The News Corporation business empire has come under intense scrutiny in the UK over the last few years thanks to the phone-hacking saga and the ongoing Leveson Inquiry into the ethics and practices of the press. But what will this mean for shareholders in the long run? Australian-listed shares in the company rose 2.4% this morning following reports of the split, but it is not yet clear whether the publishing arm will remain the property of News Corp or will become an entirely separate entity.
News Corp’s Fox movie studio and television networks are by far the most profitable part of the company, and the key generator of most of its revenue. Entertainment operations brought in $23.5bn revenue in the year to June 2011, whilst publishing brought in a respectable but much more modest $8.8bn. There has been pressure from shareholders to make entertainment the core operation and focus on this much more profitable area. The spun off publishing company would include The Wall Street Journal, The Times (UK), The New York Post and HarperCollins book publishers.
Rumour has it the Murdoch family will retain control of both businesses if the split goes through, but no official statement has been made, and Murdoch has rejected the idea of dividing the business in the past, so no guarantees. But the move would make sense from a profit and PR point of view: many see the newspaper scandals as a key factor in the breakdown of News Corp’s $12bn bid for the part of British Sky Broadcasting (BSkyB) that it does not already own. Shareholders were rather gutted when that little number slipped through their fingers.
There’s no doubting that shareholders are keen on the split, though. It’s also fairly safe to assume the plans are not just a rumour – the story came from the Wall Street Journal first, which Murdoch owns. Newspapers run in Murdoch’s veins, but it might be time to ditch those redtops if baying shareholders have had enough…
Check out MT's interview with Kevin Reilly, the entertainment president of Fox Broadcasting Company.