Why is News Corp attacking tax reform? Because it’s actually a real estate company

News Corp’s controlling share of REA Group is worth about $13.75 billion — about 65% of News Corp’s entire market value. No wonder The Australian is tut-tutting so hard.

Cover: Anthony Albanese conferring with the Prime Minister and Chief Landlord of Australia

Crikey || Why are News Corp’s mastheads fighting the budget property tax changes so hard? Because it’s a real estate company — in its wallet, if not its heart. The US company’s majority control of the global real estate advertising company REA Group is a core media asset upon which it depends.

It’s where the two big money-makers of the past quarter-century — digital tech and real estate — collide. As Australian housing boomed, with the help of the Howard government’s 50% capital gains tax discount in 1999, News Corp’s majority share of REA Group has enabled it to ride the waves of that collision.

Now, the stock market reckons News Corp’s controlling share of the real estate company is worth about A$13.75 billion, which is about 65% of News Corp’s entire market value.

But techno-enthusiasts are stampeding to more AI-shaped investments, stripping the innovation bump out of companies built on the old internet. “The fear that AI will threaten the monopolies of the online property platforms has destroyed billions of dollars in a matter of weeks,” the AFR’s Jonathon Shapiro wrote off the back of a JP Morgan report on the sector last December.

The expected “cooling” that the Reserve Bank is expecting from the budget changes is the last thing REA Group’s majority owner needs. The real estate company’s latest report showed buy listings are already down year-on-year everywhere except Sydney and Canberra.

A “cooler” market means fewer sales, with slower price growth — that means less advertising in the REA Group products and less advertising from REA Group into the News Corp mastheads. The ASX seems to think so: in the wake of the budget last week, the REA Group share price dropped almost 10%, although it has partly rebounded this week. 

No wonder The Australian, the company’s flagship masthead, is tut-tutting over Treasurer Jim Chalmers’ “class war rhetoric” from back in 2019 and pompously editorialising over him having taken the “wrong lessons from house prices”.

But the problem for News Corp is not this week’s marginal falls from a cooling market. It’s that the digital listings business has lost its market pizzazz. In the current AI moment, companies like the REA Group are suddenly all very early twenty-first century. The REA Group has felt the market’s sentiment shift more than most, with its share price dropping by over a third since last August. 

It’s dragged News Corp down with it. Luckily, the parent company has a ready buyer for its shares — itself. In July last year, it committed to buying back up to US$1 billion of its own shares (or about 7% of its market capitalisation). In a report to the ASX this week, the company advised that it has spent about a quarter of that amount so far.

It looks like digital listings are now just another old-fashioned commoditised business that rises and falls with the market it sells for — it just happens to be on the internet. Worse, it’s a competitive space, particularly here in Australia, where Domain’s new US owner, CoStar Group, is threatening to take a chapter out of the Murdoch playbook and undercut REA Group on price. 

Most of those legacy media outlets that built digital listings off the back of their twentieth-century print classifieds have been cashing in, splitting up or selling out in the past couple of years. 

In 2024, the largest traditional news company in Scandinavia, Schibsted Media Group, decided to follow the money, pushing its news business off to an independent trust and rebranding itself as a digital marketplace company, Vend. 

Later that year, Germany’s Axel Springer split off its classified advertising business in a sale to private equity, enabling the Springer family and CEO Mathias Döpfner to consolidate ownership of the news business and fund a global buying spree, including Politico in the US (and soon in Australia) and the London Telegraph. 

And last year, Nine downsized to a more boutique offering, selling Domain to CoStar for about $3 billion with a commitment from the US company to bring its “innovation, digital tools, and customer experience enhancements” to take on REA Group.

Has News Corp missed the moment? It won’t be the first time. In 2023, it came close to selling its US real estate business Move Inc for an estimated US$3 billion before the potential buyer — CoStar, again — pulled the plug. 

If you can’t get out, get big. In 2024, REA Group lodged a failed £6.2 billion bid for UK-based Rightmove Plc. Eighteen months on, the UK company is valued at half that offer.

In News Corp, REA Group is not just another asset; it’s a trophy. It’s central to the Lachlan Murdoch mythology. Buying in during the depths of the internet bust in 2001 for just $10 million turned into the young heir’s first big success, washing away the 1990s losses of Super League and One.Tel. 

Following Nine, Springer and Schibsted by shedding REA Group may make financial sense. But it would remove the Australian ballast it gives the US company, leaving News Corp’s footprint in Australia as the tabloids, The Australian, Sky News, and a few magazines. 

No wonder those mastheads are fighting so hard to support the real estate industry.