No one enjoys having their phones tapped: The U.S. National Security Agency knows this and Rupert Murdoch’s News Corp. (NASDAQ:NWSA) found this out, as well. The media conglomerate’s United Kingdom branch has been forced to settle hundreds of lawsuits over the past three years thanks to a 2011 phone hacking scandal. And while the lawsuits themselves are nothing new for the News Corp.-owned News of the World, new hacking-related lawsuits keep cropping up. Already in 2014, 32 have filed lawsuits seeking to participate in a June civil trial, according to Bloomberg, and a hearing took place Friday in London to discuss the new claims.
Over the course of three years, investigations uncovered both bribery and phone hacking at two of News Corp.’s tabloid publications. In 2006, reporters at the News of the World used private investigators to illegally gain access to the voicemails of hundreds of individuals who were of interest to the publication. The most recent string of lawsuits included claims from singer Craig David; designer Kelly Hoppen, who is the stepmother of actress Sienna Miller; and former soccer player John Fashanu. Previous civil trials were avoided by last-minute settlements.
The allegations of voicemail hacking began in November 2005, after News of the World printed a story about a knee injury sustained by Britain’s Prince William, and just over a year later, News of the World royal editor Clive Goodman and private investigator Glenn Mulcaire were convicted of conspiracy to hack into phone voicemails of the royal family. Subsequently, more employees of News of the World became implicated in the scandal as more voicemails were found to have been hacked, leading to an eventual apology from the paper and the creation of a victim compensation system.
But in July 2011, it was found thatNews of the World had possibly hacked the voicemail of then-missing teenager Milly Dowler. News Corp.’s Murdoch responded by promising full cooperation with investigations, although he called the accusations “deplorable and unacceptable.” Within a few days, the 168-year-old News of the World had published its final edition with the headline “Thank you and goodbye,” on July 10, 2011.
Seven individuals — including former editors Rebekah Brooks and Andy Coulson — are currently on trial, facing criminal charges related to the investigation.
Mention of the ongoing legal problems were absent from News Corp.’s release of fiscal second-quarter earnings after the markets closed Thursday. Only two quarters have passed since News Corp. spun off its entertainment and television businesses into a separative company now known as 21st Century Fox (NASDAQ:FOX), making direct comparison with year-ago results difficult. News Corp. — a publishing company with assets that include the Wall Street Journal, New York Post, Times of London, and the HarperCollins publishing house — managed to beat Wall Street’s earnings expectations even though advertising revenue continued to drop.
For the final three months of the year, News Corp. reported net income of $151 million, or 26 cents per share, a decrease from the $1.4 billion, or $2.42 per share, the company earned in the year-ago quarter. The significant difference in earnings between the two quarters was the result of a nontaxable gain of $1.3 billion the publisher recorded in the second fiscal quarter of 2012 related to the November 2012 acquisition of several Australian television businesses.
Meanwhile, revenue dropped 4 percent to $2.24 billion from the $2.32 in sales generated a year ago. More specifically, circulation and subscription revenue declined 7 percent primarily because of problems at the Dow Jones institutional unit, although the declines were partially covered by an increase in subscription prices for the Wall Street Journal and WSJ.com, plus a higher cover price for Britain’s The Sun. New Corp.’s fledgling educational materials business experienced declines, but revenue at HarperCollins increased 4 percent on the back of a 39 percent jump in electronic book sales.
“We are determined to be disciplined about costs, determined to be leaders in an increasingly digital world, and determined to take carefully calculated risks,” News Corp. CEO Robert Thomson said during a post-earnings conference call with analysts. Increasing attention to costs gave the publishing company its earnings beat.
News Corp. investors — who bid shares of the publishing company up a modest 9.87 percent in 2013 — reacted with some enthusiasm to the earnings report. Shares have risen as much as 8.46 percent, to $17.38, since fiscal second-quarter results were released.
More From Wall St. Cheat Sheet:
- Boehner Says No to Immigration Reform, Fears Obama Interruption
- The Safest (and Most Dangerous) Places to Shop Online
- Google Is Not Doubling Up on Lenovo Shares
Follow Meghan on Twitter @MFoley_WSCS