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December 3, 2012 8:36 pm
Rupert Murdoch’s latest reshuffle at News Corp – together with the loss of a prized executive and the abandonment of a multimillion-dollar pet project – gives some indication of how complex it will be to create two companies from the one he inherited 60 years ago.
Monday’s announcement brought reminders of the company’s history, promotions for close lieutenants, and important hints about the future of its entertainment and publishing operations after they split in mid-2013.
A new publishing company – holding the Australian newspapers that Mr Murdoch began with, the British titles that have dragged him into costly scandals, The Wall Street Journal, HarperCollins and Australian television and digital assets – will carry on the News Corp name.
A larger entertainment company will take the name Fox Group – encompassing cable channels, such as Fox News, the Fox broadcast network, 20th Century Fox film studios and interests in BSkyB, Sky Italia, Sky Deutschland and Star TV.
Some advisers had wondered whether Mr Murdoch might yet balk at splitting his company in this way. But the 81-year-old chairman emphasised how excited he was by the prospect.
“The challenges we face in the publishing and media industries are great, but the opportunities are greater,” he said. He was in celebratory mood in the Journal newsroom, pouring champagne over its new managing editor, Gerry Baker.
His expansionist plans had been stalled in 2011 by the scandal emanating from phone hacking allegations at News Corp’s News of the World title – scuppering a move to take full control of BSkyB and prompting Mr Murdoch to agree to a $10bn share buyback programme that he had earlier resisted.
However, in spite of continued risks from investigations in the UK and the US, Mr Murdoch has made it clear he is in a spending mood again.
Fox Group, which recently bought a stake in the New York Yankees’ TV network, would continue “enhancing its sports portfolio through key investments in Asia, Europe and Latin America,” News Corp said.
News Corp, meanwhile, would “relentlessly drive global growth” by investing in its businesses, the statement added. Mr Murdoch has been considering possible bids for Simon & Schuster, the CBS-owned rival to HarperCollins and for the Chicago Tribune and Los Angeles Times newspapers.
The separation of News Corp follows substantial shareholder protests about governance at the group, where the Murdoch family controls about 40 per cent of the votes. Lord Justice Leveson’s report into British press ethics last week also raised questions about News Corp’s management, suggesting some evidence heard “points to a serious failure of governance” at the company.
One important question about News Corp’s future governance was addressed on Monday, with the confirmation that Robert Thomson will become chief executive of the publishing company, under Mr Murdoch as executive chairman.
But further details of the two company’s boards – and the number of independent directors they will include – remain to be settled.
“Whether you have one company with disproportionate voting or five, it’s the same thing,” said Charles Elson, a professor of corporate governance at the University of Delaware. “Investors want independent boards.”
Mr Thomson, a journalist who ran the US edition of the Financial Times before editing The Times and then The Wall Street Journal for Mr Murdoch, has no public company CEO experience but has a reputation as one of his chairman’s most trusted advisers.
Mr Murdoch is godfather to Mr Thomson’s sons. Mr Thomson, described by The New Yorker as “perhaps Rupert Murdoch’s only close friend”, said the new publishing company would “lead a broader revenue renaissance for quality content”.
Mr Murdoch has often favoured journalists, antipodeans and pay-TV executives with experience of subscription television businesses for the top jobs. Mr Thomson is an Australian-born journalist and Mike Darcey, News International’s new CEO, is a New Zealand-born BSkyB executive.
Nevertheless, some industry predictions concerning the group’s plans were proved wrong.
First, Mr Thomson’s choice as publishing chief executive defied speculation that Mr Murdoch might hold that job open for his oldest son, Lachlan, who is now focusing on his own investments in Australia.
Second, Mr Murdoch shuttered The Daily, a tablet-only “newspaper” launched with great fanfare and a $30m start-up budget 18 months ago, but did not close other lossmakers such as the New York Post. He said this summer he would not tolerate any print losses, but details of cost savings such as an accelerated integration of the Journal with Dow Jones newswires were scarce.
And third, financial details of the spin off that News Corp has promised were held back until later this month – keeping analysts in the dark for now about its profitability and value.
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