What News Corp.’s Breakup and the Demise of ‘The Daily’ Mean for the Future of Murdoch’s Media Empire

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Carlo Allegri / REUTERS

Media mogul Rupert Murdoch leaves his Fifth Avenue home in New York, November 29, 2012.

Billionaire mogul Rupert Murdoch‘s plan to split his giant media conglomerate News Corp. into two independent publicly traded companies began to take shape Monday, after the company announced a flurry of management and organizational changes ahead of the breakup. The moves are further evidence of Murdoch’s plan to focus on entertainment assets — he’s making a big push into regional U.S. sports television ahead of a possible national Fox sports network — as News Corp. seeks to regain its footing after a tough phone-hacking-and-police-corruption scandal involving its U.K. newspaper business.

Perhaps the most striking news, from a technology and media perspective, is the announcement that News Corp. plans to close The Daily, the New York-based iPad newspaper that was launched to great fanfare less than two years ago.

To start with, Murdoch announced that Wall Street Journal managing editor Robert Thomson, a former top editor at The Times of London and the Financial Times, will become CEO of the new publishing company, which will keep the name News Corp. Murdoch will serve as Chairman of this entity, which will include the newspapers, the HarperCollins publishing house and News Corp.’s education business. “From the moment we made the decision to split the company, I could think of no one better suited to be CEO of our publishing company than Robert Thomson,” Murdoch said in a statement.

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Gerard Baker, a former Times of London journalist whom Thomson tapped to be the The Journal‘s deputy editor in chief, will succeed Thomson as managing editor of the paper and editor in chief of its publisher Dow Jones, effective January 1, 2013. At a ceremony in the newsroom announcing Baker’s appointment, Murdoch reportedly poured a bottle of Veuve Clicquot champagne over the head of The Journal‘s new top editor, following celebratory speeches.

“Gerry has had a distinguished career that included a stint at the Bank of England, and a celebrated journalistic past at the BBC, the Financial Times and The Times, and I expect him to have an even more successful future as Editor-in-Chief of The Wall Street Journal and Dow Jones,” Thomson, like Murdoch a native Australian, said in a statement.

The 81-year-old Murdoch, meanwhile, will serve as Chairman and CEO of the much larger and more lucrative entertainment business, to be called Fox Group, which will include Hollywood movie studio 20th Century Fox, the Fox broadcast network, and cable news leader Fox News Channel. These businesses accounted for 90% of News Corp.’s operating income in 2012, according to The Journal.

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In something of a blow to News Corp.’s digital ambitions, the company said it would close the iPad newspaper The Daily, which will publish its last edition on Dec. 15. It’s unclear if the dozens of rank-and-file journalists who work at The Daily, into which News Corp. poured some $30 million, will be laid off or will be eligible for other roles at the media giant. But the company said that some of The Daily’s technology and staff will be folded into other news assets.

“From its launch, The Daily was a bold experiment in digital publishing and an amazing vehicle for innovation,” Murdoch said. “Unfortunately, our experience was that we could not find a large enough audience quickly enough to convince us the business model was sustainable in the long-term.” Jesse Angelo, founding editor in chief of The Daily and long-time executive editor of the New York Post, will become publisher of that popular New York City tabloid.

Meanwhile, News Corp. continues its push into the lucrative television sports market. Last month, the company announced a blockbuster deal to buy 49% of the Yankees Entertainment and Sports (YES) Network, the country’s most valuable regional sports network. The deal, which values YES at a whopping $3 billion, allies the media giant with the New York Yankees, arguably the most valuable professional sports franchise in the world. Then, late Monday, Reuters reported that the company is expected to buy SportsTime Ohio, the Cleveland Indians-owned baseball channel for around $230 million. These deals bolster News Corp.’s strategic position as it lays the groundwork for a new national Fox sports network to compete with cable sports leader ESPN.

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The U.K. phone-hacking scandal may have been the impetus, at least in part, for Murdoch’s decision to split up his conglomerate, but on a deeper level, the move represents an acknowledgement of the fundamental, technology-driven changes rocking the media business. Simply put, News Corp.’s newspapers were nowhere near as profitable as the company’s entertainment assets, and in fact, Wall Street analysts have been calling for the media company to shed the newspapers for some time.

But given Murdoch’s lifelong obsession with print newspapers, it was unlikely that he would easily jettison those properties. “Many of you know that a belief in the power of the written word has been in my bones for my entire life,”  Murdoch wrote in a memo to employees obtained by several news organizations. “My personal mission is to serve and satisfy the human need for insight as well as I possibly can.”

Now, the entertainment entity, Fox Group, has been unshackled from the publishing assets, which will undoubtedly mean that it will command a higher Wall Street stock multiple than had previously been the case. For the publishing company, however, the new arrangement removes a major financial support system that has effectively been subsidizing the newspapers, some of which, like the Post, reportedly lose money every year. Murdoch is an unreconstructed print newspaper romantic, but the News Corp. split indicates that even he has begun to see the writing on the wall — writing that clearly portends the demise of mass-market print newspapers.

(Disclosure: The author worked at The Times of London and the New York Post between 2003 and 2006.)

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