News Corp.’s plan to split itself into two companies marks the end of an era for Rupert Murdoch‘s decades-long, largely successful quest to build the most powerful media company in the world. Company shareholders have already applauded the plan to spin off the conglomerate’s newspaper assets from its much more lucrative entertainment holdings, sending News Corp. stock soaring 11% to the highest level in four years.
That’s because the newspaper assets, which include The Wall Street Journal, The Times (of London), and the New York Post, reportedly lose tens of millions every year, imposing what some have called “the Murdoch discount” onto the company’s stock price. But make no mistake: Even though the split will splinter Murdoch’s $50 billion baby, the mogul and his family will remain firmly in control of each new entity.
Will Murdoch’s largesse be enough to maintain the protective cocoon that has long-enveloped the mogul’s beloved newspaper properties? One thing is certain: the News Corp. breakup represents a bell-tolling in the twilight story of one of the most important media titans of the modern age. Late Wednesday, News Corp.’s board approved the split, which calls for 20th Century Fox, the Fox network and Fox News Channel — long the real money-makers in the House of Murdoch — to become a stand-alone company. A second, much-smaller company will contain the newspapers, the HarperCollins publishing house and News Corp.’s education business. (A formal announcement could come as early as Thursday morning, according to The Journal.)
Until recently, the idea that the 81-year-old Murdoch would split up the conglomerate he built from a single Australian paper over 50 years ago was almost unthinkable. As recently as one month ago, Murdoch was still saying: “no way would he do this,” according to one knowledgeable News Corp. insider who spoke to Reuters. For decades, Murdoch has controlled News Corp. with an iron grip, seemingly impervious to external pressure, as he became one of the most feared power-brokers from Canberra to London to New York.
Ultimately, it was something rotten inside of News Corp. itself that spurred the decision: the devastating phone-hacking-and-police-corruption scandal that for the last year has rocked the company. That scandal effectively scuttled News Corp.’s plan to take full control of lucrative UK satellite network BSkyB.
From a purely financial standpoint, the split has long made sense, as Murdoch biographer Michael Wolff, author of The Man Who Owns the News, wrote earlier this week. The sticking-point was Murdoch himself, whose attachment to the print properties is legendary. The mogul has long delighted in taking a hands-on role at the papers, including the Post, reportedly phoning in hot scoops to top editors. Wolff writes:
Even before the phone-hacking scandal in Britain killed the News of the World, the company’s newspapers were an issue of internal complaint. From a rational business view, the papers consumed far more resources than any returns they can ever hope to offer. Still, because News Corp was singularly Rupert’s company (pay no attention to its public shareholders), and Rupert was atavistically committed to his newspapers, there could be no real debate about their future.
The risk for the print properties is what might happen now that they are no longer subsidized by the News Corp. entertainment juggernaut. (The company’s entertainment assets generated $6.2 billion in revenue and $1.3 billion in operating income, while the publishing side generated roughly $2 billion in revenue, but only $130 million in operating income, according to The New York Times.) In particular, attention has focused on the fate of The Journal, which Murdoch purchased in 2007 by acquiring its parent company Dow Jones for the inflated price of $5.6 billion. The Journal remains one of the crown jewels of American journalism; it’s not hard to imagine that staffers there are feeling uncertain about the future. Look for Murdoch to reassure them Thursday. Wolff:
It is almost impossible to imagine that a stand-alone public print company would not have to quickly cut costs and dispose of those assets that do not have a credible path to profitability. Indeed, for each of News Corp’s newspapers, protected so long by the company’s vast diversification, being spun off, instead of sold to enthusiastic bidders, might be their worse fate.
Ironically, even as Murdoch has come to be viewed by some as journalism’s bête noir, it’s hard to imagine another corporate overlord so utterly enamored by newspapers. While the News Corp. split will no doubt be greeted with a substantial amount of schadenfreude by Murdoch’s adversaries, this outcome must be bittersweet for those who love the increasingly antediluvian practice of committing newsprint to rolls of paper. The break-up of the Murdoch empire is a story about what happens when scandal meets business reality. But it’s also a reminder of an ink-stained past that grows more distant by the day. One wonders if someday, Murdoch’s fierce embrace of newspapers and insistence on subsidizing thousands of print reporters won’t be viewed with a touch of nostalgia.
(The author was in intern at The Times (of London), then a reporter at the Post, from 2003-2006.)