LOS ANGELES (AP) — Rupert Murdoch's News Corp. said Thursday that its board has approved a plan to split into two companies, one containing struggling newspaper and book publishing businesses and the other comprising faster-growing entertainment operations.
Murdoch will serve as chairman of both new companies and CEO of the entertainment company. The Murdoch family, which controls nearly 40 percent of the voting shares in News Corp., is expected to maintain control of both companies.
News Corp.'s board unanimously approved the split in principle. It will take a more formal look at the plan's details in coming months. The separation is also subject to regulatory approval and is expected to take about a year.
The split of News Corp. is a symbolic turning point for Murdoch, the company's 81-year-old CEO. Through the years, Murdoch maintained a fondness for newspapers even as he purchased entertainment companies and built a media conglomerate with a market value of $53 billion. In hearings last summer before U.K. lawmakers, he conceded that he regularly called newspaper editors under his employ with the greeting: "What's doing?"
Investors have already applauded the change. Since news of the split broke early Tuesday, News Corp. shares are up 9 percent. They slipped 32 cents, or 1.4 percent, to $21.99 on Thursday.
News Corp. said existing shareholders will get one share of stock in the publishing company for every News Corp. share they own. The exact ratio could change. Each company would maintain two classes of stock, voting shares and non-voting shares.
Murdoch is hoping the television and movie company will be more highly valued by shareholders who had been unwilling to accept the dour growth prospects of the newspaper and book business.
But he now faces the challenge of making the publishing division attractive to investors. Taken as a whole, News Corp.'s entertainment businesses are much more promising. In the nine months through March, the combined cable channel, TV station, satellite TV and movie businesses saw revenue rise 9 percent to $18.66 billion. Operating profit rose 23 percent to $4.17 billion.
By contrast, the publishing arm's revenues and profits have been shrinking over the same period. Revenues declined 4 percent to $6.22 billion while operating profits slipped 22 percent to $458 million.
The entire newspaper industry is struggling. Companies that once spent money for newspaper advertisements have been flocking to the Internet in search of cheaper ad space. Print newspaper subscriptions continue to fall. Meanwhile, digital subscriptions and ads at newspaper companies have been slow to make up for the decline.
"News has been reduced to being a minor part of what we now think of as media," said newspaper analyst Ken Doctor said, writer of the Newsonomics blog. "News needs to be thought of differently and, in a sense, subsidized."
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