Wed June 27, 2012
Splitting Media Outlets Could Help News. Corp. Investors
Originally published on Wed June 27, 2012 5:49 pm
LINDA WERTHEIMER, HOST:
A publicity storm from the hacking scandal has shaken media conglomerate News Corp. Now, the company is taking steps to split in two - the smaller newspaper and book publishing arm and the vastly more profitable broadcasting and entertainment side. NPR's David Folkenflik has more.
DAVID FOLKENFLIK, BYLINE: Newspapers have been News Corp. chairman Rupert Murdoch's first and most enduring love. And of late, they have been his heartache, too.
RUPERT MURDOCH: I would just like to say one sentence. This is the most humble day of my life.
FOLKENFLIK: That was the chairman, then CEO, testifying at hearings before the British Parliament last summer amid the tabloid scandals involving charges of corruption and phone mail hacking that led him to shut down the U.K.'s most widely read Sunday paper.
The Murdoch family controls about 40 percent of News Corp.'s stock, which is publicly traded on NASDAQ. But outside investors, even loyal longtime investors like Don Yacktman of the Yacktman Funds, questioned why the company is invested in newspapers at all.
DON YACKTMAN: I think the basic newspaper business is sort of an ice cube.
FOLKENFLIK: That is, quickly melting away.
YACKTMAN: Just been a dramatic change in model in the way people get their news. Newspapers are a fading kind of thing.
FOLKENFLIK: News Corp. executives had been talking privately about this split for months, years really. But the revelation that such talks picked up momentum first surfaced yesterday in one of the company's journalistic jewels - the Wall Street Journal. In the past, Murdoch had always resisted such talk, but the publishing division, including the newspapers and HarperCollins book imprint, achieves profit margins that are less than a third of those for the company's satellite, cable and broadcast TV businesses.
Wall Street investors, including Yacktman, cheered the possible news. The value of News Corp. stock jumped more than 8 percent yesterday. Paul Hodgson is a senior research associate at GMI Ratings, a firm that analyzes publicly traded corporations. His outfit has been deeply critical of News Corp., because the Murdoch family runs it like a family concern.
PAUL HODGSON: The hacking scandal that's besetting the company at the moment is really just a more public example of the poor governance of the firm.
FOLKENFLIK: However they are to be structured, both new companies would ultimately still be controlled by the Murdoch family, a division between News Corp.'s traditions and its more lucrative future.
David Folkenflik, NPR News, New York. Transcript provided by NPR, Copyright National Public Radio.