News Corp Splits into Entertainment and Publishing Companies

The media conglomerate News Corp is going to have two very different faces within the next few years.

The company’s board unanimously approved a plan to split the media giant into two separate corporations. Chairman and Chief Executive Rupert Murdoch spoke at the board meeting along with financial advisers who made presentations to the board. The meeting and decision were completed within about 90 minutes – although some details, like who will head the publishing business – remain yet to be determined.

The first company will contain the News Corp entertainment businesses, which contains 20th Century Fox, Fox broadcast network and Fox News Channel. The second company will be focused on publishing – The Wall Street Journal, the Times of London, HarperCollins book publishing and the News Corp’s education business.

Before the announcement was made, News Corp. shares jumped 11% on rumor of the split alone. The newspaper assets have been much less profitable in the recent years, and have a lower profit margin than the TV and film divisions. DRTV media buying and advertising rates have fallen about 50% in the past five years industry wide – leaving the publishing portion of the company struggling to keep up.

The stand-alone publishing division will face big challenges as it spins off from the entertainment division, while the latter will see an increase in its overall profit margin. Separating the two divisions will also help the entertainment company distance itself from the phone-hacking scandal at News Corp.’s British papers. This will open up doors for new entertainment acquisitions, say experts.

Despite the benefits of the split, both new companies will need to contend with the impact that the Internet has had on both the entertainment and publishing industries. Profit growth for both divisions has been hard hit by online news sources and on demand television shows. The process of splitting the conglomerate in two is expected to take a year, and the formal approval of the board will be required before any movements are made.

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