription base, and that revenue growth is more than offsetting the decline in broadcast. Fears that our world-class streaming products would be a catalyst for cannibalisation have been unfounded. Broadcast churn is at near record low levels, with Foxtel retail churn in March under 10%. That success is also a tribute to our marketing and customer service teams at Foxtel and to the leadership of Patrick Delaney and Siobhan McKenna. As at the end of March, Binge, our entertainment streaming product, launched advertising on its basic service, adding a new lucrative revenue stream. Interest from advertisers has been ardent as the initial phase of packages were sold out. We have demand and seemingly some flexibility on pricing in the months and years ahead. After a couple of tough quarters, fortunes have certainly improved at HarperCollins, with a bevy of bestsellers and some moderation of supply chain snafus. Margins were higher in the third quarter compared to the first half. We also have an attractive roster of books in this and upcoming quarters, so we believe we are on a journey to the sunlit uplands. Amazon's orders improved in a quarter and our titles prospered. In particular, Ron DeSantis' The Courage to be Free, Barbara Kingsolver's Demon Copperhead, as well as Colin Hoover and Taryn Fisher's Never Never and Ben Hall's Saved. In the fourth quarter, Kat Timpf is already topping bestseller lists with You Can't Joke About That. If I could make a self-interested recommendation, it is worth a read or a listen. Last week, we also published the latest incarnation of the Magnolia Table cookbook. We are justifiably optimistic about the prospects for the Bridgerton prequel, Queen Charlotte, by Julia Quinn and Shonda Rhimes, which went on sale this week, coinciding with the launch of the new Netflix series. The news media segment reported a substantial improvement over the second quarter, with advertising in constant currency increasing 2%, though down 5% in US dollars. This increase was a vastly different outcome to that of most media companies in most countries. We are confident that our teams are more skilled in sharing advertising insights across borders and platforms, and that innate intelligence is reflected in our revenue numbers. One success story is the sun.com, where total page views in the quarter surged 94% year over year, reaching close to a billion views. The site, which has benefited from the partnership with the New York Post and our other US properties, has triumphed in tough times. And notably, the sun's US digital advertising revenues now exceed those of the British platform. In the UK, connected listing hours at wireless hit an all-time high, reaching an average of 8.4 million per week in the quarter, a 10% increase from the prior year, and reflective of our superb coverage of the Premier League, which reaches its seasonal crescendo in coming days, hopefully with an against-the-odds triumph by Arsenal. And as for the New York Post, the previously perennial lossmaker continued to be profitable in the third quarter and to build on its important influence on the national debate. Engagement at the Post's digital properties rose 4% over the prior year to 690 million page views in March, providing a powerful platform for its compelling content. At Digital Real Estate Services, obviously enough, the interest rate surge and accompanying uncertainty in the housing market have had an impact in the US and Australia, but these are not permanent conditions and the digitisation of the property market is far from complete. There were signs of improvement in the market this quarter, but we understand that the increase in rates has had an impact on affordability and created uncertainty for potential house sellers and buyers. When that uncertainty evaporates, we will be primed to take full advantage of the opportunity. In the midst of the challenges, Realtor is focusing on adjacencies, particularly on the sell side and rental segments. And we are continuing to see benefits from the use of our media platforms, among others the WSJ.com, New York Post and the US edition of The Sun to drive brand recognition and generate traffic. The results of that campaign were seen in the past quarter and we expect they will continue to be seen in coming quarters. Since the campaign began in February, the project has generated more than half a billion impressions and shown the unique power we have to bolster brands and turbocharge traffic. Realtor.com also further integrated Upnest into its seller experiences in Q3 and is seeing significantly higher conversion rates. At REA, revenues were softer in Q3 compared to the prior year due to the lower listing volume, though we are seeing encouraging signs with realestate.com.au reaching almost 132 million visits in March, the highest total in 16 months and the fifth highest on record. With indications that prices and demand are again strengthening in Australia, we believe we are poised to prosper. And that is also true in India, where Housing.com is the leading digital property platform and saw 21% year-over-year growth in average site visits in the quarter. It is worth noting this metric, as India has just passed China as the most populous country and continues to have relative political stability and enormous economic potential. As I said at the outset, there has been much tangible progress in the third quarter and the auguries are certainly positive for coming quarters. We will absolutely focus on our core engines of growth and prioritise simplification, cost reductions and thoughtful capital stewardship. We remain committed to constantly reviewing our structure and to creating enduring value for our shareholders. And now, to provide more insight into third quarter developments, I turn to Susan Panuccio.

Thank you, Robert. Our financial results this quarter demonstrated tangible improvements from the first half, which combined with the implementation of our aggressive cost actions should position News Corp well for fiscal 2024. Third quarter total revenues were over $2.4 billion, down just 2% year over year, which was a significant improvement from the second quarter rate and included a $98 million or 4% negative impact from foreign currency headwinds. Excluding the impact of foreign currency fluctuations, acquisitions and divestitures, third quarter adjusted revenues were flat compared to the prior year, with improving trends at the news media, subscription video services and book publishing segments, offset by the decline at digital real estate services segment. Advertising trends were mixed across our geographies. Total segment EBITDA was $320 million, 11% lower compared to the prior year's record Q3 profits. Results included $7 million of professional fees related to the proposed merger with Fox and the potential sale of Move. Adjusted total segment EBITDA declined 15% versus the prior year. For the quarter, we reported earnings per share of 9 cents compared to 14 cents in the prior year. Adjusted earnings per share were also 9 cents in the quarter compared to 16 cents in the prior year. Before I discuss the quarter, I wanted to provide an update on our headcount reduction program. Reductions across the business units will vary given the differing nature of our businesses and cost work done to date. We currently expect the annualised gross cost savings to exceed $160 million, up from our initial estimate of at least $130 million, with the majority of the savings to be reflected in fiscal 2024. We also expect to incur approximately $90 to $100 million of cash restructuring charges related to the headcount reductions in the second half of fiscal 2023. Moving on to the results of the individual reporting segments, starting with digital real estate services. Segment revenues were $363 million, down 13% compared to the prior year, impacted by the ongoing macroeconomic pressures on both the US and the Australian housing markets. The results include a negative impact of $13 million, or 3%, from foreign currency fluctuations. On an adjusted basis, segment revenues decreased 10%. Segment EBITDA declined 26% to $102 million impacted by lower revenues, the negative impact related to currency headwinds and higher costs related to REA India, partially offset by lower costs that move. Adjusted segment EBITDA declined 24%. REA revenues were $222 million which declined 10% on a reported basis or down 4% on a constant currency basis. The revenue decline was primarily driven by lower residential revenues and to a lesser extent softness in financial services. In the quarter, Australian national residential buy listings were down 12%, with Sydney and Melbourne down 20% and 18% respectively. Those declines were partially offset by the annual price increases in the residential and commercial businesses, increased uptake in premium products including Premier Plus, favourable depth penetration and another robust performance from REA India which maintained its audience leadership. Like our other businesses at News Corp, REA is taking steps to reduce expenses with a focus on discretionary operational spend and marketing costs. Please refer to REA's earnings release and their conference call following this call for more details. At move, revenues were $141 million, down 17% compared to the prior year. Real estate revenues were down 23%, driven by lower lead and transaction volumes, reflecting broader housing market challenges. Lead volume fell 30%, while realtors' average monthly unique users declined 24% to 72 million in the third quarter, based on internal metrics, yet up from the 66 million in the second quarter. Realtor has been focusing on optimising revenues via a prioritised set of initiatives, while managing operating expenses as the business weathers ongoing market headwinds. Initiatives include enhancing media advertising placements, including implementing a broader partnership with the businesses across News Corp, optimising lead allocation across markets, accelerating our go-direct path for new homes and building out the rentals vertical. Turning to the subscription video services segment, revenues for the quarter were $477 million, down 3% compared to the prior year on a reported basis due to foreign currency headwinds. On a constant currency basis, revenues rose 2% versus the prior year, the fifth consecutive quarter of growth in constant currency. Streaming revenues accounted for 26% of circulation and subscription revenues compared to 20% in the prior year, And again, more than offset broadcast revenue declines, benefiting from both volume growth and higher pricing at KO and Binge. Total closing paid subscribers across the Foxtel group improved to nearly 4.6 million at quarter end, up 6% year over year. Total paid streaming subscribers were approximately 3 million, increasing 16% versus the prior year and accounted for approximately 65% of Foxtel's total paid subscriber base. Paid subscribers for KO reached a record of over 1.3 million, up 14% year over year. Net ads from the prior quarter improved to 183,000, the largest sequential increase in seven quarters, with the start of the popular winter sports codes in March. Revenues also benefited from a price rise implemented in February. Binge-paid subscribers grew 22% year-over-year, or 109,000 net ads from the last quarter, to nearly 1.5 million subscribers, benefiting from the successful release of The Last of Us. As Robert mentioned, on March 30, Foxtel introduced advertising within the Binge Basic product. The product accounts for approximately 30% of all Binge subscribers. We expect a modest revenue contribution from advertising beginning in the fourth quarter. Foxtel ended the quarter with over 1.3 million residential broadcast subscribers. Broadcast churn continued to improve, down 200 basis points year-over-year to 12.3%. In fact, Foxtel retail churn was just under 10% for March 2023. Broadcast APU rose 2% to over $84 Australian. Segment EBITDA in the quarter of $68 million was down 14% versus the prior year. Adjusted segment EBITDA declined 9%, reflecting higher sports costs due to contractual escalators and enhancements. Moving on to Dow Jones. Dow Jones posted healthy top-line growth in the third quarter with revenues of $529 million, up 9% compared to the prior year. Digital revenues accounted for 79% of total revenues this quarter, up 3 percentage points from last year. Circulation and subscription-based revenues represented over 80% of total revenues, up 3 percentage points from the prior year, underscoring the stability and recurring nature of the revenue base. On an adjusted basis, revenues were flat, impacted by weaker advertising revenues compared to the prior year. We are continuing to see very strong momentum in our professional information business, with revenues rising 38% year-over-year, reflecting the acquisitions of Opus and CMA, coupled with strong revenues from risk and compliance. PIB revenues accounted for 37% of segment revenues. Risk and compliance revenues rose 16% despite a three percentage point negative impact from foreign currency, led by an increase in demand for screening and monitoring and financial crime search products. The pipeline remains robust, most notably in EMEA. Opus and CMA's strong revenue performance is helping reshape Dow Jones revenues to be more recurring as we have increased pricing across our customer base. As Robert mentioned, its carbon index offering continues to expand and we expect will lead to the creation of new products for current and new customers. Retention rates for Opus and CMA's products remained well over 90% in the quarter. Circulation revenues declined 1%. The modest decline was driven by lower print volumes and some softness in IBD. Total Dow Jones digital-only subscriptions grew 10% year-over-year or by 208,000 sequentially, the highest net add since the fourth quarter of fiscal 2021. The focus this year has been on the launch of bundles, which expanded to include IBD in the third quarter. Advertising revenues declined 14% to $88 million and accounted for 17% of Dow Jones revenues this quarter. Within advertising, digital fell 17% and print was down 8%, with notable impacts from the technology and finance categories, as we mentioned last quarter. While the advertising market remains challenged, we are seeing encouraging signs with the rate of decline abating. After hitting a low in December, each successive month showed an improvement with March notably down mid-single digits and we saw further improvements in April. Dow Jones segment EBITDA for the quarter grew 24% to $109 million as cost growth moderated from the first half, albeit the business is still experiencing the impact of inflationary pressures. The results also reflect the lapping of transaction costs related to the Opus acquisition last year. Segment EBITDA margins rose to over 20%. Adjusted segment EBITDA for the quarter declined 11%. At book publishing, revenues were flat at $515 million, driven by higher Christian book sales, offset by foreign currency fluctuations. After a challenging first half of the year, we saw some positive trends with stability in Amazon orders in North America following the reset in the first half, as well as stronger performance from several recent titles. Segment EBITDA declined 9% to $61 million. Costs rose approximately 1%, reflecting ongoing supply chain issues in North America, specifically in manufacturing, distribution and freight costs, which are now showing signs of moderation. The headcount initiative is well underway, which should result in lower employee costs in the fourth quarter. In the quarter, HarperCollins also settled a three-month long strike with the UAW. The backlist represents 60% of revenues for the quarter, up slightly from last year. Digital sales declined 3% this quarter and accounted for 23% of consumer sales in line with the prior year. On an adjusted basis, revenues rose 2% and segment EBITDA fell over 7%. Turning to news media, revenues were $563 million, down 3%, and included a $42 million or 7% negative impact on revenues from foreign currency fluctuations. Adjusted revenues rose 4%, improving from the prior quarter rate. Circulation and subscription revenues declined 4% but rose 4% in constant currency. Growth on a constant currency basis was driven by cover price increases in the UK and Australia and double-digit digital subscriber growth across News Australia and The Times and The Sunday Times. Advertising trends improved this quarter as advertising revenues were down 5% but gained 2% in constant currency. Advertising revenues at News UK rose 8% in constant currency, led by a strong digital advertising performance, which is continuing to benefit from the growing scale of the Sun.com in the US and an improved performance at the Times and Sunday Times. Advertising was flat at News Australia in constant currency and notably both Australia and the New York Post benefited from an improvement in print advertising this quarter. Segment EBITDA of $34 million declined 13%, reflecting a much more modest decline from the first half rate as incremental year-over-year investments related to the Talk TV initiative in the UK and other digital initiatives in Australia slowed to approximately $13 million. Newsprint costs remain a challenge, having $14 million of negative impact this quarter from higher prices. Those pressures were partially offset by ongoing cost-saving initiatives across the businesses. Adjusted segment EBITDA fell 5%. Turning to the outlook, as a reminder, last year's fourth quarter included an extra week which contributed $110 million to revenues or about 4% to revenue growth and will impact prior year compares. We continue to face some supply chain and inflationary pressures and advertising conditions remain uncertain. However, it is important to note that the company's exposure to advertising has materially declined as a result of the reshaping of our portfolio, including the acquisitions of Opus and CMA. In fact, advertising revenues represented only 16% of total revenues in the third quarter. Despite the extra week, a difficult prior year comparison and ongoing foreign exchange headwinds given current spot rates, we expect to see improvements in profitability in the fourth quarter as we continue to implement aggressive cost initiatives. Looking at each of our segments, at Digital Real Estate Services, Australian residential new buy listings for April declined 24%. Please refer to REA for more specific outlook commentary. At Move, like the third quarter, we expect lead volumes to remain challenged in the near term and we will continue to balance marketing spend and reinvestment in adjacencies with necessary cost reductions elsewhere. In subscription video services, we continue to expect the Foxtel Group's profitability in local currency for the full year to be relatively stable to the prior year, despite a step up in sports rights costs in the second half related to annual contractual escalators. At Dow Jones, we saw an improvement in advertising in April, albeit visibility remains limited as the prior year compares will be further impacted by the extra week in fiscal 2022. We expect the rate of investment spending to slow, which should lead to improved profitability in the fourth quarter. We have now fully lapped the Opus acquisitions in the third quarter and will lap CMA in June. In book publishing, April revenue trends were soft, consistent with industry data, but we expect cost pressures to start to moderate and are optimistic about our release slate, which, as Robert noted, includes Magnolia Table Volume 3 from Joanna Gaines and Queen Charlotte, a prequel to Bridgerton from Julia Quinn and Shonda Rhimes. At News Media, advertising trends remain volatile with limited visibility. We expect total segment cost decline in part due to lower incremental costs related to the Talk TV investment, which launched in April 2022, and we hope to see improved profitability for the segment. We have also seen moderating newsprint cost pressures in the UK. With that, let me hand it over to the operator for Q&A.

Thank you. We will now start the Q&A session. Please limit your questions to one per participant. If you have joined via the Zoom application, please use the raise hand functionality to ask a question. If you have joined via the audio line, please press star nine. Questions will be answered in the order they are received. We will now pause a moment to assemble the queue. Our first question comes from David Karnofsky from JP Morgan.

Hi, thank you. Robert, following up on your comments about generative AI, I'd be interested to get, you know, kind of your expanded view on how you think this tech is going to impact how consumers receive their news and information and what opportunities or risks that opens up for you in terms of your relationship with readers. And then, you know, maybe as a follow-on, what use cases do you see for the technology and the generation or repackaging of some of the news content you produce? Thank you.

David, a very thoughtful question. We're obviously at an early stage of the evolution of generative AI. It will have a profound impact. And I was recently in Tokyo seeing our teams. And in recent months, Harbacons Japan has been using sophisticated programs to create images for manga stories by transforming a sketch or a photo or just inputting words, three separate generative AI programs. you use an image from our library to create complete manga sets, obviously saving a lot of time and transforming potentially the character of that business. But it's not only going to have an impact on content, it will clearly have a profound impact on the management of the business, whether customer service or billing or whatever. One contradiction of any business is that the more you customize, the harder and more expensive it is to scale. that contradiction can be overcome with AI. I think as the well-known management consultant Socrates observed, the secret of change is to focus all of your energy not on fighting the old but building the new.

Thanks, David. Leila, we'll take our next question, please.

Our next question comes from Kane Hanan from Goldman Sachs.

Good morning, guys. Thanks for the question. Maybe just the cost down. I'm interested... I suppose some of the commentary there, particularly Dow Jones and then books was pretty positive on the top line outlook and how things have been improving. Just interested why the cost out target's been upgraded with that backdrop. And I suppose as a follow on to that, just what the net benefit of the cost out program was in the first quarter, if we think about all in with the restructuring charges potentially coming through. Cheers.

Kane, look, obviously the headcount reduction is about calibration, not celebration, but it's fair to say that the savings will exceed significantly the $136 million that we identified in the last earnings call and will now surpass $160 million. That's a tribute to the diligence of our teams undertaking difficult work. And to emphasise, that's just one element of the cost cutting that's underway at the company as we severely scrutinise everything from tech spend to travel expenses. So the total savings number next year will obviously exceed that total.

And, Cain, just to add, you know, our business units, they're quite experienced at identifying areas for improvement, and we can leverage those across the group as we look for cost savings, which is one of the reasons we've been able to drive additional cost savings. You know, we're not going to get into the details about sort of the net off of the cost savings, but we can expect that as we head into fiscal 2024 from Q1, we really would expect to see the majority of those cost savings hit the P&L.

Thanks, Cain. Leila, we'll take our next question, please.

This next question comes from Craig Huber from Huber Research. You may use star six to unmute, Craig.

Yeah, hi, Craig Huber. Thank you. I have a similar question on the cost. Obviously, you announced 5% headcount reduction three months ago, roughly about 2% of total costs. Can you quantify at all what the other cost savings you're talking about is? I mean, a few companies just reduce headcount and don't touch other stuff, and you guys are taking costs elsewhere. Can you quantify that for us? Is that possible?

We haven't quantified it, Craig, but what I can say is it cuts across lots of different areas. We're looking at discretionary spend, as you'd expect, office expenses, T&E. We have a look across our print sites and we're constantly looking for opportunities around our manufacturing plants and what we can do there. We look at our casual cost base with the variable costs. We have a look at marketing costs as well. So it's really a variety of costs that we continue to focus on. And as I've said, the businesses are pretty good at actually having a look at this now.

Thanks, Craig. Okay, thank you. Layla, we'll take our next question, please.

This next question will come from Darren Lung from Macquarie.

Hello, guys. Thanks for the opportunity. I just wanted to ask around the high printing costs and supply chain issues in books, please. So I think we had talked about it being a headwind in prior periods and looking at it, it looks like it's flat versus the prior year. Can you just give us a feel as to what we've achieved or what's changed in the business to sort of maintain that, please?

Actually, I think the costs are up year on year because we are still experiencing some of those supply chain pressures. I mean, what I would say is freight costs, we're seeing a moderating of that as, you know, we're seeing an easing of some of the supply chain pressures on shipping costs. But we are seeing enhanced paper costs still coming through, and we're seeing some additional fuel costs that are coming in because of the inflationary pressures. So it is a little bit mixed. We are seeing them moderating, but they have been up.

And so, Darren, just to supplement Susan, of course, what has been particularly prevalent over the past year is the change in purchasing rhythms at Amazon. And now that their reset has been reset, we have more confidence in the profitability of HarperCons and no doubt that the current crop of bestsellers will make a positive difference in coming quarters.

Thank you, Darren. Layla, we'll take our next question, please. Thanks, Darren.

Our next question comes from Alan Gould from Loop Capital.

Thanks for taking the question. Robert Susan, I'm always shocked how well the news media business continues to hold up. Two things on there. Can you give us a little more detail of what's happening with Talk TV and the plans to turn that profitably? And secondly, just shocked to see print advertising actually doing better than digital advertising this quarter. What is happening there?

Well, Eleanor, Talk TV, we've always said it will be a low-cost, high-quality project, and it will constantly review progress and technological developments that give us flexibility in delivery and reduce expenses. In the coming months, you should see that incremental costs are falling with a naturally positive impact on our earnings. And I have to say the venture has certainly enabled us to promote products across a plethora of our platforms and enhanced our video capability globally, given that we're able to slice and dice programs in different formats for different time zones. And as you can imagine, increasing our video expertise generally is a core priority for all our businesses.

And Alan, just on the print side, I mean, look, it has been a pleasant surprise and we've seen this over the last couple of years as it relates to print advertising. It really just depends on the categories. Down in Australia, they've seen a pickup in travel advertising, which has really helped down there as the markets have started to open up. They do get some good tailwinds from retail in different quarters as well. So it really is variable each quarter, but it's down to the different categories.

Thanks, Alan. Leila, we'll take our next question, please.

We'll take a follow-up from Craig Huber from Huber Research. Go ahead, Craig. Your line is open.

Yes. Sorry. Sorry about that. Your book revenues held up much better than we thought in the quarter. I mean, given the issues you guys have called out in the past about Amazon and warehouses and issues with them and stuff. Can you just talk through that or do you think that's all behind you now?

Craig, as I mentioned earlier, there clearly has been an adjustment at Amazon. That adjustment, as we understand it, is complete. And so those awkward moments are past. And now, really, it's down to the quality of the front list and expanding the impact of our backlist. For example, in the most recent quarter, backlist was 60% of sales. As you know, backlist generally is more profitable for us. And so now we have an opportunity to make the most of our excellent authors and our marketing potential.

And Craig, we're also, I mean, for April, we've just had the results come in and there has been a little bit of softness just in consumption. So we're still waiting to see where consumption settles down in the post-COVID world. But pleasingly, the results for Q3 were much better than the first half.

Thank you, Craig. Yes, thank you. Thanks, Craig. Layla, we'll take our next question, please.

At this time, we have no further questions, so I'll hand back to Michael Florin for closing remarks.

Great. Well, thank you, Layla, and thank you all for participating. Have a great day, and we'll talk to you soon. Take care.