News Corp (NWS) 2014 Q2 法說會逐字稿

Good day and welcome to the News Corp second-quarter earnings conference call.

(Operator Instructions)

Today's call is being recorded. 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, sir.

Thank you very much, operator. Hello, everyone, and welcome to News Corp's fiscal second-quarter 2014 earnings call.

We issued our earnings release about 30 minutes ago, and it's now posted to our website at www.newsCorp.com. On the call today are Robert Thomson, Chief Executive; and Bedi Singh, Chief Financial Officer.

We'll open with some prepared remarks from both Robert and Bedi. 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-Q for the three months ended December 31, 2013, identifies risks and uncertainties that could cause actual results to differ, and these statements are qualified by the cautionary statements contained in such filings.

Additionally, this call will include certain non-GAAP financial measurements. The definition of and reconciliation of such measures can be found in our earnings release and our 10-Q filing.

Finally, please note that certain financial measures used in this call, such as segment EBITDA, adjusted segment EBITDA, and adjusted EPS are expressed on a non-GAAP basis. The GAAP to non-GAAP reconciliation of these non-GAAP measures is included in our earnings release.

With that, I'll pass it over to Robert Thomson for some opening comments.

Thank you, Mike, and thank you, all.

With this quarterly report, we marked the first six months of our existence as the new News Corporation. And I would like to provide you with an update of the journey so far -- a journey which is certainly in its early stages.

The principles and goals we articulated during our Investor Day in June continue to drive our day-to-day decisions. We said then, and repeat today, that we want the sensibility and energy of a startup. That we will be conscientious in our cost cutting. And that we are determined to take advantage of the two great economic trends of our time: globalization and digitization.

Our aim is to have a single cost of content and to repurpose that content across platforms whether it be a real estate listing or a great news scoop, or a thriller; and whether the canvas be a mobile phone, a tablet, or a newspaper. That is how we leverage our strengths, and how we become far more than the sum of our parts.

The conceptual math aside, I would like to highlight a few telling figures ahead of Bedi's more extensive exposition. Direct comparables are, of course, awkward because the Company did not exist in this form a year ago. But our financial teams have done their best to make the comparisons meaningful.

Our second-quarter earnings show total segment EBITDA of $327 million, a 9% increase over the second quarter of last year. And adjusted net income available to News Corp stockholders was $179 million, compared to $178 million in the prior year. Adjusted earnings per share for the second quarter were $0.31, flat with the prior year. And free cash flow available to News Corp for the six months to end December was $217 million, an improvement of $393 million over the prior year.

It has been a period of particularly significant activity thanks to the extra focus that has come from being a smaller, more concentrated entity. There is certainly greater cooperation across the companies, with digital strategies and core infrastructure increasingly shared, and health and pension plans being consolidated.

Of the individual companies, Harper Collins has made particular progress in its digital transition, with adjusted revenues increasing 8% in the second quarter and e-book revenue rising almost 40%. It is invidious to highlight a single title, but why not? As the Divergent Trilogy, for which the Harper Collins team deserves much kudos, has been a remarkable success. And that success is likely to be extended next month with the scheduled release of the first film in the cinematic trilogy. It is reasonable to expect that the publicity around such a high profile release will stimulate book sales and introduce another generation of readers to the wonders of the Divergent series.

Another highlight was the announcement in December of our first acquisition, the Dublin-based Storyful. Although the purchase involved a modest amount of money, the acquisition will be of relevance to most companies in the new News. Storyful is the world's first social news agency with a particular strength in identifying and verifying viral video. And those skills will be a benefit to Harper Collins in developing video content to all our newspapers and to our other media properties around the world.

Storyful also aims to extend its long list of external clients including Vice, ABC News, and Yahoo!. But Storyful will be more than a contemporary news and video agency, as its unique blend of individual intelligence and sophisticated algorithms will enable us to provide customized social feeds for corporate clients wanting to track in real-time how their products are being used and whether there are emerging legal or reputational risks to their company.

Speaking of digital growth and opportunity, we made progress in increasing the digital paid circulation of our newspapers in the UK. We announced in December that Sun Plus had broken the 100,000 subscriber mark in four months, which was three times faster than the rate seen at the Times and the Sunday Times when they introduced digital subscriptions three years ago.

Let me caution, these are early days in a pioneering venture for a popular paper, the most popular paper in Britain. Sun Plus is an important part of our mission to redefine the value of digital content. In the recent past, too much of that value has been siphoned off by distributors at the expense of creators.

The inherent value of Sun Plus and their subscriber Affinity, is recognized by our advertisers and partners. Last month, O2, one of the largest mobile phone operators in the UK, announced that it would be packaging Sun Plus with its 4G service, giving customers immediate access to the Sun's unique content including exclusive highlights of English football.

More broadly, advertising saw sequential improvement in the second quarter. While visibility is limited and the macro environment remains uncertain, we are cautiously optimistic and continue to refine our digital offerings and invest in high-quality content.

In the US, as you are no doubt aware, we recently announced a change in leadership at Dow Jones and appointed Will Lewis as the interim CEO. We are also undertaking a fundamental review of our institutional sales strategy. We have been listening to our customers, and intend to make DJX more flexible, and thus more compelling to clients from a wider range of business sectors.

We will be refining our product, our pitch, and our prices. These decisive actions were taken following an intensive assessment of the state of the business, which made quite clear to us the need for prompt action. I'll work closely with Will to revitalize the Dow Jones institutional business and to reinvigorate The Wall Street Journal, whose continued cross-platform growth and development is also our priority.

Bedi will furnish you with detailed figures, but it's worth examining a few of the broader economic themes affecting sector performance. The fall in the relative value of the Australian currency is likely to be of ultimate benefit to the Australian economy, but it has obviously lowered the converted revenue and profit numbers for our businesses in that country.

There has been a degree of equity market volatility around the world, and our strong cash position, at a time of some uncertainty, is an asset of itself. That uncertainty is also an extra reason for cost discipline. And News Corp's operating expenses were 6% lower this quarter. Thanks, in part, to a series of ongoing cost-saving initiatives. Bedi will take you through some of those measures a little later.

Overall, excluding the impact of acquisitions, divestitures, and foreign exchange fluctuations, revenues were relatively flat year-over-year, which compares favorably to a 4% decline in the first quarter. In coming months there will be further development and cooperation across our Company.

Foxtel of will which we have 50% ownership, announced that it will launch a triple-play of television, broadband, and telephone service later this year. We're all familiar with the popularity of triple-play packages here in the US and elsewhere, and we are naturally enthusiastic about the potential of this initiative.

At Amplify, our education business, the building of core curriculum continues at pace. There is no doubt that the development of digital education is a priority for the current US administration, which has announced plans to bring high speed broadband to 20 million students over the next two years. The more schools with broadband access, the greater the potential for the products and services that Amplify can provide.

At REA, the company continued to widen its lead in the online real estate business in Australia and demonstrated strong pricing power. Measured in local currency, REA's revenue growth accelerated from 23% in the first quarter to 32% in the second quarter. And we continue to be very excited about the opportunities to expand this leading digital enterprise. As of today's market close, the Company, in which we have a 61.6% stake, had a market cap of around AUD5.87 billion.

In conclusion, as we begin 2014 and start the second half of our first fiscal year, the new News is continuing the proud tradition it inherited and building an increasingly powerful platform for the future. We are determined to be disciplined about costs, determined to be leaders in an increasingly digital world, and determined to take carefully-calculated risks to build our business and extend our e-expertise, thus producing ever-greater value for our shareholders.

Let me now turn to our CFO, Bedi Singh.

Thanks, Robert, and good afternoon, everyone.

We reported FY14 second quarter total revenues of $2.24 billion, a 4% decrease versus the prior-year period revenues of $2.3 billion. Excluding the impact of acquisitions, divestitures, and adjusting for foreign exchange, revenues were flat with the prior year. The earnings release you will see includes the reconciliation to reflect these adjustments.

Turning to EBITDA, we reported total segment EBITDA of $327 million, which was a 9% increase versus the prior-year period. Excluding all acquisitions and divestitures and costs related to the U.K. Newspaper Matters, which were $19 million this quarter and foreign exchange fluctuations, EBITDA declined by 1%.

Reported diluted EPS were $0.26, versus $2.42 in the prior period, which you will recall, included a $1.3 billion non-taxable gain from the CMH transaction. Excluding restructuring and impairment charges, U.K. Newspaper Matters costs, the gain from the CMH transaction, and other one-time items, our adjusted EPS was $0.31, which was flat with the prior year. Free cash flow available to News Corp for the first six months improved by $393 million compared to the prior year.

Now, let's turn to the individual operating segments. In News and Information Services, revenues declined $160 million or 9% versus the prior year. And Australia accounted for $93 million or nearly 60% of the segment decline. Excluding the sale of the Local Media Group and foreign exchange fluctuations, segment revenue declined 4%.

Within segment revenues, advertising declined 10%, an improvement from first quarter, which was down 12%. Looking at advertising performance across our key units, at News Corp Australia, newspaper advertising revenues declined around 20%, which includes a 9% negative impact from foreign currency. So overall, an improvement from down 25%, which we reported in the first quarter. And this is mainly due to sequential improvement in real estate, retail, and auto.

News UK advertising declined low-single digits versus the prior year. And Wall Street Journal, both domestically and globally, declined low- to mid-single digits in the quarter. We remain cautiously optimistic about advertising, although Australia remains very challenged, while the UK and US have been more stable.

Circulation and subscription revenues declined 7%, of which FX was 2%. We were impacted this quarter by lower print circulation and a continued decline in institutional sales at Dow Jones, which had a negative $17 million impact to revenues this quarter. The rate of decline in institutional has been steeper than we had initially anticipated; and as Robert noted, we're in the process of reviewing our institutional strategy with the goal of stabilizing revenues in the near term.

Circulation revenue declines were partially offset by cover price increases at the Sun in the UK and several of our Australian mastheads, plus higher subscription pricing at the Wall Street Journal. Additionally, we have taken a price increase at the Times and Sunday Times in the UK in the current quarter. At News America Marketing, sales improved 4% versus last year, led by the in-store business, which was up 5%.

Total costs for News and Information Services were down 8% this quarter. That was due mainly to lower headcount as we realized some savings from prior year restructurings, lower newsprint and production costs, partially offset by higher costs related to our Sun Plus initiative in the UK.

Segment EBITDA decreased $37 million in the quarter or 13% as compared to prior year. Results were impacted by continued weakness in Australia and Dow Jones institutional business, offset by a favorable arbitration ruling at News UK and the absence of losses from the Daily, which was closed in December 2012. Excluding the sale of the Local Media Group and foreign exchange fluctuations, segment EBITDA decreased 8%.

Just some additional items I'd like to share on the segment. In Australia, we recently entered into a new multi-year newsprint and ink supply contract, which should yield approximately $30 million to EBITDA in cost savings for the balance of FY14 and FY15 combined. And we should benefit from lower unit rates going forward.

In the US, as part of our ongoing rationalization of print operations, we entered into an agreement to sell our printing facility in Charlotte, North Carolina. And entered into a new print supply agreement, which should yield annual cost savings in the $2 million to $3 million range.

And finally, in the UK, in January, we entered into a long-term lease to occupy The Place, our new headquarters in London. News UK, Dow Jones, and Harper Collins UK will house their London operations together for the first time and will begin relocating this summer. In connection with this, there will be a primarily non-cash expense of approximately $30 million in the second half of this fiscal year, related to deal rent and other facility charges and a similar amount for the first half of next fiscal year. Over the life of the long-term lease, the office relocation should be net EBITDA neutral and should also allow us for improved collaboration and additional efficiencies in our operating unit in the UK.

Turning to Cable Network Programming. Segment revenue this quarter were $110 million, and segment EBITDA was $53 million. On a standalone basis, assuming we owned Fox Sports Australia in the prior-year quarter and excluding foreign exchange fluctuations, revenues were increased 9% and segment EBITDA increased 34%.

Advertising improved 6%, thanks to solid market share gains, but was partially offset in December by the absence of the domestic cricket rights compared to the prior year. Subscription revenues also grew 6%, helped by an increase in digital platform subscribers and higher contractual affiliate pricing. We also had some additional revenue growth from commercial and pay-per-view offerings. EBITDA improvement this quarter was due to a combination of the higher revenues, coupled with a 10% decline in expenses primarily due to the absence of the domestic cricket rights versus the prior year.

In Digital Real Estate services, our revenues there increased $16 million or 18% compared to last year, reflecting increased revenues from higher pricing and uptake of premium products. Average revenue per agent in Australia improved around 30% in local currency.

Segment EBITDA increased $9 million or 20% compared to the corresponding prior-year period, primarily due to the increased revenue. Margins were 53.4%, up from 52.9% in the prior year. And excluding foreign currency, revenue and EBITDA grew 32% and 33% respectively.

Turning to the Book Publishing segment. Revenues improved 4%, and EBITDA grew 33% versus the prior year. Revenues, excluding the sale of our live events business and foreign currency fluctuations were up 8%, and EBITDA improved by 38%.

Some titles to call out this quarter. In children's, we had a very strong performance from the Divergent series by Veronica Roth, including the release of Allegiant, the third and final book in the series, which has sold 2.2 million units to date. In general books, we benefited from Mitch Albom's The First Phone Call from Heaven and Ree Drummond's The Pioneer Woman Cooks: A Year of Holidays.

E-book sales grew nearly 40% versus the prior year and accounted for 17% of total sales, up from 14% in the prior-year period. Segment EBITDA margins of around 17% improved nearly 400 basis points versus the prior year, as we benefited from the strong top line growth, continued e-book conversion, and ongoing operational efficiencies.

In our other segment, revenues decreased $10 million compared to the prior year, primarily due to declines at Amplify related to lower project-based consulting revenues at its legacy assessment business, coupled with divestitures of certain of the Company's non-core Australian businesses during FY13. At Amplify, we are on track to launch our K-8 English language arts curriculum for the fall of 2014, and we will begin product demonstrations next month at South by Southwest in Austin.

Segment EBITDA in the quarter improved $4 million, primarily due to decreased fees and costs net of indemnification-related to the U.K. Newspaper Matters, which was partially offset by higher investment spending at Amplify, higher corporate overhead, and costs related to our corporate Strategy and Creative Group. In the quarter, U.K. Newspaper Matters' net impact on total-segment EBITDA declined to $19 million, from $49 million in the prior year. Again, that's net pretax costs after the indemnification from 21CF.

Turning to equity income. Earnings from affiliates were $17 million compared to $28 million in the prior year. The lower contribution primarily reflects the absence of the Company's 44% stake in SKY Network Television Limited, which was sold in March 2013 and the consolidation of Fox Sports Australia in November 2012.

Partially offsetting this decline was a higher contribution from Foxtel, due mainly to the Company's increased ownership to 50% from 25% in November 2012. Foxtel's EBITDA was up mid-single digits this quarter and up around 10% for the first half in local currency.

On operating metrics, total ending subscribers were up 5% to over 2.5 million for the first half of the year versus the prior year, driven by higher digital platform subscribers. Churn declined to 12.4% versus 14.2%, benefiting from the Austar customer migration.

Turning now to cash flow. For the six months ended December 31, News Corp's cash flow from operations improved to $407 million compared to $5 million in the prior year, and free cash flow available to News Corp improved to $217 million from a negative $176 million in the prior year.

And just a couple of additional items. We continue to expect full-year CapEx to be relatively similar to the FY12 levels of $375 million. CapEx this quarter was $80 million versus $77 million last year. Our restructuring costs were down again significantly this quarter at $24 million; of this, $21 million was related to the newspaper business compared to $62 million in the prior year.

So in summary, the themes we outlined in the first quarter remain broadly intact. I think our operating expenses are generally on the right track in the face of still-challenging revenue trends. As Robert mentioned, we made our first acquisition, Storyful, which is a step towards further expanding our online video offerings. And we still view FY14 as a transition year, as we balance ongoing operational efficiencies with prudent investments, and we continue to focus on stabilizing top line performance.

With that, let me turn back to the operator for our Q&A.

Thank you.

(Operator Instructions)

And at this time, we will take our first question from John Janedis with UBS. Please go ahead.

Thank you, guys. Can you give us an update on the Dow Jones' Institutional business? You mentioned you're looking at strategy, but is there a point where that asset isn't considered core if some of the changes you make don't gain traction with [that with] customers?

John, Robert here.

No, the Dow Jones' Institutional business is very much core. And there's no doubt that the original concept of DJX had much merit to it. But to be quite frank, the execution was not quite right, and the trajectory was not quite right. And so the right thing to do was to make a change promptly and decisively.

And what we've already seen is that Will Lewis has been an efficacious presence. He's certainly making a positive difference in terms of both mood and momentum. And he's looking very closely at the great assets that are part of the Institutional business -- and Factiva, the Newswires, and The Journal content as well, which is part of the fuel that makes us the preeminent provider of business news globally.

So, but what you'll see, John, in coming weeks and months, is a much more flexible approach to our customers. Not a plethora of prices, but a pricing schedule that makes sense to Institutional customers according to the hierarchy of usage. It will be based on utility. And I'm sure many of the people on this call are users of Dow Jones Institutional news and analysis, and we'll be in touch with you.

Thank you, John. Operator, we'll take the next question.

Thank you. At this time, we will move to Entcho Raykovski with Deutsche Bank.

Good afternoon.

My question's around FOX SPORTS Australia. Obviously that was a good result in the quarter. I was wondering if you could give us any indication of what the domestic cricket rights cost in the third quarter of last year? Because I presume [there's a cost that] might be incurred heading into next year -- into next quarter, rather.

Hi. Yes. So, in terms of the actual cost, it was about AUD7.5 million that related specifically to cricket. And we had about AUD1.5 million of ad revenue, specifically related to those in the prior quarter.

Sorry to interrupt. Go ahead.

Obviously, as you know, there's a great seasonality to a sport in every country, particularly in Australia. As you have the rolling out of rugby league and Aussie rules in coming months, the cost calculation again changes.

Sure. I understand. Thank you.

Operator, we'll take our next question, please.

Thank you.

(Operator Instructions)

At this time, we'll move to just Justin Diddams with Citi.

Thanks. Gee, one question? I've got so many.

So, news and information services. The number -- the EBITDA number -- came in ahead of my expectations for the quarter. Just wondering if you'd give us a little bit of a breakdown amongst News Australia, UK, and Dow Jones where the better performances were out of those businesses and the slightly weaker performances? To give us an idea of where that EBITDA fell in that division. Thanks.

So, hi, Justin. As you know, we don't break out EBITDA specifically, but I think the way to think about it is -- if you look at what happened on revenues. So, Australia was down, but I would say sequentially, the decline was less decline -- if you get what I mean. And in terms of the UK and the US, we were sort of down very low digits. So I think if you look at the revenue perspective, Australia continues to remain challenged.

I think cost cutting has gone on apace across all of the businesses. I mentioned in Australia we had new contracts for newspaper purchasing and ink. And in the US, we're looking at our print operations. I think we're looking at headcount closely. We have a sort of purchasing counselor. We're looking at all the things we're buying. So cost containment remains a priority, I would say, across all of the businesses.

We also -- I think Robert alluded to this -- we also consolidated a number of our healthcare plans. What that's done is it's going to help us mitigate cost increases in the future. I think if you know what's happening in the US, health costs rising here quite significantly. We took a good, hard look at that, and consolidated those.

We also froze all of our defined benefit pension plans. These plans had been closed to new participants, but what we've now done is we've basically frozen the entitlements. So that's going to save us, I think, about $5 million -- roughly in that range -- going forward. So it's things like that we're continuing to do across all of the businesses.

Thank you, Justin. We will take our next question, please.

And we'll move to Jessica Reif Cohen with Bank of America Merrill Lynch.

Thank you. My long one question is first on Amplify. Can you discuss some of the key initiatives? Is there any change in outlook? Maybe you could also clarify if you fixed the equipment issue that you had in your initial market.

And second question is the balance sheet is so flexible. You've got so much cash. And you mentioned -- could be acquisitions, maybe you could discuss capital returns, dividends. But I was just wondering, to the extent you do make more acquisitions, what are the areas of interest? Book publishing seems to be an area that you're doing very well in. Would it be that, or would it be more digital initiatives.

Thanks, Jessica. On the Guilford issue, we're continuing to work with the local officials there. I think -- stay tuned, quite frankly. As you well know, the most important part of the Amplify suite is the creation of the core curriculum. And as we've indicated, both on the Investor Day and subsequently, as you get deeper into this year, there will be real benchmarks for adoption.

For the fall of 2014, the adoption states for English we believe will be California, Idaho, Oklahoma and West Virginia. So keep an eye on those four, among others, and that will be indicative of the evolution of the curriculum.

And just on acquisitions. Clearly, we started off with the Storyful acquisition which, although modest, I think was very disciplined and key in terms of fit because of the digital propulsion it will bring to our businesses globally. So I think we continue to think about acquisitions in terms of those that will enhance our existing businesses -- those that will enhance technologies -- and we want to remain disciplined. And we want to remain sensible in terms of what we buy.

Clearly, cap returns are something we have at the forefront of our mind. Look, I think we're very focused on making sure we maximize long-term value for our shareholders. And with the cash that we have at our disposal -- although Robert mentioned, obviously, that given these turbulent times it's helpful to have a healthy cash balance -- we're also mindful that we want to deploy that cash in a judicious and expeditious manner.

Thank you, Jessica. Operator, we'll take our next question, please.

At this time, we'll take a question from Craig Huber with Huber Research.

Yes, hi.

On the cable network side in Australia, can you lay out for us how you think about the costs there, on a year-over-year basis, say for the next 18 months? The puts and takes in the various sports contracts -- I'm trying to get at. Thanks.

I think in terms of the sports contracts, I think we shared this at the Investor Day. Most of the contracts are tied up for the next three to four years. So we don't have too many of those renewals coming up.

In terms of how the costs under the existing contracts spread out, clearly these tend to be lumpy based on how the sports play out. So next quarter, when we start with AFL and NRL, we'll begin to see additional programming costs come into Q3. So that's sort of the cost profile that we expect in the coming quarters.

Thanks, Craig.

Thank you.

Operator, we'll take our next question, please.

At this time we'll move to Alexia Quadrani with JPMorgan.

Hi, thank you. My question's just back on the Australian newspaper. You know, you saw a little bit of sequential improvement if you exclude FX in the quarter. But still, obviously, it's a tough area for you.

Any sense if you're seeing any sort of grounding in the market there? Any signs if you're bottomed out and things might be getting a bit better? And any early color on what you've been seeing in the March quarter?

Well, under the new leadership of Julian Clarke -- who's certainly an inspiring character -- there has been improvement in the atmosphere as, crucially, in the outreach to advertisers. And Julian is very much focused on -- as you should be -- both revenue and expenditure.

I think, generally to sum up, December was a good month. I think, as you know, after holiday periods, there is characteristically a little bit of softness which would have been the case in January. And February seems to be a slightly better month. Certainly, in the US with The Wall Street Journal, February is looking to be a reasonably good month.

Going forward, obviously have the fall of Easter being a little later this year, and the potential impact on, really, the unfolding of the numbers. But all in all, the team is working on bolstering the newspapers and developing, frankly, a more coherent digital strategy that reflects the local strengths of mastheads.

And making a greater connection between the masthead and the local population. And developing that affinity, and then using that affinity as part of a new outreach to advertisers in the states where we have papers is Julian's priority. From what we can see, he is doing an excellent job.

Thanks, Alexia. Operator, we'll take our next question, please.

Thank you. Moving forward, we will hear from Eric Katz with Wells Fargo.

Hi. It was nice to see the acceleration -- or, I guess, improvement -- in advertising in the quarter. I was wondering if you had an advertising and circulation and even an EBITDA number for the organic business if you were to strip out stuff like DJX, the Local Media Group, and foreign exchange as well. Seems like it might be better than the down 10% on advertising.

I don't think we've given out that sort of analysis. But I think generally, the trends are similar to -- trends are similar, but I think -- I mean, I don't think we can specifically say much more than that. But excluding FX, I think we've got [61] down.

6%?

6%.

I think to supplement what Bedi said -- and, really, to add to what we already explained about the trajectory of advertising -- the visibility, as is customary to say on these calls, is somewhat limited. But it's more mist than fog.

Thanks, Eric. Let's take our next question, please.

Thank you. We'll move to Adam Alexander with Goldman Sachs.

Thanks. Just a question on books. Really solid margin improvement there -- about 400 basis points. Just wondering how much of that was driven by your closing and consolidating the warehouse versus the e-book penetration? And whether or not this sort of margin level is what we can expect going forward, or even some improvement as e-book's penetration increases?

Certainly Brian Murray and his team, and Charlie Reddmayne, the new head of the business in UK, are focused on costs and consolidation where necessary -- and where sensible. Including consolidation of technological costs with the new News, generally.

But what you're seeing at HarperCollins is the development of a very successful digital business. Clearly, the margins are higher in digital books and the -- one thing that is of particular note is the growing increase in the value of the back catalog. So it's not only the digital component for contemporary releases, but the wonderful archive that we're able to exploit at HarperCollins in a manner which is raising the value of those books and, frankly, increasing the margin potential of the Company.

Thank you. We'll take our next question, please.

Moving forward, we will now hear from Alice Bennett with CBA.

Yes. Hello. I have a question around FOX SPORTS Australia. Just wondering if you could give us a sense of the digital subscriber growth? You talk about where that's coming from -- is it mainly through the Telstra T-boxes? And is the ARPU you receive on those digital subscribers the same as you would for a cable and satellite sub?

And just a follow-up from several previous questions around the cost base for FOX SPORTS. Just trying to get a sense -- as we move into the next few quarters, the NRL I guess is already in the base, as it was in the last -- in the PCP. Is there any benefit from the cricket coming into the next quarter, or is that all received in the second quarter?

And are there anything -- is there anything coming up in future quarters that -- is FOX SPORTS involved with the World Cup, cricket next year? Is there anything lumpy that we need to be aware of, given this cost base does seem to move around so much quarter to quarter?

I think you had three questions there. But I'll try and answer all of them.

Starting with the question with respect to growth of digital subscribers. Yes, most of that is from the T-box roll-out. And I think that's continuing at a steady pace. In terms of what we get -- it's about the same as we would get for a television subscriber. So I think that's -- the level of penetration into the T-box universe might be a little less than what you would have in the PV residential subscribers, but we get paid the same amount.

In terms of -- I think the cricket rights was the other question -- the benefit will continue to flow through in Q3. And I don't think I can comment on things that we may be looking at doing -- of course, you must have seen that we did get the V8 motor sports. So some of those costs, when they come through, will cause some lumpiness in comparisons with prior years when we didn't have that event. But that's a little while away. But I don't think there's anything else specific I could share with you at this stage.

Thanks, Alice. Operator, we'll take our next question, please.

And our next question will be from Alan Gould with Evercore.

Thank you. With Foxtel switching -- or moving -- into the triple play bundle, what kind of opportunity does that bring to you? How much do you think that could expand the EBITDA at Foxtel? And would there be certain costs involved upfront before they are able to execute on that?

Hi, Alan. I think we're very excited, as Robert said, about triple play. I think we'll see that coming into the market sometime later this year. I don't expect there to be significant cost impact on Foxtel, but I do expect that Foxtel will benefit from -- hopefully -- newer subscribers coming in a as a result of triple play being offered.

I think it's hard to say, exactly, what the impact will be on EBITDA. But one would hope that, given minimal set-up costs -- and as you get new people in, hopefully that will be a positive to the EBITDA.

Just to supplement. As Bedi said, it's a little early to tell at this stage. There may well be some marketing costs associated with the new offering, but obviously, we perceive the benefit to be much more substantial than that.

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

The next question will be from Tim Nollen with Macquarie.

Hi, thanks. My question is back on Amplify -- was curious about the adoptions you're talking about for this fall. If you believe you could compete head-on and win a major ELA contract from a traditional education publisher in a state like California?

And secondly, along those lines, hearing a lot of talk and seeing a lot of press about potential delays to the common core from a number of states. And it's becoming quite a political issue. Just wonder if you could comment on that, please.

To be honest, education has always been a somewhat political issue. But look, we are well-advanced in the creation of the core curriculum. It's a competitive market. But if you had the pleasure of seeing our team at work, you would have the confidence that we do that we'll be more than competitive come the time for the [tenders].

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

We'll move this time to Lance Vitanza with CRT Capital Group.

Hi, guys. Thanks for taking the question. Could you talk a little bit about the subscription price increases at The Wall Street Journal? I'm wondering how meaningful those increases were. If you could put some numbers around it?

Presumably, you've still got a long way to go to close the pricing gap versus New York Times and FT. Is that right? I'm wondering what the plan is for closing that gap. Thanks.

So, in terms of The Wall Street Journal subscription pricing, we took a pricing increase -- I believe it was November last year -- for, I think it was a magnitude of $1 on the bundled pricing that we had for online, and then online plus analog. We no longer offer, I think, for new subscribers a paper only option. So, pretty much, people have to get either just digital or digital plus the paper.

Look, I think we talked about this issue earlier, not just at the Investor Day, but I think even at the last call. We believe there are pricing opportunities for us. But I think we have to be judicious in how we take them, because we also want to make sure that we're delivering fantastic value to the readers. And I think at the appropriate time, we probably will take modest pricing.

Obviously, one of the imperatives for Will Lewis over the next few months is to look at what elasticity there is -- the type of bundle, the pricing of the bundles, and the marketing of those bundles. As Bedi said, we genuinely believe what we're offering readers -- not only in English in the US, but in languages around the world -- is, by some way, the best possible business briefing and analysis available.

Okay. Operator, with that, thank you very much for participating. We look forward to talking to you next quarter. Have a great day.

Once again, this does conclude today's conference call. Thank you all for your participation. You may now disconnect.