The cracks spread: Why News Corporation’s rumored split isn’t a surprise

With reports suggesting that News Corporation is considering splitting in two, separating its publishing and entertainment divisions into separate entities, it’s worth looking at why it’s looking at doing this. It’s a move that won’t have surprised many onlookers.

July 7 2011, a momentous day in the history of Rupert Murdoch’s News Corporation.

This was the day the plug was pulled on News International’s (News Corp.’s UK news publishing division) News of the World (NotW) over the phone-hacking allegations it just couldn’t shake off. Irrespective of your views on the newspaper and the style of journalism on which it thrived, it was a pretty dismal end for the 168-year old publication. It was a national institution, and for it to end so spectacularly was indicative of the crimes with which it was charged.

In many ways, the death of The News of the World marked the death of something else. Old-school tabloid journalism dies just as the digital news revolution is gaining momentum. It was a coincidence, sure, but a symbolic one.

But many would argue – myself included – that killing The News of the World was like a lamb to the slaughter for the Murdoch empire, an attempt to salvage its bid to take over lucrative ISP, satellite TV and phone firm BSkyB. But a week after NotW was dead, so was the BSkyB deal.

Rupert Murdoch was hardly a popular man before the phone-hacking scandal came along, but he held a lot of power and generally got his way in most matters. When he killed The News of the World, here was a man on the back-foot. The balance of power had shifted.

News Corporation: The cracks spread

What was initially painted as one rogue reporter hell-bent on getting stories at whatever cost, turned out to be anything but. A lot of people at The News of the World either knew what was happening, were actively involved or chose not to know, referring to the phone-hacking practice in vague, non-specific terms such as the ‘black arts’.

Was The News of the World the only publication that illegally accessed voicemails to get the scoop on stories? I very much doubt it. I think there are a lot of reporters out there, cowering with sweaty palms hoping that they don’t get rumbled for their deeds.

However, from Rupert Murdoch’s point of view, it has been obvious for a long time that the damage caused by one UK newspaper would spread throughout his empire. It was inevitable.

The future for News Corporation…and why Murdoch will go

In making sense of the Murdoch mess last July, we pondered how it might all end for Rupert & Co. It was clear that Rupert had lost the trust of people around him, and from the get-go he sought to blame others for his lack of stewardship in his own organization. When asked by MPs whether he would be next to resign, he was adamant that he would stay on and take the company forward:

“People I trusted let me down. I think they behaved disgracefully. They let me and the company down, I’m the best person to lead the company forward.”

Murdoch will be forced out eventually, but he won’t go quietly. Before that happens, we previously argued that in an attempt to save News Corporation, he may sell off the newspaper side of its business altogether, or otherwise restructure things. We said:

“Most of its revenue comes from other sources anyway, such as 20th Century Fox, so it would make sense to sever all ties with its newspapers, thus distancing itself from any more damage from the phone-hacking scandal.

If the scandal remains within the UK-side of its operations, then this sale could be limited to its three remaining UK newspapers – the Times, Sunday Times and the Sun. But two things are almost certain – Murdoch will go, and News Corporation will downsize – to what degree, remains to be seen.”

Thus far, the scandal has pretty much remained on the UK side of the pond. But it’s no surprise to learn overnight that News Corporation is considering siphoning off the publishing side of the corporation.

Quoting “People familiar with the situation”, the Wall Street Journal say that the proposed plan would see the film and TV side of News Corp.’s affairs carved off – this would mean the likes of 20th Century Fox, Fox Broadcast Network and Fox News would be completely separate from the likes of The Wall Street Journal, The Sun, The Times and HarperCollins.

It’s worth noting that this is far from concrete, and nothing has formally been announced as of yet. But it’s revealing that claims indicate that whilst Murdoch was once cold to the idea of dividing the business up, his stance has recently changed. Indeed, the publishing arm would be significantly smaller than the entertainment branch – with a 90%/10% split in terms of the revenue generated by each.

Despite the turmoil at News International, Murdoch’s 39% stake in BSkyB looks healthy, as the satellite broadcaster is expected to have a pretty good 2012. Now TV will be launching shortly, a pay-as-you-go alternative for those who don’t want a full subscription TV package.

Perhaps in semi-anticipation that the phone-hacking scandal will grow rather than go away, he’s keen to create further distance between the different areas of his media empire. Not a bad move by Murdoch if he does it – he’ll no doubt still retain the same control as he has now, but it may make things that little bit easier if he does decide to cut his losses, downsize and lose the publishing arm of his business if things do get worse.

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