News Corp (NWSA) 2016 Q3 法說會逐字稿

Good day, and welcome to the News Corp third quarter 2016 earnings call.

Today's call is being recorded. Media is allowed to join today's conference in a listen-only mode.

At this time, for opening marks and introductions, I'd like to turn the conference over to Mr. Mike Florin, Head of Investor Relations at News Corp. Please go ahead.

Thank you very much, Tom. Hello, everyone, and welcome to News Corp's fiscal third quarter 2016 earnings call. We issued our earnings press release about 30 minutes ago and its now posted on our website at newscorp.com. On the call today are Robert Thomson, Chief Executive, and Bedi Singh, Chief Financial Officer. We will open with some prepared remarks, 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 March 31, 2016, 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 a 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 a 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. In our pursuit of digital and particularly mobile growth, we continue to develop and to diversify the portfolio of our businesses and aggressively control our opening costs to free resources for further innovation and to expand margins across the company.

The third quarter results were materially affected by a $280 million pretax charge at News America Marketing to resolve a legacy lawsuit and related claims and continued currency headwinds, which impacted revenues by $72 million and EBITDA by $9 million. Excluding those factors and other special items, our revenues and total segment EBITDA declined 5% and 8%, respectively, which was disappointing. We believe, however, that the company is on track to see improvements in the fourth quarter with the expansion of our digital real estate business, foreign currency comparisons hopefully beginning to ease, and cost saving initiatives that confirm the root.

Our pursuit of digital growth continues apace and we enhanced our status as the world's largest digital property company with REA's completion of the iProperty acquisition in Southeast Asia, where we are now the most influential player. Meanwhile, traffic and revenue growth remained robust at REA and Realtor.com. We have focused on driving mobile revenue and are pleased with, but are not complacent about, the results at Realtor.com, where their mobile audience grew close to 50% this quarter and now represents 60% of page views and the majority of leads.

Despite the difficult conditions for advertising, we saw both Dow Jones and News Corp Australia contributing to segment EBITDA growth thanks to more digital subscriptions, digital advertising growth, and ongoing cost-reduction. While we believe in the strength of our print properties, we are investing energetically in the rapid pursuit of digital which is clearly evident in the transition at Dow Jones. At Dow Jones this quarter, digital accounted for more than 50% of total revenues, and digital only subscribers at the Wall Street Journal grew to 893,000, representing nearly 45% of the base.

We are building a strong digital platform on top of the WSJ print circulation, which today is double the size of its nearest rival. And 51% of the Wall Street Journal digital audience now comes from mobile, up six percentage points from a year ago. With the advertising market in the midst of upheaval, advertisers and agencies are understandably experimenting with their spend, but we firmly believe that premium brands and audiences are currently undervalued by advertising agencies, some of whom are more interested in fashion than function.

With Silicon Valley's demand for quality content more voracious than ever and advertisers rightly seeking greater digital accountability, we believe News Corp is ideally positioned to capitalize on these macro trends through the power of our global mastheads, businesses, and audiences. Bedi will shortly provide more granular detail in the numbers, but reported revenues fell 7% to $1.9 billion, and the reported total segment EBITDA loss was $122 million. Excluding the one-time pretax legal charge of $280 million at News America Marketing, total segment EBITDA would have been $158 million, a decline of 14%.

We are very focused on leveraging the key strength of our portfolio. As one example, we've recently reached an agreement with a leading consumer packaged goods company that involves both News America Marketing and Realtor.com and we expect many more such deals, as advertisers appreciate the value of our brand and deep audience relationships. Let me review some of our lines of business, beginning with Digital Real Estate Services.

With the ongoing success of REA, the completion of REA's acquisition of iProperty, and the growth of Realtor.com, News Corp's digital real estate business is continuing its robust expansion. iProperty is the leading digital platform in Southeast Asia, complementing our existing businesses and allowing the further repurposing of software and of expertise.

News Corp Australia also completed the acquisition of Diakrit, a leading provider of 3D visualization for the real estate industry, which we plan to incorporate more broadly at REA and around the industry. This will help differentiate News Corp's digital real estate capabilities worldwide and provide a valuable service to realtors, vendors, and buyers.

For the most recent quarter revenues at Move, which operates Realtor.com expanded at 20% year-over-year, while user engagement at Realtor.com continue to grow briskly, with page views more than 25% higher to a record 1.5 billion views. And minutes spent on the site increasing nearly 30% year-over-year. We have momentum and the strongest engagement in the US housing market. A market that we believe is yet to fully recover from the financial crisis, and is still at a relatively early phase of its digital evolution.

Also in this quarter, average monthly unique users increased by 30% year-over-year, including strong growth in mobile. For the month of April, we recorded 55 million monthly uniques, and the average user of our mobile app accessed around 20 pages per visit, and that's not including photo galleries. We are continuing to improve our product line to enhance of the services for realtors and the efficacy for users.

We have number of new products coming to market at Realtor.com, including Turbo which will assist in the promotion of listings for agents and brokers. Early in FY17, we plan to roll out Showcase 2.0 to provide even more direct links to properties and leads for realtors, vendors, and buyers. We're also enhancing our software and services offerings for agents to improve the efficiency of their business and bolster the efficacy of leads and ROI. We continue to enhance the site experience to drive deeper engagement, personalization, and integrating more relevant content with robust, local neighborhood information.

In Australia, where digital real estate is at a more advanced stage of development, the REA Group had a solid quarter, with revenues expanding by 20% year-over-year, excluding the impact of foreign currency, thanks primarily to the broader penetration of premium products. REA in Australia has more than twice the traffic of its nearest competitor, and REA continues to work ever more closely with Realtor.com and other News Corp properties. One modest sign of our partnership was the successful launch this past week by the Australian newspaper of a glossy magazine, Mansion, based on the Wall Street Journal's well-known section and in conjunction with REA.

Overall, excluding currency and M&A costs, adjusted revenues at the Digital Real Estate Services segment grew 18% and adjusted EBITDA grew 23% year over year despite the higher legal costs at Move, which is involved in ongoing litigation in tandem with the National Association of Realtors against Zillow over the theft of corporate secrets and the destruction of evidence.

In Australia, Fox Sports posted strong EBITDA growth in part due to the absence of [costs] from the Cricket World Cup and Asia cup in the prior year. We are encouraged by the particularly robust ratings with the launch of the new season of Rugby League and Australian Rules Football. The NRL and AFL are both up low double digits over the prior year. We believe the strong early returns in both sports this year are positive indicators for subscriber growth and advertising and highlight the value of our deals to secure NRL and Aussie Rules rights until 2022. These key sports should provide a platform for the long-term growth of our franchise.

At Foxtel, we saw the appointment of Peter Tonagh as CEO, and expect that he will further develop the company, which we operate in partnership with Telstra in Australia. There have been several changes to the Foxtel executive team, and we are confident that the development of products, and crucially, the marketing of those products will be enhanced over the coming year. In a challenging marketplace, Foxtel grew subscribers to around 2.9 million subs, which included a roughly 6% increase in cable and satellite subs versus the prior year and higher Presto subscribers.

An Foxtel is announcing today an agreement with six top English Premier league clubs, launching three dedicated channels with all home and away matches for Chelsea, Liverpool, Manchester United, Manchester City, Tottenham Hotspur, and most significantly and profoundly, Arsenal. These teams account for 75% of the EPL fan base in Australia.

This agreement is yet another strong sign of how Foxtel differentiates itself from the competition with its premier content, which we believe also includes Australia's best portfolio of films and other programs and a growing roster of homegrown dramas that are proven audience pleasers. We expect our new team will make that point to consumers tempted by lesser offerings from other providers who may have name recognition but a relatively limited flow of compelling content.

Foxtel, which has an approximate 14% equity stake in the Ten Network, is already seeing benefits from the MCN advertising joint venture. The partnership with MCN delivers a broadened sale platform and obvious operating efficiencies. It is worth noting that Ten was the only free-to-air network to gain market share in its fiscal first half.

While HarperCollins faced a challenging quarter, as we had foreshadowed due to tough comparisons with the strong sales of Divergent and American Sniper last year, the trends do appear to be improving. There is a stronger pipeline, including the paperback edition of Go Set a Watchman and the publication of Megyn Kelly's first book, scheduled to appear this November.

In the next fiscal year, we look forward to launching the latest books from Daniel Silva, Patricia Cornwell, and Veronica Roth, the author of the Divergent series, whose next novel, Carve The Mark, the first part of a duology to release in January. The books cover was released today to much acclaim by Veronica's many, many fans. As a result, we are encouraged by the outlook for the next fiscal year, and expect to see improved year-over-year comparisons in the current quarter. We also continued to strengthen our international operations to make most of hit books globally. For example, by having taken full control of our operations in Italy and France and expanding in India.

At News and Information Services, while the print ad market, particularly in the UK, remains somewhat challenging, and News America Marketing's FSI revenues were certainly under pressure, we are continuing to rightsize our cost structure while emphasizing the importance of high-quality content and providing creative products and quality audiences for our advertisers.

This quarter, segment EBITDA reflected positive growth at both Dow Jones and at News Corp Australia, thanks in part to the benefits of earlier efficiencies. Let me take a moment to discuss some of our cost initiatives in detail. At News Australia, we've announced an initial goal of 5% in annualized fixed cost reductions across the business, and we are well on the way to achieving that target with AUD40 million of cost savings expected in the second half of this fiscal year.

These are savings range from lower production costs to the closure of lossmaking businesses and reduced headcount across the divisions. This, along with a moderation in print ad declines and acceleration in digital revenue has contributed to News Corp Australia's stronger quarter this quarter. As a way to demonstrate our scale, according to a new study by Nielsen and IAB, News Corp digital properties reached just under 16 million Australians above the age of 14 in each month, which is higher than Facebook.

At Dow Jones, expenses moderated thanks to a combination of lower sales and marketing spend and reduced newsprint expense. We continue to make strides in circulation, outpacing our peers, and as we've communicated, we have ambitious goals for ongoing digital growth. In this quarter, we also relaunched the MarketWatch website and we have seen 20% revenue growth, with quarterly traffic exceeding 20 million unique users and page views of over 150 million, up high teens versus the second quarter.

At the professional information business, we rolled out customized newswires, created a new vertical targeted at financial regulation and launched Factiva Mobile, providing additional avenues of future growth and improving the service for our professional subscribers. Revenues at our risk and compliance business grew 30% year-over-year, and the tougher regulatory climate in many sectors, particularly in financial services, is clearly stimulating demand for our products.

At News UK, we still see challenges in the ad market. There was continued weakness in print demand, specifically from the supermarket sector, which itself is in the midst of upheaval. But variable and fixed operating costs are both declines, a trend which Bedi will detail momentarily. In addition, the cover price of the Sun rose 10P in March, and the Times cover price increased by 20P in April. We're looking forward to the launch of a redesigned Sun website in the coming weeks, which should attract more traffic and be a stronger ad platform.

We believe there is clearly room for significant growth in digital advertising of the Sun, given that the site itself has just emerged from behind a payable. Traffic is almost doubled to more than 35 million monthly unique visitors since October, after which the site was fully opened.

News America Marketing continues to face pressure on freestanding insert revenues, while domestic in-store display showed solid growth. Our key ambition is to complement the printed coupon business with a new mobile offering, which is why the team is focused on growth at Checkout 51. Leveraging our platforms at Dow Jones, the New York Post, and Realtor.com, NAM has accelerated expansion of Checkout 51 and it is now in the top 10 of all free shopping apps in the Apple Store.

As mentioned previously, we announced this quarter that News America Marketing has agreed to settle its legacy class action lawsuit with consumer packaged goods companies that was instigated by trial lawyers. We're pleased that we can continue to work with our long-term business partners without the unwelcome distraction of this case. In conclusion, we are focused on rapidly shifting News Corp into higher growth businesses while determinedly reducing our expenses at the news and information services segment to better reflect the changes in the advertising market. And we're pleased with the continuing progress in digital real estate, which has become a large and growing pillar for the company's future.

With that, I'll turn you to Bedi for further detail on the quarter's numbers.

Thanks, Robert. We reported FY16 third quarter total revenues of $1.9 billion, down 7% from the prior year period.

As Robert noted we were again impacted by currency headwinds, although lessening from the prior quarter, which negatively impacted Q3 total reported revenues by $72 million. Excluding the impact of foreign currency fluctuations and acquisitions, adjusted total revenues declined 5% compared to the prior year.

Reported total segment EBITDA loss of $122 million includes a one-time pretax charge of $280 million related to News America Marketing's settlement of the CPG class-action lawsuit and related claims. Excluding that cost, total segment EBITDA would've been a positive $158 million. Currency fluctuations impacted total reported segment EBITDA by $9 million or 5%, and we also incurred transaction costs of $7 million related to REA's acquisition of iProperty and $3 million in legal costs related to the UK newspaper matters.

For the quarter, adjusted EPS from continuing operations was $0.04 versus $0.09 in the prior year. Reported EPS from continuing operations, which includes the News America Marketing settlement charge net of tax, were negative $0.26 compared to $0.08 in the prior year.

Turning now to the individual operating segments. In news and information services revenues for the quarter declined $122 million, down 9% versus the prior year period. Adjusted segment revenue declined 6%. Within these segment revenues, advertising declined around 15%, or roughly 11% in local currency due to a weakness at the FSI business in News America Marketing and in print advertising, offset by strong digital ad growth at Dow Jones.

Circulation and subscription revenues declined 4%, but were overall flat in local currency. News and information services reported a segment EBITDA loss of $187 million. Excluding the News America Marketing settlement charge, segment EBITDA this quarter would've been a positive $93 million, a decline of 18% compared to the prior year. Adjusted segment EBITDA was down 11%, an improvement from the prior quarter rate, with declines at News America Marketing partially offset by growth in our newspapers due to strong improvements at both Dow Jones and News Australia.

Looking at performance across our key units. At Dow Jones, domestic advertising at the Wall Street Journal declined 4% versus the prior-year quarter, a slight improvement from last quarter. Declines in print advertising were again partially offset by continued solid growth in digital, driven by strength in programmatic and custom content. And digital accounted for approximately one third of Dow Jones' ad revenues this quarter.

Wall Street Journal circulation revenues grew 5% this quarter due to higher subscription pricing and higher digital paid subscribers, as print volume remained relatively stable. Digital only paid subscribers were 893,000 for the quarter, a strong double digit gain over the prior year. And at PIB, we saw positive net installs and stable revenues excluding currency, led principally by continued strength in the risk and compliance business.

At News Australia, advertising revenues for the quarter declined 15% or 7% in local currency. The rate of decline in print advertising moderated due to sequential improvements in the national and retail categories, and we also saw an acceleration in digital advertising growth compared to last quarter, led by strength at News.com.au. Circulation revenues at News Australia were relatively stable in constant currency as a result of cover price increases and higher paid digital subs, largely offsetting print volume declines.

We took a cover price increase for the weekday Metro newspapers of $0.10 during the quarter. Digital paid subscribers grew over 25% year-over-year to 273,000 for newspapers and other publications as of the quarter end. And as expected, we are seeing the benefit of the cost reduction program implemented at the end of Q2, and realized an estimated AUD17 million of cost savings in the quarter and are on track to meet the AUD40 million target for the second -- fiscal second half. As a result, News Australia showed improvement both on reported and local currency basis compared to the prior year.

At News UK, advertising revenues declined 21%, or down mid teens in local currency, driven by weakness in print advertising at both the Sun and Times, reflecting a weakened marketplace from the prior quarter. Digital, while small as a percentage of revenues, accelerated led by the Sun. Circulation revenues at News UK declined mid-single digits in local currency compared to the prior year, primarily due to news stand volume declines and the removal of the Sun's paywall, which were partially offset by subscription and cover price increases.

The key management focus at News UK is on improving the performance at the Sun, particularly its digital proposition. We will be relaunching the Sun's website imminently, which will be integrated with much more video and better aligned for mobile usage and monetization in conjunction with our video ad platform, Unruly.

In Q3, the Times continued to gain circulation market share and saw modest volume growth. The Times had 174,000 digital subs as of the quarter end, representing more than 40% of the total paid subscribers. Declines at News UK moderated from last quarter, primarily reflecting overhead and editorial saving initiatives, lower newsprint prices across our titles and cover price increases.

At News America Marketing, revenue declined 17% versus the prior year quarter. FSI weakened this quarter due to lower volumes and pricing pressure, as we had anticipated. Domestic in-store, however, rose slightly this quarter. News America Marketing also incurred higher investment spending at Checkout 51, its digital and mobile coupon company. Checkout 51 is a key part of the strategy to digitize News America Marketing, and the current focus, as Robert mentioned, is to drive app downloads and expand usage.

Turning to the Book Publishing segment, revenue decreased 11% and segment EBITDA declined 36% versus the prior year. Declines were due to expected tougher year ago comps from the sales of the Divergent series and American Sniper, as we noted in the last earnings call, as well as lower e-book volume across the marketplace, similar to the second quarter. As a result, total digital revenues for the quarter were 21% of consumer revenues, down from 25% in the prior year.

Divergent sold less than 1 million units this quarter compared to 2.3 million units in Q3 last year, and HarperCollins also sold 2.7 million units of American sniper in the prior year. Combined, those two franchises accounted for the majority of the year-over-year revenue shortfall. Top-selling books this quarter include The Nest by Cynthia Sweeney, and Pretty Happy by Kate Hudson in general trade books, and the Glass Sword by Victoria Aveyard in children's.

And Digital Real Estate Services, total segment revenues increased $24 million, or 14% to $194 million, which includes the consolidation of iProperty and Diakrit, which closed in February and the lapping of the Move acquisition in November 2014. Segment EBITDA was $39 million, down from $42 million in the prior year. This reflects $7 million in one-time transaction costs for the iProperty acquisition, higher planned marketing expenses at REA Group, and $11 million higher legal expenses at Move related to the Zillow litigation.

Importantly, adjusted revenue and adjusted segment EBITDA grew 18% and 23% respectively, inclusive of the $11 million higher legal expenses at Move. As Robert noted, Move is currently in litigation with Zillow, and we would expect to incur some additional legal costs in the fourth quarter as we prepare for trial in early June. REA's revenues grew 9% or approximately 20% in local currency due to higher list depth product penetration, partially offset by an earlier Easter as compared to the prior year.

Move revenues rose 20% versus the prior year, driven by strong growth in the connection for core brokers product and higher non-listing media revenues, partially offset by reduced ad inventory as part of the site redesign. Unique user growth at Realtor remains strong, up 30% to 50 million average per month for fiscal Q3 and hitting a record 55 million users in April.

In cable network programming, revenues decreased by $9 million, or 8% compared to the prior year, but on a currency adjusted basis, revenues were flat. Subscription revenue declined 5% as higher affiliate fees and subscriber gains were more than offset by FX headwinds.

Excluding currency, subscriber revenues grew around 3%. Advertising revenue declined 18% due to the absence of the Asian Cup and Cricket World Cup in the prior year and the local currency ad revenues declined around 12%. Segment EBITDA in the quarter, however, rose 26% on a reported basis and 33% adjusted for currency, due to lower acquisition costs from the absence of these two sporting events. With respect to earnings from affiliates, Fox 10 entered the quarter with approximately 2.9 million total subscribers, with cable and satellite subs increasing approximately 6% compared to the prior year period and higher Presto subs despite increased competitions from SVOD players.

[Foxtel] revenues for the quarter in local currency were up 2% and EBITDA declined 4% in local currency due to higher programming costs and an increase in subscriber acquisition costs driven by new offers launched in January. Foxtel no longer expects to increase EBITDA over FY15 due to these factors and continued focus on sales and marketing. Foxtel posted record gross cable and satellite ads this quarter, driven by favorable consumer reception to offers in the market.

Churn in the quarter rose to 14.3% from 10.9%, which was largely driven by subscribers on no contract offers, and we expect churn to remain higher than normal in the short-term. However, year to date churn was relatively stable, and amongst longer tenured subscribers, remains near record low levels.

Heading into the fiscal fourth quarter, there are a few points to note. First, as we've disclosed in our filings, this being a 53 weeks fiscal year for us, we have an extra week in fiscal fourth quarter, which should have a modest positive impact on revenue and EBITDA. We expect to see continued cost savings at NIS segment across each of our key mastheads and the flow-through of recent cost saving initiatives.

Book Publishing should benefit from the normalizing of comparables given the absence of Divergent comps and a strong pipeline this quarter, including the paperback release of Go Set A Watchman. We expect REA to benefit from the early Easter, which should be a positive on listing volume in Q4, and Move continuous to expect strong revenue growth off the back of increased audience. And finally, CapEx for continuing operations for the year is likely to be in the $240 million to $260 million range, below the $308 million from last year.

And with that, let me hand it over to the operator for Q&A.

Thank you, sir.

(Operator Instructions)

Eric Katz, Wells Fargo.

There's been quite a bit of news around potential buyout of Telstra's stake in Foxtel, so I was just wondering if you could touch on some of the key positive and negative aspects you're mulling over for that potential acquisition?

And maybe just your general thoughts in that business over the next few years and how it differs from Telstra, who looks like they want to exit? And I guess on top of that what's your appetite for leverage to make a deal of this size happen?

Eric, we're not going to speculate on idle speculation. What we can tell you is that the new team at Foxtel, led by Peter Tonagh, and at our partners in Foxtel Telstra are determined to improve the business.

We're investing in subscriber growth, and you saw today with the announcement of the acquisition of EPL, the premier league rights for the six most important clubs, that day after day, week after week, Peter and team are both improving the product and most crucially improving the projection, because we believe that there's no doubt that Foxtel has the best suite of programs.

There's no doubt that that portfolio is starting to resonate. It already is resonating with our long-term subscribers. There's obviously a little bit more churn when you have a lot of offers out there, but long-term we believe that the health of Foxtel is robust and that we have a full faith in the new executive team. And I think the cleverness of the deal that they've done on premier league rights tells you that we're certainly going to look after our fans who like EPL, but we were never going to acquire EPL in a way that would hurt EPS.

Now you might want to watch a game in the middle of the night and pay a lot of money to do that. That's what Australians would call a nocturnal marsupial, but you're a rather sad and sultry person in the middle the night, or you can watch the game, frankly, with your family at lunchtime and cheer on your favorite players. And one other thing about the particularly interesting offering that Peter and the team have at Foxtel is that you'll also be able to see all the reserve games, the under 21 games, and so when well-known players like (inaudible) or Jack Wilshire come back into the intermediate teams ahead of playing in the mountain, you'll be able to watch those games as well.

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

Entcho Raykovski, Deutsche Bank.

Hello, Robert. Hello, Bedi. My question is around digital real estate services and Move specifically. Apologies if I missed this, but are you able to tell us what the EBITDA for Move was over the quarter, and then in light of the continued legal expenses which have been incurred, do you expect Move to be breakeven for the full-year?

So, we don't actually specific give out Move's EBITDA, but I can tell you that in Q3 there was positive EBITDA and this was despite the fact that we incurred the higher legal expenses in the Zillow litigation.

And we expect, clearly, given the audience growth we see at Move, we expect revenue growth going into Q4, and I would expect barring legal fees, which we don't know what the quantum of those could be in Q4. Barring legal fees to one side, we would expect to see EBITDA positive and EBITDA growth in the fourth quarter for Move.

Entcho, to supplement what Bedi said, and that includes our stock-based compensation, which some companies in the sector don't do. As Bedi said, we fully expect core EBITDA growth this quarter, and we fully expect even faster EBITDA growth in succeeding quarters. Were in the middle of what you might call home renovations at Realtor.com. You can see from what you might call a buy-side product, the co-broke where we have 45% revenue growth year on year.

That side of the business is doing well, and Ryan O'Hara and the team at Move are now working on improving the sell side products. So that's one known as Turbo and another known as Showcase, and we expect over coming months and into the next fiscal for those also to have a positive impact.

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

Alexia Quadrani, JPMorgan.

Hello this is James Kopelman, in for Alexia. A question on the Journal and digital. Digital subs are obviously growing fast and you guys are reaching impressive levels. Can you talk about strategies for further growing digital subs, and maybe provide some color on what you're looking at, whether it's with regards to retention, perhaps lowering churn, or in terms of -- on the product side, whether it's adding PDO, expanding into new verticals?

You mentioned MarketWatch earlier. I guess, where do you see the opportunities, and how are you exploiting them? And then as a follow-up, one of your publishing peers, I think when they were at a similar level of subs, within about a year they passed 1 million. So I guess any color on -- if you could comment on what your own broad timeline is for hitting that key threshold of 1 million digital only subs? Thanks.

Well, we certainly are optimistic for the digital potential at Dow Jones and the Journal in particular. What we're doing obviously is emphasizing, as one must in the contemporary age of content, video, increasingly interactive engagement with this premium audience. But also developing new verticals. Virtuous verticals that give us more elasticity because they touch professionals in a way that, on a need to know basis, these are knowing audiences, but frankly they're also paying audiences.

I think you need to see the Dow Jones offering as essentially having three segments. The B2C and the B2B, both of which are well known, Factiva and newswires, venture capital related verticals are at the B2B side, but there's also a very strong B2P play between the consumer and the business. That's the business to professional, and we see that the team there, Will Lewis and the editorial team are constantly fashioning new products for the fast-growing B2P segment, which is obviously a more sophisticated product, frankly, at a more sophisticated price.

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

John Janedis, Jefferies.

Thank you. Robert, you talked about mastheads and audiences being undervalued by agencies, and I think you'd say you have the scale and you felt that way for awhile. So how do you change that narrative and/or inertia to realistically gain share of budget?

So that's a really good question. One way you change the narrative is to start talking about it, as we are. Secondly, we have to do a better job of selling the power of the platforms and the reach of the audiences. You look at our US digital platforms, and that's Realtor, the Post, Wall Street Journal, Marketwatch, that's around 160 million monthly uniques. And I'll tell you one story, which we use our own platforms to create new products and generate new audiences.

You may have noticed just over two weeks ago, we created a packaged libertarian site called HeatStreet. HeatStreet has picked up 1 million uniques in just over two weeks. External marketing spend on Heat Street, $10,000. That is proof of the power of our platforms relative to external platforms.

We have to do a better job of explaining it, but quite frankly, I think advertisers need to challenge agencies. Because at times, the interest in the agency and the interest of the advertiser or not in alignment.

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

Doug Arthur, Huber Research.

Bedi, on book publishing, HarperCollins, just to be clear, are you expecting topline growth in the fourth quarter, or just improvement? Thanks.

Look, clearly it also depends on what the mix of books is, but at this stage when we look at where the last month and where we were entering this month, I would expect both topline growth and I would expect improvement at the bottom line.

Great. Thank you.

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

Craig Huber, Huber research.

You guys threw out a lot of numbers on the new [super ad revenues]. I don't think I heard the UK ad revenue percent change in the core year over year without currency. And also, can you remind us, the Zillow lawsuit you talked about, what dollar amount are you guys going after there please?

On the UK, what I said was that ad revenues in the UK declined 21%, but in local currency they were down mid teens. And on the legal segment, I'm not sure we are going to be saying a lot other than the fact that there is a trial date that's been set in early June and we are preparing to go to trial.

Thanks, Craig. Operator, we will take our next question please.

Michael Kass, BlueMountain Capital.

Just a follow-up on one earlier question on Move. (Inaudible). Did you disclose the revenue in the quarter for Move, you have generally done that?

Mike, can you repeat the question, we just had trouble hearing you.

I was wondering what the absolute revenue at Move in the quarter was?

We actually don't give out a separate number for actual revenue, we give out percentage increase.

It was up 20%, quarter on quarter. The unique users up 30% for the quarter itself, in April up 25%.

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

Brian Han, Morningstar.

Thanks very much. Are you still incurring any cash flow losses on Amplify, even though you sold it? And also as a general question, what percentage of your newspaper cost space relates to newsprint now?

With respect to Amplify, we've pretty much cleaned up most of the bits that were left over. In the quarter, there was a very immaterial loss, looking at the Q4. We have a very immaterial amount of cash flow to go, and we expect to be completely sheet cleaned up as of 30 of June.

And as for newsprint, newsprint is probably less than 10% of total cost for a masthead these days. What we have been able to do across our mastheads were the extra focus of the new news is whether it be software, the publishing systems, newsprint contracts, generally we are engaging a lot more collective cooperative bargaining of the company.

We are able to get costs down. Share experiences. Share expertise. De-dupe expenditure in a way that is having a tangible positive impact on all the cost bases.

Operator, we'll take our next question please.

Sacha Krien, CLSA.

Thanks, guys. In relation to News America Marketing legal costs, can you give us idea of the quantum of fees you've incurred over the past quarter and perhaps over the past 12 months? And just to confirm that there aren't any legal fees rolled up in that charge? And then just a quick second question in relation to Foxtel. Is it churn that's the primary reason behind not hitting the previous guidance?

With respect to legal fees for NAM, we incurred $10 million roughly in the quarter, and the settlement that was for $280 million does not include these $10 million of legal fees, which went through separately.

As for Foxtel, as you know, we're in the midst of an intensive marketing drive. The churn will have an impact on revenues partly because, as Bedi mentioned, they are no contract offers. But you're still looking at ARPU in the high $80's which is significant. And you're looking at a low rate of churn for long-term customers. And you should note that Foxtel implemented a $1 price increase for the entertainment tier, which will have a benefit in the next quarter.

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

Tim Nollen, Macquarie.

Thanks. I'm interested in the Sun, with you removing the paywall, and if I remember correctly, when you set up the paywall for the Times several years ago in the UK, your viewership dropped by a big number, 90% or something like that, which is understandable because you are getting people to pay.

So I just wonder if the Sun went through something similar, and now I think you said the unique's have -- I think you said have doubled. I recognize it's relatively early, but it seems like there might be a lot more ground to recover, and I just wonder what might be different now versus the last time The Sun was basically free to all viewers. Thanks.

I think we have a lot of faith in the quality of content of the Sun. There's no doubt that the audience already has increased. We are relaunching the website itself in coming weeks, which we presume both obviously on desktop and crucially on mobile will have a profound impact.

The ad sales teams are gearing up for that opportunity and it's definitely an opportunity. The Sun will be a brand that resonates obviously particularly in the UK, but it's also a brand with a global halo. And so we see real potential there over coming quarters.

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

Michael Kass, BlueMountain Capital.

Thanks for taking another question. I was just wondering, now that you've settled at least on the CPG side, the NAM suit, I was wondering if you could talk a little bit more about how you see the value of that business quantitatively versus the pretty considerable settlement?

I guess from a market perspective, it's not clear that you're getting that much value from the ownership of NAM, and you don't disclose metrics, so why was it worth spending $300 million to settle this lawsuit?

As you can see, Marty and the team at NAM are investing significantly in the digital character of the company, because NAM has unique relationships with CPGs. It has unique relationships with retail. And what we're seeing with NAM coming closer to other parts of the organization, is those are complementary skills which are helping introduce, for example, Realtor and our other properties to advertisers who in the past may not have had a particularly close client relationship with us.

So the key thing over the next 12 months will be the development of digital. You always have to remember that NAM has significant free cash flow. That the in store business has been a growing strongly, even as the FSI business has been under pressure.

And in a very short period, Checkout 51 -- and would advise you to check out Checkout 51, has become one of the top 10 shopping apps. And that means in terms of reach on the Apple App Store, it has more prominence that Walmart and Walgreens.

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

Peter Stamoulis, Evans & Partners.

I was hoping you could provide a little visibility into programming costs back across Fox Sports Australia and Foxtel going forward of the next 12 months? Thanks.

In terms of Fox Sports, as you know, the simulcast of the NRL will be starting in the fourth-quarter. So we expect to incur some additional costs there. We will also have some additional costs related to a few more matches of Wimbledon and then the new Rugby Union contract also kicks in. So we'll see an increase in sports costs there.

But as you know, at Fox Sports costs tend to be lumpy, and so EBITDA tends to be a little lumpy. But overall we expect that in the fourth quarter, EBITDA should be improving slightly compared to the prior year.

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

(Operator Instructions)

Mr. Florin, there are no further questions at this time. I'd like to turn the call back over to you for any closing remarks.

Well, great. Thanks Tom, and thank you all for participating. Have a great rest of the day. We'll talk to you soon.

Ladies and gentlemen this does conclude today's conference. We appreciate your participation.