Murdoch may split News Corp into two divisions

RUPERT MURDOCH is considering splitting his News Corp media company into two, with one unit focusing on publishing and the other on entertainment.

Mr Murdoch, who is chairman and chief executive officer of News Corp, is overseeing internal discussions on whether to separate the New York-based company’s businesses, according to sources who asked not to be identified because a decision was not yet final.

The potential split of the company comes as British regulator Ofcom considers whether News Corp should be allowed to keep its 39 per cent stake – with a market value of £4.3 billion – in British Sky Broadcasting Group.

The recent phone-hacking scandal at its British newspapers thwarted News Corp’s plans to take full control of Britain’s biggest pay-TV operator, which was led by Mr Murdoch’s son James for almost a decade. Some News Corp shareholders had pushed for a break-up.

News Corp, owner of Fox Broadcasting and Fox News, derives at least 70 per cent of its annual profit from television and is working to invest in pay-TV operators in markets outside the US.

Ofcom may force News Corp to sell or cut its stake in BSkyB. The regulator is inquiring into whether News Corp and its directors are fit to hold a broadcasting licence.

The regulator would still take News Corp’s holding into account in any separate company. Ofcom declined to comment yesterday.

Its publications, which includes the New York Post and the Australian newspaper, contributed about 18 per cent of News Corp’s operating income in the 2011 financial year. Cable network programming generated 57 per cent of earnings alone. For the nine months ended March 31st, News Corp’s publishing unit generated operating income of $458 million, or less than 8 per cent of its sales, according to the company’s earnings report in May.

The cable networks, film and television units accounted for a combined $4 billion in profit, more than 25 per cent of their $15.9 billion in revenue.

The Murdoch family would retain control of both companies, News Corp’s Wall Street Journal reported yesterday. The Twentieth Century Fox studios, the Fox broadcast network and Fox News would form the bulk of the entertainment company, the Journal said. – (Bloomberg)