News Corp split to benefit networks and increase digital reach

By
Jennifer Billings

July 03, 2012

News Corporation is to separate its entertainment and publishing business segments into two companies. The move, which is expected to take 12 months to complete, will result in a global media and entertainment company consisting of cable and television assets, filmed entertainment, and direct satellite broadcasting, including Twentieth Century Fox Film, Fox Sports, FX, Hulu and Sky Italia; and a global publishing company that will include digital and print news and financial information consisting of The Wall Street Journal, Dow Jones Newswires, The New York Post and newspaper interests in the UK, Australia and elsewhere.

The intention is for both companies to mirror the business practices of the current News Corporation. The initial spin off value for each company will be one to one, but will be revalued as News Corp solidifies the new structure of each entity. It is confirmed that the global publishing company will begin net cash positive.

Media and entertainment, relieved of publishing segment preoccupations and empowered by new resource allocation flexibility, will likely see continued cable network growth. As seen in the June 2012 IHS report Movies Thrive on Basic Cable, FX Networks is a key component to News Corp's cable division, accounting for 20 per cent of total net revenue and acquiring rights to 28 of the top 50 highest grossing films of 2011. Depending on beginning balance sheet decisions, networks could see greater potential to play for movie rights.

To maintain a positive beginning balance sheet after a past-life business segment history of negative revenues and declining operating income, publishing will need to ramp up digital platforms and licensing agreements (of the Dow Jones brand for example). The depreciation and amortisation thorn in publishing's side could diminish as digital becomes the main mode for business functions and product delivery.

Over the past three years, News Corp publishing, media and entertainment companies have introduced a plethora of mobile applications to complement web platforms, giving both companies new windows to attract advertising revenue.

Tags:

Countries: USA
Companies: News Corporation FX Twentieth Century Fox Fox Sports Hulu Sky Italia The Wall Street Journal Dow Jones The New York Post