Tuesday, June 26, 2012

News Corp may divide itself into two

The Wall Street Journal has revealed that News Corporation (NASDAQ:NWS) is considering dividing itself into two companies.

  1. The first one will focus on entertainment business, such as 20th Century Fox films, Fox News and broadcast network.
  2. The second company, which will be smaller of the two, will handle all the publishing assets such as book publishing including HarperCollins and newspaper publishing such as Wall Street Journal and Times of London.

Rupert Murdoch, the chairman of News Corp, has given his approval to the idea but a final decision has not yet been made. The Murdoch family enjoys 40% of the voting rights in the company and that is not going to change after the division.


The company has earned $25.34 billion in revenues from the first nine-months of the current fiscal year; almost 75% of it came from the entertainment business. The company recorded an operating profit of $4.2 billion, out of which just about 11% ($458mn) was accorded to the publishing business. Naturally, the outside investors of the company had wanted it to focus more on its entertainment business. The current division, if it happens, will be welcomed by them.


The now gigantic News Corporation originally started by Mr. Murdoch with a small Australian newspaper which he had inherited. He has always been more interested in the newspaper publishing than anything else as that is where the roots of the company lie. The company entered into the entertainment business with the purchase of 20th Century Fox in 1980s. Almost three decades later, it earns about 90% of its profits from entertainment business.

The company is still recovering from the disgraceful phone hacking scandal, which led to the closure of its London based tabloid ‘News of the World’ while the company was forced to cancel its $12 billion deal for purchase of BSkyB’s (LON:BSY) remaining stocks. 

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