News Corp weighs proposal for two-way split

Rupert Murdoch, pictured here in October 2011, is known to remain attached to his newspaper operations.

Story highlights

  • News Corp has drawn up plans to separate its entertainment assets from its publishing arm
  • The entertainment group would be much larger than the publishing company
  • It is understood that the board has not made a final decision on a break-up of the group
  • An analyst says the move would be the right step for News Corp

News Corp has drawn up plans to split the media business into two parts, separating its entertainment assets from its publishing arm, the Wall Street Journal reported.

Under the plans said to be being considered, Rupert Murdoch's News Corp would see its film and television businesses, including the Fox News Channel, the Fox film studio and broadcast network, put into a separate company.

News Corp's publishing assets -- the Wall Street Journal, The Times, The Sun, The Australian, The New York Post and publisher HarperCollins -- would be grouped together in a second company.

News Corp declined to comment on Tuesday. Chase Carey, chief operating officer, said this year that the management team had considered such a split.

The entertainment group would dwarf the size of the publishing company in terms of revenue. In the year to June 2011 the entertainment assets generated $23.5bn in revenue while the publishing business generated $8.8bn.

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Investors are likely to welcome the split as the entertainment assets accounted for about 90 per cent of operating profit in the same period.

It is understood that the board has not made a final decision on a break-up of the group -- a move which has long been discussed but opposed by Mr Murdoch.

However, the renewed talks come after a turbulent year at News International, News Corp's UK arm, which has been the focus of the phone-hacking scandal that led to the closure of Mr Murdoch's News of the World tabloid paper, senior executive resignations and has cast a shadow over his UK operations. It also forced Mr Murdoch to abandon his bid for the part of British Sky Broadcasting, the UK pay-TV group, he does not already own.

Claudio Aspesi, analyst at Bernstein Research, said: "The market has reacted positively. In general the newspapers have proved a drag on the management and on the capacity of the company to control BSkyB. This move is a necessity if News Corp has aspirations in the UK and Europe and it is the right step.

"In the long term it is still clear that anything that News Corp does will be viewed with suspicion, but this step opens up the possibility for News Corp to come back for the remainder of BSkyB."

As a result of the phone-hacking scandal Ofcom, the UK broadcasting regulator, is reviewing whether BSkyB, and it's largest shareholder News Corp with 39.1 per cent, is a fit and proper owner of a broadcasting licence.

James Murdoch, who came under severe criticism for his handling of the phone-hacking scandal, relinquished his chairmanship of BSkyB two months ago.

It is likely that in the event of a spin-off, the Murdoch family would retain control of both entities. The Murdoch family controls the group through its 40 per cent voting stake.

Mr Murdoch started his media empire with an Australian newspaper that he inherited in the 1950s. The early part of his career saw him focus on expanding his newspaper empire with the purchase of The Sun and News of the World. He moved to the US in the 1970s.

But since the 1980s, News Corp's focus has been film and television with the acquisition of the film studio 20th Century Fox and the Fox broadcast network.

Mr Murdoch is known to remain attached to his newspaper operations, however, and is understood to have rebuffed any suggestion that he sell his UK newspaper assets in light of the phone-hacking scandal.

Australian-listed News Corp shares rose 2.4 per cent to A$20.79 after reports of the split were published.

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