Nearly a year after hacking allegations led to the closing of tabloid News of the World, it sounds like News Corp. (s NWS) is considering a move that Rupert Murdoch has brushed away in the past — spinning off publishing. The variation being floated via unidentified sources in Tuesday’s Wall Street Journal, the media conglomerate’s flagship business publication, is as simple as it gets: split publishing and entertainment into two companies.
It’s being compared to the Viacom (s VIA) CBS (s CBS) split in 2006 — but that was like dividing a really thick sandwich in half. This would be more like keeping the sandwich and spinning off the chips.
In May, News Corp. reported $4.1 billion profit on revenues of $25.3 billion for the first nine months of 2012. Publishing — newspapers (News International, Dow Jones and the Wall Street Journal, Australia) and book publisher HarperCollins — accounted for $458 million of profit and $6.2 billion of the revenue. Nearly all of the rest, roughly 90 percent of the profit and three-quarters of the revenue — came from Fox, cable programming (Fox News, FX, the sports regionals, National Geographic, etc.) 20th Century Fox, and Sky Italia.
Rupert Murdoch is passionate about newspapers, investing in them when others in the company demurred. (One of the hardest aspects of the hacking scandal to reconcile is the insistence on his distance from the way News International operated compared with his hands-on activity and keen interest over the years at the papers.) But the hacking scandal and its high-profile fallout — including closing of the News of the World, the loss of the chance to acquire the rest of BSkyB, executive resignations, arrests, and the tarnishing of James Murdoch — put it in a different light. Instead of simply being too small or high enough margin, parts of the publishing unit were causing problems, one of the moneymakers was gone and those who think News Corp. should focus on its video business, including COO Chase Carey, have a shot at making that happen.
A spin with the current ownership structure in place would accomplish both goals — Rupert Murdoch would still be in newspaper publishing and News Corp. proper would be out of it. Where does he stand on the notion? According to the Journal, “Mr. Murdoch has recently warmed to the idea, said one person familiar with the situation.” That’s better than a flat-out no.
News Corp. winds up its fiscal year June 30. Last year, before anyone knew hacking would be the theme of 2012, the top priority was getting rid of MySpace by the end of FY2011. There’s no suggestion that’s the case with publishing.
Update: After declining to comment late Monday night, News Corp. confirmed Tuesday morning that a restructuring is being considered.