Rupert Murdoch has written down the value of the Sun newspapers to zero as the impact of the Covid-19 pandemic helped to fuel a £200m loss at his flagship tabloid titles.
Advertising and sales revenues at the Sun and the Sun on Sunday plummeted, with turnover falling by 23% from £419.9m to £324m in the year to the end of June 2020.
The torrid market conditions, coupled with one-off charges related to ongoing legal action over allegations of historical phone hacking, led to pre-tax losses more than tripling from £67.8m in 2019 to £201.4m.
As a result News Group Newspapers, the subsidiary of News UK that operates the two titles, wrote down their value to zero. The £84m non-cash “impairment of publishing rights” essentially means the publisher does not believe the titles will return to positive growth.
More than 80% of the Sun’s losses, about £164m, were one-off charges mostly related to phone hacking. They included £52m in fees and damages paid to civil claimants, double the £26m paid out in 2019, and a £26m in costs accounted for as “UK newspaper matters”.
The Sun paid a substantial sum on Thursday to settle a phone-hacking claim brought by the former Liberal Democrat MP Simon Hughes, who claimed reporters wanting to out his sexuality had targeted him illegally.
“The company is exposed to libel claims in the ordinary course of business and vigorously defends against claims received,” News Group said. “The company makes provision for the estimated costs to defend such claims when incurred and provides for any settlement costs when such an outcome is judged probable.”
It was not able to stem losses despite cutting sales and marketing costs by 40%, and cutting staff numbers from 605 to 546. “The company will continue to take various steps intended to offset the impact of Covid-19 by reducing variable costs and implementing cost-savings initiatives,” it said.
The Sun, which Murdoch acquired in 1969 and celebrated its 50th anniversary two years ago, lost its title of the UK’s bestselling newspaper to the Daily Mail last year. It had been the nation’s most popular newspaper since 1978, spawning memorable splash headlines such as Freddie Starr Ate My Hamster, Gotcha!and It’s The Sun Wot Won It – the 1992 front page taking credit for the Conservatives’ unexpected general election victory.
There was better news for the Times and the Sunday Times, which managed to boost pre-tax profits from £3.7m in 2019 to £10.3m in the year to 28 June 2020. The titles managed to minimise the annual decline in revenue to £20m, with the £330m reported in 2019 falling to £310m last year.
“The decrease in revenue was due to challenging market conditions, with declines in both newspaper circulation and in print advertising, in line with other businesses in the sector and wider economy,” said Times Newspapers Limited, the News UK subsidiary that operates the titles.
“This was partly offset by strong growth in digital subscription revenue as well as digital advertising revenue, supported by the implementation of price increases on The Sunday Times during the period.”