News Corp (NWSA) 2014 Q1 法說會逐字稿

Good day, and welcome to the News Corporation first quarter earnings call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. 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 first quarter 2014 earnings call.

We issued our earnings our press release about 30 minutes ago, and it is now posted on our website at www.Newscorp.com. On the call today are Robert Thomson, Chief Executive, and Bedi Singh, Chief Financial Officer. We will also will have some prepared remarks from both Robert and Bedi, and then we will 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 Corporation's Form 10-Q for the three months ended December 30, 2013, indentifies 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 these 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 will pass it over to Robert Thomson, for some opening comments.

Thank you, Mike, and welcome all to our first earnings call at new News. There will certainly be time for questions, after Bedi Singh elucidates the figures, but I thought it useful to provide some context for the fledgling's Company's operations, and a sense its trajectory. We are confident about our prospects given the market-leading brands in our midst, the talented executives servicing our companies, and the focus that has come from concentrating minds and aggregating assets.

Among our competitive advantages are the following. We have scale, meaning that we can influence the terms of trade for digital content businesses, at a time of mass migration in mass media. There are dramatic shifts under way in the creation, delivery, and consumption of content. The platform permutations are multiplying, and so are the opportunities to profit.

Secondly, we are diverse globally, and see clear opportunities to expand beyond our existing footprint. You will see evidence of those expansion plans in coming months, but it will be expansion-based on extending our existing expertise.

And we have a robust balance sheet that provides the Company with genuine financial flexibility, allowing us to be agile in responding to emerging opportunities. But we also have our costs under vigilant watch, and there is no doubt that the focus of the new News has enabled us to identify inefficiencies and extract expense.

We have been public for a mere four or so months, but the Company has a remarkable prominence and a very proud history. We will be candid with you about the challenges, as we have been about the headwinds buffeting our Australian newspaper business. But we are confident that our emerging strategy will well-serve our investors, employees and our customers. Our aim is not just to transform the Company, but to transform its long-term prospects.

Bedi will provide you with the detailed figures, but the overall themes are as follows. Total segment EBITDA has risen significantly, adjusted EBITDA is, however, down slightly. Margins in our largest segment, News and Information Services have risen, even as revenues in Australia have been particularly soft. Free cash flow has improved by $145 million over the same period last year, although comparisons are generally made difficult by the fact, that technically the Company itself didn't exist at this time last year.

We collectively recognized the need to evolve. We must generate more advertising revenue, but overall, be less dependent on advertising, and much more subscription-focused. And we must take advantage of the rise of mobile as a platform.

Across our businesses, we are seeing exponential increases in the use of smartphones and tablets to access our content. Each platform has unique challenges and opportunities, but we will be among the pioneers on packaging and pricing, and profiting in the emerging environment. Our initiatives will play an important role in that development, as we indicated at the Investor Day.

Three projects have already been launched, in particular, a global programmatic advertising exchange. Secondly, our excellent UK team has created Sun Plus, the digital strategy for Britain's best selling newspaper. And we have just launched BallBall, our Asian digital football business which focuses on upwardly mobile users, smartphones, the web and tablet.

Our advertising exchange, which has involved unprecedented cooperation among all of our media businesses began trading just over a fortnight ago, and has already attracted more than ten major advertisers. We are able to leverage our leading global brands, and our exclusive first-party data, thus allowing us much more leverage over yields, and protecting the integrity of our audience. We are discontinuing remaining arrangements with third-party ad networks, so that any advertiser who wants to reach our great content and premium audiences must do so directly.

Some of you will be aware, that we acquired exclusive Premier League near-live video clip rights in the UK, highlighting goals and other monumental moments for subscribers and loyal readers of our British newspapers. But Sun Plus is much more than soccer snipets, as the team in London have worked to improve the depths of our digital editorial for subscribers and provide them with retail, leisure and other discounts of at least GBP200 a month. The purpose behind these subscriptions is to heighten affinity, which is of supreme importance to advertisers frustrated by audiences who have little loyalty, and are digitally distracted. On our next call, we will have firm figures for you, as we are now early in the acquisition phase and developing doable metrics on elasticity and churn.

We told you at the Investor Day that we were underrepresented in Asia, where macroeconomic growth rates remain relatively high, and smartphone penetration is increasing exponentially. For a modest sum, we acquired exclusive video clip rights for the Premier League and rights to other European soccer leagues for apps and webs and websites for a Company called BallBall in Indonesia, Vietnam and Japan.

We have been repurposing content and statistics from our London papers, as well as utilizing the WSJ digital networks in Japan and Indonesia, and the video expertise on FOX SPORTS Australia. Such creative collaboration is crucial to making us more than the sum of our parts. There is no doubt that important lessons from this digital-only venture will be adopted elsewhere in our Company, as the second screen becomes a first priority.

And within our core companies, the digital transformation continues the pace. For example, at Harper Collins, e-books rose from 15% to 22% percent of sales, while our margin improved from 11.4% to over 13% in the past year. We spoke at the Investor Day about plans for e-expansion mansion, and we have since announced a number of initiatives, including subscription deals with Oyster and Scribe.

At the Wall Street Journal, where advertising revenue has been stable, it is worth highlighting that mobile usage rose 59% in September, compared to the same month last year. Meanwhile, the development team has just completed work on the first phase of DJX, our new B2B product, which will be rolled out over coming months.

In Australia, at REA, of which we own 61.6%, the management team is constantly seeking to innovate and connecting agents with customers. The revival of the Australian property market has certainly been a benefit as you can see from today's numbers, and the market cap of the Company since July 1 has risen from AUD3.56 billion to AUD5.3 billion. While the majority of REA revenues come from within Australia, the Company is continuing to expand its international footprint.

At Amplify, Joel Klein and the team are focused on building our K- to12 subject matter, which is the most significant segment of the Company's three divisions. They aim to bring their product to market for the fall of 2014, and you will be able to track our success as we compete to supply school districts with contemporary curriculum. We will continue to be disciplined, and to seek out opportunities we think will enhance the growth profile of News Corp and complement our existing strengths, but we will also continuously review our asset portfolio.

This quarter, we sold the Dow Jones Local Media Group and live events business at Harper Collins. We concluded that these assets were non-core to News Corp's strategy.

Four months along in the life of the new News, we are even more convinced that the Company will thrive as it becomes more digital and increasingly global. We will continue to balance heightened cost consciousness with the need for investment, all informed by the very clear goal of enhancing the value of shareholder returns.

Now let me usher in Bedi Singh, who will furnish you with the financials.

Thank you, Robert, and good afternoon, everyone. First I would like to share with you some high level financial highlights, and then we will discuss each segment in further detail.

We reported fiscal 2014 first quarter total revenues of $2.07 billion, a 3% decrease versus the prior year period revenues of $2.13 billion. Excluding the impact of acquisitions, divestitures and adjusting for foreign exchange fluctuations, total revenue declined 4%. The earnings release, you will see includes a reconciliation to reflect these adjustments.

Turning to EBITDA, we reported total segment EBITDA of $141 million, which was a 58% increase versus the prior year period. Again, excluding all acquisitions and divestitures, most notably FOX SPORTS Australia which we acquired last November, and the Dow Jones Local Media Group which we sold in September of this year, all costs related to the UK Newspaper Matters which were $17 million this quarter and excluding foreign exchange fluctuations, total EBITDA declined this year by 5%.

Reported diluted EPS were a positive $0.05, versus negative $0.16 in the prior period. Excluding restructuring charges, the UK Newspaper Matters costs and other one-time items, adjusted EPS was $0.03, down from $0.06 in the prior period. But importantly, free cash Flow available to News Corp improved by $145 million compared to the prior year.

Now let's turn to the individual operating segments. In News and Information Services, revenues declined $171 million or 10% versus the prior year. Australia accounted for $121 million or around 70% of the segment decline, of which almost half was due to foreign exchange.

Within segment revenues, total advertising declined 12%, of which FX was 4%. And looking at advertising performance across our key units, at News Corp Australia, newspaper advertising revenues declined around 25%, including a 10% negative impact from foreign currency.

News UK advertising declined 7%, with the majority of the decline being due to incremental Olympic spending last year. Wall Street Journal advertising domestically was virtually flat with the prior year. And overall, Dow Jones advertising was down low single-digits, impacted by some weakness in Asia and Europe.

We haven't seen so far any inflection points in advertising in either direction. Australia remains very challenged, while the UK and US have been more stable, but we recognize that visibility is still somewhat limited.

Circulation and subscription revenues declined 6%, of which FX was 3%. We were hurt this quarter by lower print volumes, a decline in institutional sales at Dow Jones which were partially offset by cover price increases in the UK and Australia, and growth at the Wall Street Journal and WSJ.com.

As Robert mentioned this past quarter, we launched Sun Plus, our pay wall in the UK bundled with English Premier League highlight clips, and have put all of our major milestones in Australia behind the pay wall. We have also relaunched the New York Post website, and we are also in the early phases of rolling out DJX, our bundled institutional offering at Dow Jones. And the conversion to their single-product offering had a modest negative impact this quarter to revenues.

At News America Marketing, sales improved 3% versus last year, led by strong double-digit growth in the in-store business, consistent with our comments at the Investor Day. And importantly, we saw margin expansion there this quarter. We saw growth in Canada, and growth in several food and drug categories.

Operating costs for News and Information Services were down 12% this quarter. That was due mainly to lower headcount, as we realized some savings from prior year restructurings, lower news print costs, and production costs and lower marketing expenses.

So turning to News and Information Services EBITDA, this increased $7 million or 6% versus last year. We saw strong profit contributions from News UK, News America, Marketing, and also benefited from the absence of losses from the Daily last year, partially offset by continued weakness in Australia and foreign currency impacts.

So if you look at EBITDA excluding the sale of Local Media Group and foreign exchange fluctuations, segment revenues -- EBITDA increased 12% and segment revenues declined 6%. We do not believe this level of EBITDA growth or margin expansion is indicative of the next few quarters or a run rate. We have several initiatives which we are in the early stages, including DJX and Dow Jones, Sun Plus at News UK, and we are developing our digital assets in Australia.

In cable network programming, segment revenues this quarter were $132 million, and segment EBITDA was $29 million. On a stand-alone basis, assuming we had owned FOX SPORTS Australia in the prior year quarter, revenues were flat and segment EBITDA declined 31%. However, excluding foreign exchange fluctuations, revenues increased 14% and EBITDA declined 21%.

Advertising improved strong double-digits, thanks to solid audience gains and increased government spending around the elections. Subscription revenues grew approximately 8%, helped by an increase in digital platform subscribers.

The decline in cable network programming EBITDA was driven primarily by timing of higher expenses associated with the airing of the National Rugby League rights contract which began in March 2013. Operating expenses should be lower in Q2, which is seasonal given our roster of sports rights.

In Digital Real Estate Services, REA revenues increased $9 million or 11% compared to last year, reflecting increased revenues from listing depth penetration, and new product growth. Segment EBITDA increased $9 million or 26% compared to the corresponding prior year period, primarily due to the increased revenue. Margins were 48.9%, up from 43.2% in the prior year. Excluding foreign currency, revenue and EBITDA grew 23% and 43%, respectively.

Turning to the Book Publishing segment, revenue declined 7%, but EBITDA grew 8% versus the prior year. The top line this quarter was hurt by the sale of the Women of Faith live events business, the decision to exit the US distribution business, a soft Christian publishing marketplace, and foreign currency fluctuations.

Looking deeper at the results, we had a very strong performance this quarter in e-books. Some key titles to call out were the Veronica Roth Divergent series in Children's and Daniel Silva's English Girl and general books. For the quarter, e-books as a percentage of revenues improved to 22% from 15% in the prior period, and total e-book sales improved by over 30%.

We are very excited by the pipeline of titles in Q2, led by Allegiant, the final chapter in the Divergent series which debuted October 22, and has sold approximately 1.8 million copies to date. This should lead to an improved performance for Q2, even with some revenue headwinds from the sale of the live events business. And EBITDA margins advanced to 13.1% from 11.4%. The EBITDA growth and margin improvement was driven by higher e-book penetration and improved operating efficiencies.

In our Other segment, which includes Amplify, our Corporate Strategy and Creative Group, corporate overhead, and costs related to UK Newspaper Matters, segment EBITDA improved $4 million primarily due to lower costs of approximately $44 million related to the UK Newspaper Matters, partially offset by higher expenses of $29 million at Amplify, $6 million incurred by our Corporate Strategy and Creative Group including the launch of BallBall as mentioned by Robert, and increased corporate overhead expense of $8 million, compared to an allocated basis used for fiscal 2013.

In the quarter, we incurred $40 million related to the UK Newspaper Matters, of which the net impact on total segment EBITDA was $17 million. That is net pre-tax costs after the indemnification from 21st Century Fox.

Now for the full year, we expect corporate overhead to be in the $140 million to $160 million range, consistent with our comments at the Investor Day. For our Corporate Strategy and Creative Group, we will likely spend in the $35 million to $45 million range. This includes spending on our BallBall product offering, including small rights acquisition costs, our advertising exchange, as well as a few other key initiatives currently in development. On Amplify, we expect operating losses to be higher than in fiscal 2013 but in contrast to last year, costs are unlikely to ramp up from the first quarter, as curriculum development is now well under way.

Turning to equity income, our earnings from affiliates were $13 million this quarter, compared to $26 million last year. The lower contribution primarily reflects the absence of the 44% stake in SKY Network Television which was sold in March 2013, and the consolidation of FOX SPORTS Australia in November 2012. On the plus side, we had higher contribution from Foxtel, which benefited from an increased ownership of 50% from 25% in November 2012. Foxtel's EBITDA grew mid-teens this quarter in local currency.

Turning now to cash flow. For the quarter, cash flow from operations improved to positive $59 million, compared to negative $87 million last year, and free cash flow available to News Corp improved negative $10 million versus negative $155 million last year. This improvement was driven by lower restructuring payments, lower costs related to UK Newspaper Matters, lower tax payments, and the inclusion of FOX SPORTS Australia, partially offset by the absence of cash distributions from SKY Network Television last year.

On our P&L statement, you can see that we recorded a tax benefit, and a corresponding expense in Other of $483 million. This relates to a tax refund we received in October over past claims in a foreign jurisdiction which had been in dispute. This refund will be remitted to 21st Century Fox as part of the tax sharing and indemnification agreement. This item is a pass-through only, and had no impact on net income, EPS, or free cash flow.

And finally, a few additional items. We expect full year CapEx to be higher than fiscal 2013, and more in line with levels seen in fiscal '12 of $375 million, as we had discussed at the Investor Day. We expect the majority of our capital investment to be continued to be focused on technology innovation, including the rollout of our common publishing system. CapEx this quarter was $67 million, versus $64 million last year.

Restructuring costs were down significantly this quarter at $27 million, of which $23 million was related to the newspaper business, compared to $115 million in the prior year. Last year, restructuring costs totaled $293 million. We continue to expect this to come down this year.

We continually review our portfolio of assets. This quarter we realized $96 million in proceeds, mostly related to the sale of the Local Media Group and a few smaller transactions including the Harper Collins live events business, which we viewed as non-core to News Corp.

On the UK Newspaper Matters, we have accrued approximately $78 million, of which $53 million will be indemnified by 21st Century Fox. So that represents our best estimate of that liability for the claims that have been filed as of quarter-end.

Cash on the balance sheet as of September 30, was around $2.7 billion, which includes $230 million of cash at REA. And lastly, we entered a $650 million five-year revolving credit facility. There are no funds drawn on it at this time. We view the revolver as a financially prudent instrument, and consistent with most of our peers.

So in summary, expenses are on the right track, although the revenues remain under pressure. We have been candid about some of the headwinds we face, particularly in News and Information Services. We continue to see fiscal 2014 as a transition year, as we balance ongoing operational efficiencies with prudent investments, and focus on stabilizing top line performance. And we look forward to continuing to update you on our progress throughout the year.

And with that, let me turn back to the operator for our Q& A session.

Thank you.

(Operator Instructions)

And our first question will come from John Janedis with UBS.

Hi, thank you. Good luck. Since cost controls within the News media segment are a theme I am assuming you are going to be talking about for the next several years. But in the near-term, could you talk about some of the cost saving opportunities, where are you going to invest, and is the net of those two, a decline?

Hi, John. It is Bedi here. Thank you for your question. And as you know, over the past three or four years, we have done significant amounts of restructurings across businesses, mainly on the newspaper side. I think the total, over the last four years was something around $500 million. Now clearly, we keep looking at operational efficiencies as we go forward, but you have to realize a substantial amount of efficiencies have been taken out. I think we will keep continuing to look at natural operating efficiencies, as we roll out the common publishing system. But I don't think we have any particular targets, or sort of slash and burn type of cost reductions in mind as we go forward. Hi, John, so it is Robert here. Just to supplement Bedi's answer, I think what is clear is that we are imposing a fair amount of discipline on the companies. There really is heightened cost consciousness, and the ability that the new News has given us to focus, quite on our strengths and on expenses is allowing us to certainly extract cost. To your other question about investment, look as we all know, there are five potential uses for capital. It is internal investment, there is acquisitions, there is debt of which we have none, dividends and buybacks. As you can see already, we are engaged in some internal investment designed to generate revenue, and the programmatic ad exchange is a good example of that. And as we have made clear at the Investor Day, look, we are interested acquisitions, but these are going to be extensions and not ex-centric. They must do more than just add to the sum.

We will take our next question, please?

Our next question comes from Justin Diddams with Citi.

Good morning. Just a quick question on the phasing of earnings across the quarters. When we look at the types of businesses you run, I would expect there to be fairly consistent revenue and earnings by quarter. However, when we look at the pro forma numbers from '13 and even '12, first to second quarter, there does seem to be a disparity in earnings contribution. I wonder if you could give us a sense of what your expectations are for the phasing of earnings across the quarters, particularly as where we have got the inaugural set of results today, and we are sort of paving the way here? So any color on that would be appreciated.

Hi, Justin, it's Bedi here. Thanks for dialing in from Australia. I think if you look at all of our different business segments, sort of the operating businesses do tend to have seasonality and sort of lumpiness. And for example, if you look at the cable programming segment, that is definitely lumpy depending on the airing of sports rights. Our book business tends to have a very good -- a big season around the holidays. And if you look at newspaper advertising, even that is seasonal. So I think generally it is hard to sort of generalize and say it is, that these businesses are sort of constant across the fiscal year.

Operator, we will take our next question, please?

Should we expect a similar -- ?

Our next question comes from Jessica Reif Cohen with Bank of America Merrill Lynch.

Oh, thanks. I have two questions. I was just wondering if you could talk a little bit about Amplify. What the current investment is, and do peak losses or peak investment, is it fiscal '14? And the second question is on the use of cash, I know Robert you outlined what the five uses could be, but you mentioned in your initial comments that you would increase, in terms of acquisitions that you would soon maybe increase your footprint in existing businesses. I am just wondering what regions seem to be the highest interest to you? Thank you.

Hi, Jessica. It's Bedi. I will take the one on Amplify. So Amplify for the quarter, we reported an operating loss for $57 million, and that included depreciation, amortization of around $6 million. So if you take that out, it's roughly around $51 million of EBITDA loss. And again, as I said in my prepared remarks, we don't expect a ramp up from that number, because pretty much the curriculum development is in full swing in this quarter. So hopefully that gives you a sense of where they are heading for the year.

Jessica, it's Robert. I am sure you don't expect me to be specific about likely acquisitions. But I think it is fair to say that the two themes that permeate our thinking, are digital and global. And obviously, acquisitions that extend our expertise.

Operator, we will take the next question, please?

And the next question comes from Eric Katz with Wells Fargo.

Hi, good afternoon. So it sounds like both News Corp and Telstra seem to be on the same page now for a potential triple play offering. Can you comment on the strategy here, how long it would take to implement, and why you think this could be a game-changer for Foxtel?

Look, we aren't going to go into specifics on our negotiations with Telstra, who are great partners of ours at Foxtel. Clearly, it is in the interest of all involved to increase loyalty, and also to increase the attractiveness of the Foxtel package. And through that, our revenues from FOX SPORTS and anything that does indeed do that, we are in favor of.

Operator, we will take the next question, please?

Thank you. Our next question comes from Alexia Quadrani with JPMorgan.

Thank you. My question is just a follow-up on Amplify. Is there anymore color you can give us on sort of the intermediate term outlook? I understand this is a longer term investment, but are there any milestones we can look to, through over the next year or so like new school districts up for bid, that could give us a sense of sort of how it is progressing? And I guess, on that topic, any update on the suspension of tablets at the Guilford schools?

Hi, Alexia, it's Bedi here. I think curriculum development is going very well. I think if you -- in terms of your specific question about when we can expect to see some specific metrics, I think we expect curriculum develop -- curriculum sales to be in sort of fiscal -- sorry, calendar '14, in the fall of calendar '14. I think that is when you should look to see the first sort of sales into school districts for the curriculum products.

And with respect to Guilford, I think the tablets have been recalled because of the safety issue that was identified. But currently, there is an independent consultant looking at the issues with these tablets. Clearly, we are not the manufacturer. So I think out of sort of abundance of caution and safety, we would [rule] them. And I think as we get the results back, and we are in constant conversations with the Guilford authorities, and we expect to have tablets back there once this matter is behind us.

Just to supplement Brady's answer, obviously the core investment in Amplify is going into the curriculum. A school district here or school district there will be indicative of a certain amount of receptivity, but really longer-term and I think you need to view Amplify longer-term, the scale roll out of our curriculum will take place in the fall of 2014.

Operator, we will take time -- or next question, please?

And the next question comes from Doug Arthur with Evercore.

Yes, thanks. I just wanted to go back to John's first question on the cost dynamics in the News and Information Service sector -- segment. It looked like on a sequential basis, the costs really came down quite a bit. And so I am wondering if you could just sort of elaborate on what caused such a big drop quarter to quarter? I know you mentioned some of the cost cuts you have done in the past are starting to come through, but is there anything unusual in this quarter? And then I think Alan has a follow-up, thanks.

Hi, Doug. So I think the unusual, I think the only thing that is sort of a one-off probably is, we shutdown the Daily. So that had an impact on -- of about $6 million I think on costs. So that was sort of a one-time item. I think generally, we expect to see this sort of level of cost reduction continuing to flow through in the following quarters. But again, you have got to sort of temper that with what I said, which is we are facing revenue headwinds. So I am not sure we will continue to see EBITDA margin expansion of the same amount in the quarters to come, but I think we certainly expect to see some of these costs flow through.

Alan? Okay, we will take our next question, operator?

Okay, thank you. The next question will come from Adam Alexander with Goldman Sachs.

Good afternoon. Bedi, I was just interested your comments that Foxtel EBITDA was up mid-teens for the quarter. Can you just give us anymore color on what is driving that, and anything on say, net adds, churn or ARPU that you have got handy?

Hi, Adam. Actually we are not, I think on the ARPU and churn, we are not really giving out numbers on a quarterly basis. I think we sort of tend to do that on an annual basis. The EBITDA improvement has been from the integration of [Auster], and it realized a nice number of synergies. So that has principally been the driving reason for the EBITDA improvement.

Operator, we will take our next call, please?

Thank you. Next question comes from Samantha Carleton with Credit Suisse.

Yes, hi, it's actually [Girirdhar Krishan] here from Credit Suisse. Just a couple for me. Just on the, could you give us any idea how the -- or how sizeable the digital revenues are within your various News and Information Businesses now? That would be the first one. And just secondly, on Foxtel and FOX SPORTS, is there any purchase price amortization charges in those EBITDA numbers we are looking at?

On the EBITDA numbers, there is no amortization charges just by the definition. And then on digital revenues, we are actually not giving out right now, the kind of splits of digital revenues in our segments. But I mean, we are seeing as Robert mentioned, a nice pick up in some of our digital statistics. I think Robert mentioned mobile usage in the Wall Street Journal was up almost 50%. So I think we are seeing traction in all of our digital properties. Clearly on e-books, we are having a -- as I gave the statistics, we had almost a 31% in e-book sales growth.

Just to supplement Bedi's answer, it is a little too early as we indicated to give you meaningful metrics on Sun Plus. But certainly, what we are seeing at the Times is good growth in digital. And that translates into strong -- potentially strong growth in digital advertising. Because what you have there, is a genuinely premium audience who are paying to access the content. And as I mentioned in my introductory statement, they have an affinity with the Times which is material and meaningful. And that sort of affinity, we are finding through our programmatic exchange is genuinely attractive to advertisers.

Operator, we will take the next question?

And moving on to [Bill Burt] with FBR.

Good evening. Could you talk a bit about how the digital subscription roll out is progressing in Australia? Thank you.

Bill, it is very early days. As you know, we have a new management team in place in Australia, under the great leadership of Julian Clarke and Peter Tonagh who came across from Foxtel, and Susan Panuccio, our new CFO. Julian is looking at that strategy at the moment. What we are able to do as a Company is learn from each other, so there will be lessons from the Wall Street Journal for Australia. There will be lessons from Sun Plus, and that genuinely is one of the advantages of the new News.

Operator, we will take our next question.

And the following question comes from [Incho Raykofski] with Deutsche Bank.

Oh, good afternoon. My question is around the NRL costs within cable network programming. Are you able to provide more data around the quantum of uplift in the current quarter? And what sort of drop off you expect into the second quarter of the year? And then finally heading into quarter three and four, whether you expect those to be broadly, I guess flat on the pace they -- given it is cycling some of the increased costs already?

Yes, I mean, NRL right costs for this quarter the impact was around $20 million. I don't think we are giving numbers for future quarters, but clearly, it is seasonal, so the season is pretty much in this quarter.

Many companies talk about seasonality and results, but when you have football season, you have genuine seasonality.

Operator, we will take our next question?

And this next question comes from Mike Morris with Guggenheim Securities.

Thanks, good afternoon. Two topics if you could. First, I know you are not getting specific on digital revenue, but you talked about a pretty big mobile growth number at Wall Street Journal, that 50% to 60%, yet advertising still is flat with the Journal. So can you talk about, is there some kind of growth in mobile that is being partially offset by traditional? Or is it still too early to have mobile impact, and if so maybe kind of how long does it take or what is the gating factor there? And then also just on the Rugby League cost, can you educate us a little bit about the benefit of the contract? It hurts you in this quarter. What is the return profile on that type of investment? Does it drive sub growth in the future, does it -- why take the higher drag in the current quarter? Thanks.

I will take the first question, and Bedi the second. Look, what we are truly seeing is mass migration in mass media. When you talk about a 59% increase in audience for a premium product like the Wall Street Journal, you are talking about, both a significant trend and a significant opportunity. It is just a little early for us to quantify what that means in terms of long-term advertising trends. But I think what you can see we have done, is create the programmatic exchange which enables us to sell across properties, but also to get our maximum yield for premium properties like the Journal on any platform including mobile.

And just on the Rugby League, I think look, after NFL it is sort of the most popular sport, and it is must-have programming you have to have, if you are into the sports programming business. It underpins our current subscriber base. I think it is very helpful to have for the digital platform where we are, where Foxtel is currently putting out new offerings. But we sort of view it as must-have programming.

Operator, we will take our next question, but please limit to one question per caller.

Our next question will come from Craig Huber with Huber Research.

Yes, hi. Can you give more clarity please, within your cable network programming on a year-over-year basis pro forma, how the advertising revenues do there versus a year ago? And also, I guess your circulation and subscription revenues there, please? Thank you.

I think on a pro forma basis we had good growth in advertising, it was up almost 50%, and subscription as I said, was up around 8%. Advertising currently is around 19% of total revenue roughly.

I think as Bedi mentioned there, there has been a significant increase in advertising. And you will recall, we mentioned at Investor Day that, that was going to be one of our priorities. And that in between sports events, the team there under Patrick Delaney was improving the quality of the programming, and around that building out an offering that was more attractive to advertisers and quite frankly, that has come to pass.

Operator, we will take our next question?

And moving on to Tim Nollen with Macquarie.

Yes, hi thanks. My question is about the News and Information business, please. I think I missed a number that you may have given out about the performance in Australia. And I am curious about your comment about how the first quarter is not indicative of the run rate for the next few quarters. Could you just give a little bit more color please, on the revenues in Australia and what you are doing there? I know you have talked about it at your Investor Day, but what you are doing, and what we should expect in terms of margin for the rest of the year, please?

Hi. So I mean, Australia, the advertising revenue I said declined around 25%, which included a 10% negative impact of -- from foreign currency. And basically, in terms of the sort of cost side of the equation, we expect sort of cost savings to continue. But what I meant was, if you look at revenues and revenues being under pressure, for the News and Information Services, I think EBITDA margin expansion sort of continues to remain challenged when we look forward.

Operator, we will take our next question?

And the next question comes from Wescott Rochette with S&P Capital IQ.

Thank you. Just a question back on the cable. If we look at it kind of on an annual basis, the business was running kind of mid to low 30%s EBITDA margin, it was down lower, I understand you have some contracts kind of came up. But as you absorb those contracts and rebuild the advertising, is it, are you looking to get back to a 30% margin in that business? Or is it kind of more sub growth kind of going forward? Thank you.

Look, I think that our FOX SPORTS Australia, obviously benefits when we have subscriber growth. And that is one of the metrics that we look for. And clearly, as Robert mentioned, there has been improvement in advertising as well. We are not giving specific sort of EBITDA margin targets on any of these businesses, but we would certainly look to extract efficiencies, and certainly look to maintain margins in the business.

Operator, we will take our next question.

And the next question comes from Samantha Carleton with Credit Suisse.

Hi, Robert, hi, Bedi. I just wanted to ask a question around Dow Jones. Can you talk a little bit about the profile of the investment in the institutional business, and when you expect revenue to kick in there?

Samantha, obviously, we are in a very early phase of the development of DJX. The problems at Dow Jones in the B2B business are certainly well known to everybody on this call, and we were very candid about them on the Investor Day. It really goes back to that period of [teller ray] trauma, where the Dow Jones lost ground to its competitors. So this is a major restructuring of that business. The first iteration of DJX is just off the blocks. And so, you will have to give the Dow Jones team and us a little while before we can give you an accurate read on its market penetration. But this is a significant development for the Dow Jones, and frankly, trying to improve the fortunes of -- part of the business, about 30% of the Dow Jones business, but trying reverse the fortunes of a part of the business that hasn't performed to its -- to our expectations, or to its potential for really almost two decades.

Operator, we will take the next question?

And next question will come from Alan Gould with Evercore.

Thank you. I was just wondering what your thoughts are on your dividend policy going forward?

Hi, Alan, it's Bedi here. Clearly, as we said in our filings, there is an expectation that we will be paying a dividend. I think the timing and the amount is going to be determined by the Board. But again, as we said before at the Investor Day, I think right now we are focused on sort of managing the operating businesses, stabilizing the revenues, and I think internal investments. And as Robert said, this is one of the users of capital we have, so clearly, it is something we said we would do, but I think at this point in time it is too early to sort of speculate on how much and when.

Okay. Thanks, Bedi.

Operator, we will take the next question.

At this time, there are no further questions, sir.

Thank you, all for your time. We will talk to you next quarter.

Thank you. That does conclude today's conference. We do thank you for your participation today.