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News Corp runs on gossip. Rupert Murdoch’s courtiers track the Sun King’s movements, monitoring who he entertains at his ranch or invites on to his yacht for clues to which executive or family member is in favour.

On Tuesday, the 81-year-old was seen loping around Sun Valley with his eldest son, Lachlan. Lachlan’s brother, James, was also at Allen & Co’s Idaho gathering, as were the executives currently deemed closest to Mr Murdoch: Chase Carey, Dave Devoe and Joel Klein. Elisabeth, his daughter, was not.

Some credit Mr Murdoch’s children and the three executives with persuading him to do what he long resisted and split his company in two. The announcement has provided fresh fodder for company gossips and Sun Valley moguls alike.

There is much support for separating scandal-struck, print-heavy, advertising-dependent newspapers from the fast-growing cash machine of its Fox cable and broadcast channels and Sky and Star satellite operations, but also much confusion. Mr Murdoch has pitched the spin-off as a world-beating publisher, saying “naysayers” are wrong to see decline ahead for newspapers. Most analysts disagree, but they miss a fundamental point: this will be no ordinary newspaper company.

Already, Mr Murdoch has made clear that it will start life with a considerable dowry, which analysts think could add up to $1bn-$3bn of cash. Cash-generative assets such as a US marketing services business should also offset print declines.

What has been overlooked is that the so-called publishing company will include large pay-TV and digital holdings.

News Corp barely mentioned its holdings in the Foxtel pay-TV business and Fox Sports Australia, home to Australian rules football rights, but these “other assets in Australia” will end up with publishing rather than entertainment.

Asked why, Mr Murdoch told US analysts that Australia was a long way away and it would just be simpler to keep assets there together. It was “really a management thing”, he told the FT, noting that Foxtel’s former chief now runs the group’s Australian newspapers.

Splits are often messy, but these are not insignificant assets. The Australian TV holdings are worth $2bn, and News Corp has just bid $2bn for James Packer’s Consolidated Media Holdings to double its stakes. The CMH bid looks like a move to give the newspapers a cash cushion, and represents a $2bn transfer from head office, even before it decides how much cash to put into the spin-off. The new company will also hold a near-$1bn stake in Realestate.com.au, a property website. These $5bn of pay-TV and online assets will loom large, as Morgan Stanley and Deutsche Bank values the publishing assets at between $4.3bn and $5.3bn.

Commonwealth Bank notes that even before TV and online stakes, newspapers make up just 39 per cent of publishing earnings this year, with the rest coming from News America Marketing and HarperCollins books. Australia contributes 70 per cent of the newspaper profits. One thing seems clear: valuing News Corp’s publishing company using the multiples that US newspaper groups such as McClatchy or the New York Times trade at, as some analysts are doing, seems woefully inadequate if Australian TV and online assets represent half of its value. Why, then, would Mr Murdoch underplay those assets? Any spin-off poses risks for a family owner looking to keep control. Investors’ dislike of newspapers could make the publishing company “the short from hell”, the Australian Financial Review remarked.

Alan Gould, an Evercore analyst, has noted that conspiracy theorists might think Mr Murdoch could put his own money on the other side of that trade, buying publishing shares that those less fond of newspapers want to dump and locking in family control for generations.

If that is not his plan, he should shine a light on the Australian TV and digital assets to explain why the publishing shares are worth holding. If not, someone else might build a stake that threatens the Murdoch family’s position. It is not long since John Malone amassed 18 per cent of News Corp. As dealmakers gather in Sun Valley, it is worth noting that the publishing company’s odd mix of assets may point to future deals. The spun-off group could always sell its Australian TV assets to News Corp’s entertainment company “if things go pear-shaped” for its papers, the AFR noted. Either way, if they want to understand Mr Murdoch’s next move, News Corp-watchers should look beyond Idaho’s Sawtooth mountains to Australia, the market where his empire began.

Andrew Edgecliffe-Johnson is the FT’s Media Editor

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