News Corp. is thinking of splitting in two, dividing its publishing business from its entertainment division, the company's own Wall Street Journal reported late Monday night. News Corp. confirmed the report on Tuesday morning, saying that it is "considering a restructuring to separate its business into two distinct public companies.”
The plan would see News Corp.'s newspapers, book publishing and education divisions split off from its film and television studios. The Murdochs would retain control over both companies. The latter properties are a major cash cow for Murdoch; the publishing properties, many of which operate at a loss, contribute far less to the company's bottom line. Last year, for instance, the entertainment division made $23.5 billion in revenue. The publishing side made $8.8 billion in revenue.
Bloomberg's Edmund Lee tweeted on Tuesday that the company had retained Goldman Sachs to help carry out the proposal.
If carried out, the plan would represent a seismic shift in the history of Rupert Murdoch's business career. The breakup of his company signals a painful rejection of the newspapers he has prized above anything else in his empire.
News Corp.'s newspapers have, of course, have been severely wounded by the ongoing phone hacking scandal. A spinoff would isolate the more toxic bits of Murdoch's business, though it could also leave the papers more vulnerable to an eventual sell-off.
On Tuesday, top editors from News Corp. newspapers around the world flew into New York for a meeting about the plan, the New York Times reported. The meeting was held to soothe any fears about what might happen to the papers. Those fears are taking place on both sides of the Atlantic; the Guardian reported that writers and editors at Murdoch's British titles are openly worrying about what might happen to them.
Murdoch's deputy, Chase Carey, has admitted that the newspapers—which most within the company appear to view as nothing but trouble—are a drag on News Corp.'s share price.
Evidence of that could be seen In Australia on Tuesday, where News Corp. shares shot up to their highest level in over four years after the Journal's report landed. The share price in America also spiked.
The company's restive shareholders, who have repeatedly registered their discontent with the Murdoch family's running of the company in recent years, would likely rejoice at the chance to funnel all of their money into the relatively scandal-free and financially stable parts of the business.
There was speculation on Tuesday that the move was aimed, in part, firmly at Britain. The phone hacking scandal torpedoed News Corp.'s plans to buy all of satellite broadcaster BSkyB, and caused media regulator Ofcom to open an investigation into the company's fitness to hold a broadcast license in the country. Analysts told Reuters that splitting News Corp. in two could help ease Ofcom's concerns.
Carey has also publicly said that a spinoff has been considered previously. In the past, the main man standing in the way of the idea has been Rupert Murdoch. As a man who built his media empire on the backs of his newspapers, he has been doggedly attached to the titles. In May, he released a statement denying that he was thinking of spinning off his British newspaper wing.
"News Corporation remains firmly committed to our publishing businesses, including News International, and any suggestion to the contrary is wholly inaccurate," he said at the time. "Publishing is a core component of our future."
But the Journal said that Murdoch "has recently warmed to the idea," perhaps seeing it as one way to ease the constant pressure on the company over the hacking scandal.
How will Donald Trump’s first 100 days impact YOU? Subscribe, choose the community that you most identify with or want to learn more about and we’ll send you the news that matters most once a week throughout Trump’s first 100 days in office. Learn more