News Corp. announces split, ‘will wow the world’
The Wall Street Journal | The New York Times | Paid Content | Newsonomics | GigaOM | Adweek
News Corp. makes it official with a release Thursday morning: The company "intends to pursue the separation of its publishing and media and entertainment businesses into two distinct publicly traded companies." Rupert Murdoch intends to remain as chairman of both companies as well as CEO of the entertainment company. Chase Carey will be president and COO of the entertainment company. News Corp. didn't announce a management team for the publishing company, saying one would be developed "Over the next several months."
In a letter to employees of News Corp., Murdoch wrote "we will wow the world as two, as opposed to merely one."
Our publishing businesses are greatly undervalued by the skeptics. ... Over the years, I have become accustomed to the noise of critics and naysayers…and pretty thick-skinned! Remember what they said when we started the Fox Network, Sky, Fox News and The Sun? These experiences have made me more resilient. And they should you, as well.
Murdoch will speak with Neil Cavuto at 10 a.m. Thursday on Fox Business Network, followed by CNBC at noon and Bloomberg TV at 12:30.
John Jannarone first reported the decision to split Wednesday evening in The Wall Street Journal.
Freed of News Corp.'s scandal-ridden and marginally profitable publishing businesses, Jannarone writes, "the entertainment company may have an easier time doing certain acquisitions, say people familiar with the situation."
That is important because the entertainment company could eventually have to confront the disruption posed by the Internet that has already affected newspapers. Film and television is already threatened by competition from online outlets, such as Netflix Inc. and Google Inc.'s YouTube.
Michael de la Merced writes in The New York Times that if, as some analysts expect, News Corp.'s entertainment properties were to trade at a multiple of earnings similar to Disney's, "its entertainment business would be worth nearly as much as all of News Corporation today. That raises the possibility that the market is ascribing no value to the publishing properties."
But Poynter's Rick Edmonds says by email, “The split will probably have a modest impact on News Corp.'s U.S. papers. The Wall Street Journal and other Dow Jones properties will be the star of the new company, compared to troubled U.K. and Australia properties. As some commentators have said, the New York Post and its losses may well demand attention -- no longer a rounding error in a huge company. The split could be a win-win. In similar divisions at Belo and Scripps, the newspaper came away debt-free, allowing reinvestment and experimentation (not yet yielding fabulous results, to be sure).”
Amy Chozick writes a behind-the-scenes look at the deal. Murdoch "had to put aside his emotional attachment" to the newspapers, one insider told her.
In effect, News Corporation had evolved into a successful entertainment company with a newspaper problem, several people close to the company have said. ...
For journalists, being owned by News Corporation was a double-edged sword. There were the accusations of editorial bias that go along with being associated with Mr. Murdoch, the kind leveled constantly at Fox News. But there was also the benefit of being owned by a deep-pocketed media giant willing to spend on journalism at a time the industry was shrinking.
In the release, News Corp. says the publishing company, which will include its "book publishing, education and integrated marketing services divisions" will "create a scaled publishing platform that would be one of the best capitalized in the industry."
Paid Content's Jeff John Roberts, too, sees value in the company's benighted publishing division.
News Corp’s publishing division made more than $800 million in profit last year and most parts of it are healthy. Those parts include publisher Harper Collins, which had sales of around $1.3 billion. It is profitable and is finding its footing in the new world of e-books.
De la Merced notes that the publishing businesses made about $130 million in operating income.
Like Edmonds, Roberts says a harsh light will shine on money-losing print assets in the rebalanced company:
The Times of London is a money pit and the Sunday Times is only scraping by, according to [analyst Ken] Doctor. News Corp’s other American paper, the New York Post, is also losing money. The bank analysts say, however, that properties like the Post have been a low priority amid News Corp’s rich and sprawling empire. Placed in a standalone Publish Corp, these type of assets couldn’t duck attention and would quickly have to shape up or be sold off.
Doctor says The Journal will be the star of a publishing division because it has "far more potential to make serious money" than its corporate siblings.
The other papers — no matter how high a quality (the Times of London), how spirited (the New York Post) or how central to a country’s coverage (the Australian) — all are winding down as print businesses, and struggling to find digital revenues to support large newsrooms.
GigaOM's Mathew Ingram casts an approving eye on some of The Journal's digital experiments, including its deal with the newsreading app Pulse that allows readers to purchase content by verticals, a la carte.
Is that how people want to read the news? No one really knows yet, but at least the Journal is experimenting with one possible solution — and you could argue that it is a smart way of taking advantage of the brand value that the newspaper has in the financial sector, where readers are theoretically more likely to want to pay for content.
In Adweek, Lucia Moses wonders about the potential loss of synergies:
Lore has it that News Corp. papers are used to promote Murdoch’s sprawling media assets and even the parent company itself. In 2011, a UC Berkeley study purported to show a "statistically significant, if small, bias" in how News Corp. properties reviewed 20th Century Fox movies. In the U.S. alone, News Corp.'s high-end (and increasingly consumer-aimed) Wall Street Journal and downmarket New York Post have ample opportunity to promote News Corp.’s vast sports, movies and TV interests. But even with Murdoch still very much in the picture, operators at separately run companies will have less opportunity for the interaction that can fuel such cross-pollination.
Staci D. Kramer takes a deeper look at the future of the entertainment companies in a piece with a completely excellent headline: "News Corp. split would create 21st Century Fox."