Digital Subscription Trends And Dow Jones Transformation Will Redefine Media

Key Takeaways

• Divestiture of Foxtel and strategic stakes in sports streaming and digital real estate enhance optionality, set up aggressive investment opportunities, and strengthen recurring revenues.
  
• Explosive digital growth, AI-driven monetization, and unique premium content position News Corp for significant gains as demand for trustworthy digital media intensifies.
  
• Structural decline in print, digital revenue challenges, erosion of trust, and tech platform dominance threaten News's profitability, audience retention, and long-term competitive positioning.

Catalysts

A media and information services company, creates and distributes authoritative and engaging content, and other products and services for consumers and businesses worldwide.

• Analysts broadly agree that the Foxtel divestiture strengthens the balance sheet, yet the true impact may be much greater as the freed-up capital, improved credit rating, and dramatically increased optionality allow for multiple strategic investments, aggressive buybacks, or even transformative acquisitions, which can accelerate both revenue growth and net margin expansion well beyond current forecasts.
  
• Analyst consensus sees DAZN as a potential earnings growth lever, but News Corp's 6% ownership in a rapidly scaling sports streaming platform positions it to benefit from a 'Sportify'-like inflection, possibly unlocking outsized value as global sports media consumption surges and delivering significant equity upside and recurring earnings contributions over time.
  
• News Corp's increasingly dominant position in digital real estate (with REA and Realtor.com leading by wide margins in user engagement and market share) sets the stage for accelerating monetization of these platforms, particularly as audience network effects and new adjacency revenue streams drive EBITDA margin expansion and double-digit revenue growth when property markets rebound.
  
• The explosive growth in digital subscriptions and ARPU within Dow Jones and News Media segments, aided by AI-driven pricing and personalization, enables compound annual subscriber and revenue per user growth-fueling stable, high-margin, recurring revenues and higher operating leverage as digital becomes an even greater share of the mix.
  
• News Corp's world-class premium content and leading brands make it a uniquely attractive partner-and gatekeeper-for major AI and tech platforms needing high-quality, fact-checked media for training and reference, positioning the company for exponential, high-margin licensing revenues and value creation as the global shift toward trustworthy digital information accelerates.

News Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on News compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming News's revenue will decrease by 2.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 4.5% today to 7.9% in 3 years time.
• The bullish analysts expect earnings to reach $757.7 million (and earnings per share of $1.34) by about July 2028, up from $467.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 40.2x on those 2028 earnings, up from 35.6x today. This future PE is greater than the current PE for the US Media industry at 20.2x.
• Analysts expect the number of shares outstanding to decline by 0.43% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.72%, as per the Simply Wall St company report.

News Future Earnings Per Share Growth

Risks

• The continued decline in print media consumption, especially as digital-native generations age, poses a structural risk to News's traditional revenue streams and will likely result in shrinking revenue and margins from legacy print businesses.
  
• Increasing digital content saturation and consumer fatigue with subscription models threaten to fragment audiences across News's online businesses, leading to higher customer acquisition costs and difficulty sustaining digital subscription growth, which could pressure both revenue growth and EBITDA margins over the long term.
  
• News relies heavily on legacy print and consumer news brands such as Dow Jones and the Wall Street Journal, and although digital subscriptions are up, lower profitability from digital offerings and the slow pace of innovation in digital monetization puts sustained top-line growth and net margins at risk.
  
• The proliferation of misinformation and eroding trust in mainstream media demands significant investment in editorial credibility and fact-checking, raising operating costs and complicating audience retention, with potential negative effects on profitability and increasing SG&A expenses.
  
• Dominance of large tech platforms in digital advertising, accelerated use of AI-powered news aggregation, and industry consolidation all decrease News's ability to capture advertising revenue and sustain audience engagement, likely impacting long-term revenue and competitive positioning.

Valuation

• The assumed bullish price target for News is $45.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of News's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $45.0, and the most bearish reporting a price target of just $26.5.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $9.6 billion, earnings will come to $757.7 million, and it would be trading on a PE ratio of 40.2x, assuming you use a discount rate of 6.7%.
• Given the current share price of $29.43, the bullish analyst price target of $45.0 is 34.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.