The Sun recorded a loss of £51m last year as the Covid pandemic and a shift of advertising spend online hurt its newspapers, while its parent company sought to end the phone-hacking legal cases that have cost it hundreds of millions of pounds over the past 15 years.
Rupert Murdoch’s News Group Newspapers, which publishes the Sun and retains liability for the activities of the defunct News of the World, spent £49m on legal fees and damages relating to historical phone-hacking allegations in the year to 27 June 2021. This compares with the £80m NGN spent the previous year.
The financial filings show the unnamed highest-paid director of NGN – most likely Rebekah Brooks, the chief executive of parent company News UK – received a 50% increase in remuneration last year to £3.6m.
On Thursday, NGN is beginning a two-day hearing at the high court in an attempt to bring an end to the ongoing managed hearings where new potential claimants start legal action each year.
There have been hundreds of cases lodged over the past 15 years – in December NGN agreed a substantial settlement with the actor Sienna Miller to ensure her hacking claims did not go to trial – with lawyers saying there could be thousands of potential victims still to come forward.
In terms of the Sun’s financial performance, the company said turnover fell from £324m to £318.6m in the past year. Digital advertising and other customer revenues, including its betting and gaming operations, were able to partly offset the losses in print, it added.
“The decrease in turnover was primarily due to adverse print market conditions exacerbated by the pandemic, particularly in Monday to Friday sales, though performance has continued to improve since the first lockdown and throughout the financial year,” the company said, in its filing to Companies House.
“There were declines in both newspaper circulation and print advertising revenues owing to an industry-wide acceleration in the shift in spend towards online.”
By contrast the Times and Sunday Times, also News UK titles, reported record profits over the same financial period, as digital revenues and cover price increases enabled them to buck the wider industry decline.
Their parent group, Times Newspapers Limited (TNL), said pre-tax profits more than tripled from £10m to £34m year-on-year, the highest since the titles started making a profit in 2014. Revenues jumped from £310m to £327m.
“The increase in revenue was underpinned by strong growth in digital subscription revenue and digital advertising revenue which, supported by the impact of cover price increases across both titles during the period, were more than able to mitigate industry-wide declines in both newspaper circulation and print advertising,” TNL said.
Digital-only paid subscribers hit 399,000 as at the end of last year with total subscriber numbers, including print, passing 600,000.
Robert Thomson, the chief executive of News UK’s overall parent News Corporation, said at the publisher’s most recent trading update that the UK operation made its highest profit contribution for the company’s second quarter to the end of December since 2011.
The Christmas quarter also proved to be a milestone for the Sun, which reported that digital advertising income overtook print advertising for the first time.
However, the scale of the challenge facing publishers was made clear this month when Reach, the owner of the Daily Mirror and Daily Express as well as hundreds of regional brands, announced that its market value had plunged by a quarter as it warned of significant cost increases.
Reach said the existing issue of rising newsprint costs, caused by growing distribution costs and supply issues, was being exacerbated by soaring energy prices.
NGN, which employed an average of 543 editorial staff last year, reported a total wage bill of £42.5m. The subsidiary’s three directors, including the News UK chief operating officer, David Dinsmore, were paid a combined £6.7m, up from £4.5m in 2020.
Last June, it emerged that Rupert Murdoch had written down the value of the Sun newspapers to zero. And last year, in a piece of Fleet Street symbolism, the Sun lost its title of UK’s bestselling newspaper to the Daily Mail. It had been the nation’s most popular paper since 1978.
Most of the costs accrued relating to phone hacking are covered by Murdoch’s US-listed Fox Corporation, which agreed to indemnify News Corporation when the businesses were separated in 2013.
