The News Corp. board of directors has approved a plan to split the company into two pieces, one for the company's lucrative entertainment businesses and its not-so-lucrative publishing businesses.
The Wall Street Journal, a News Corp. property joining the publishing side, reports the split will be formally announced on Thursday morning. The Journal, The Times of London, and HarperCollins will all fall under the publishing side, while 20th Century Fox, Fox News Channel, and the Fox broadcasting network will all fall under entertainment.
News of the split first appeared on Tuesday when the WSJ were the first to report Murdoch was debating splitting everything to win over shareholders who were tired of the publishing business dragging down News Corp.'s bottom line. Now that the split's been confirmed, the Journal explains the publishing side's future, and by association its own future, like this:
Publishing generates much lower profit margins than the company's TV and film operations, and faces stiff competition from online news outlets. Industrywide newspaper advertising has fallen about 50% in the past five years, estimates the Newspaper Association of America. While the Journal has added subscribers, and has protected its content behind a paywall, the new standalone publishing company will confront deep challenges.
And describes the entertainment side's future like this:
For the entertainment company, its overall profit margin will be higher without publishing. Its stock market valuation is expected to rise above that of News Corp.'s current valuation, analysts say, as the publishing assets are seen as a drag on the stock.
Moreover, without the taint of the phone-hacking scandal at News Corp.'s British newspapers, the entertainment company may have an easier time doing certain acquisitions, say people familiar with the situation.
"Without the taint," indeed. Yeesh.
This article is from the archive of our partner The Wire.
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