News Corp. Split: Out With the Old, In With the Young?

Rupert Murdoch, chairman and CEO of News Corp., reportedly has had a change of heart over splitting his US$50 billion media enterprise in two and is willing to give the idea serious consideration. The company has confirmed news reports that it is mulling the pros and cons of a split.

If it proceeds, it will most likely separate the publishing operations and the entertainment business to form two publicly traded companies.

The driver behind the deliberations is the hacking scandal that has enmeshed News Corp.’s UK newspapers. Ofcom, the UK’s regulatory agency, is now considering whether News Corp. should keep its stake in British Sky Broadcasting Group, partly in response to the fallout from the reports of sordid spying activities on the part of News Corp. staff. Last year, News Corp. was forced to drop a $12 billion bid for the remaining 61 percent stake of the company for that reason.

How Would It Work?

News Corp.’s entertainment arm also consists includes Fox News Channel, and the 20th Century Fox movie studio, as well as its Sky brand.

How the assets would be divvied up in a split is unclear, although the consensus is that Murdoch would keep control of both operations. However, News Corp. has not elaborated on the new structure.

One theory circulating is that 20th Century Fox, the Fox broadcast network and Fox News channel may be spun off from the news division, which would include The Wall Street Journal, The Times of London, and News Corp.’s book publishing assets and educational operations.

News Corp. reportedly hired Goldman Sachs Group to advise it on the plan, and its board of directors is said to be poised to make a decision this week.

News Corp. did not respond to our request for further details.

A Generation Divide

There are plentiful reasons to support a News Corp. split, and analysts and shareholders have long lobbied to see it happen. By separating the entertainment and news assets, the companies will be able to focus better on their respective audiences, said Rich Hanley, associate professor and director of the graduate journalism program in Quinnipiac University’s School of Communications.

“News Corp. may be following the example of Viacom when it split its various parts into separately listed CBS and Viacom companies,” Hanley told the E-Commerce Times.

“Think of it as a generation gap that will become transparent,” he said. “The split in effect would create an entertainment company that appeals to the profitable younger demographic while the publishing company would slowly decompose, even as it remains profitable. This decision will keep the old from dragging down the new.”

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