Following a board meeting this evening in New York, the board of Rupert Murdoch's News Corporation has approved splitting the company into two publicly traded entities: publishing and entertainment. The Wall Street Journal broke the news, just as it earlier reported that its parent company was contemplating such a move.
According to WSJ the company split would take about a year to approve, dividing assets such as its lucrative FOX broadcast network and TV stations, cable TV channels and 20th Century Fox studio into one company (likely led by Chase Carey, News Corp. deputy chairman, president and COO) and its newspapers, HarperCollins book publishing unit and other publishing assets into another.
Analysts surveyed by WSJ reacted favorably to the news and its share price rose as the news broke in the company's birthplace, Australia, while pundits such as GigaOm's Mathew Ingram wondered what a post-split News Corp. newspaper might become. Deutsche Bank says a split could benefit BSkyB, separating it from the scandal-hit News International newspaper arm of the company and paving the way for Murdoch to bid on the rest of the satellite broadcaster. The Guardian adds that a split would also help the publishing side offload News International.
The decision is expected to be formally announced on Thursday.
UPDATE: News Corp. issued a press release Thursday morning confirming its board's approval of the split proposal that noted in part:
News Corporate today announced that it intends to pursue the separation of its publishing and media and entertainment businesses into two distinct publicly traded companies. Upon closing of such a transaction, shareholders would hold interests in a world-class publishing company, consisting of the largest collection of best-in-class publishing assets and a new digital education group, and an unmatched global media and entertainment company, each of which would benefit from enhanced strategic alignment and increased operational flexibility with respect to an unparalleled portfolio of assets, brands and franchises.
News Corporation's Board authorized management to explore this separation after a Board meeting yesterday.
The proposed transaction would create global category leaders in both publishing and entertainment: a publishing company, which would be comprised of News Corporation's newspapers and information businesses in the U.S., U.K., and Australia, the Company's leading book publishing brands, its integrated marketing services company, its digital education group, as well as its other assets in Australia; and a global media and entertainment company, which would encompass News Corporation's broadcast and worldwide cable networks, leading film and television production studios, television stations and highly successful pay-TV businesses in Europe and India.
"There is much work to be done, but our Board and I believe that this new corporate structure we are pursuing would accelerate News Corporation's businesses to grow to new heights, and enable each company and its divisions to recognize their full potential – and unlock even greater long-term shareholder value," said Rupert Murdoch, Chairman and CEO of News Corporation. "News Corporation's 60-year heritage of developing world-class media brands has resulted in a large and unparalleled portfolio of diversified assets. We recognize that over the years, News Corporation's broad collection of assets have become increasingly complex. We determined that creating this new structure would simplify operations and greater align strategic priorities, enabling each company to better deliver on our commitments to consumers across the globe. I am 100 percent committed to the future of both the publishing and media and entertainment businesses and, if the Board ultimately approves a separation, I would serve as Chairman of both companies."
As expected, the new management structure would also see Murdoch would serve as CEO of the media and entertainment company, while "Chase Carey would serve as President and COO of the media and entertainment company. Over the next several months, the Company will assemble management teams and Boards of Directors for both businesses."
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The Wall Street Journal illustrated how the publishing side has been a drag on the company's stock with a graphic that broke down Murdoch's media empire based on 2011 year-end figures:
CABLE NETWORKS: $8 billion revenue, $2.8 billion profit
Challenges: Cord-cutting hurts revenues
Opportunities: Overseas acquisitions
MOVIES: $6.9 billion revenue, $927 million profit
Challenges: Piracy, falling DVD sales
Opportunities: Overseas growth in film attendance
BROADCAST TV: $4.8 billion revenue, $681 million profit
Challenges: Stagnant ad growth, Internet competition
Opportunities: Overseas acquisitions
NEWSPAPERS: $6.4 billion revenue, $554 million profit
Challenges: Falling print ad revenue
Opportunities: Help consolidating newspaper industry, Internet investment
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