This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

News Corp Split May Make Disney Last Media Tycoon

NEW YORK ( TheStreet) -- The media industry may lose another conglomerate after News Corp. (NWSA) confirmed on Tuesday a report in its Wall Street Journal that the company may split into two companies, one focused on its newspapers and publishing businesses and the other on entertainment.

While news of the split is a major development for Rupert Murdoch's media empire -- pushing its shares to a four-year high in Tuesday trading -- a decision to spin off businesses would also be a meaningful moment for the media industry.

If News Corp. were to split, Disney (DIS) would remain the only major consumer media conglomerate left intact after a generation of consolidation and M&A that created sprawling media giants in the U.S. and Europe.

The split is being considered by an embattled Murdoch, who was told by a British House of Commons Culture Committee in May that a phone-hacking scandal at the company's British newspaper unit shows he is unfit to lead the media giant, which owns Fox broadcast network, Fox News, Twentieth Century Fox and a near 40% stake in British Sky Broadcasting.

Rupert Murdoch

If News Corp. were to follow through on a separation of its publishing unit from its more profitable cable TV, broadcast and movie studio businesses, Murdoch would be appeasing calls by frustrated shareholders.

Still, even as News Corp shares rally over 6% to $21.34, its prospective split and asset divestitures carried out my media conglomerates like Time Warner (TWX) and Viacom (VIA) in recent years have not helped any of their shares outperform Disney, which hovers near all-time highs.

Disney's five-year outperformance relative to conglomerates that are slimming down highlights an interesting contrast within the media sector. Although M&A efforts in the industry have left a trash-heap of bad mergers, broken synergy promises and assets that perform better independently, signs of success in Disney's recent Marvel and Pixar acquisitions and its share outperformance signal the creator of Mickey Mouse may have uncovered a rare winning conglomerate formula.

Previously, lagging shares and a hard-to-manage sprawl of assets led Time Warner (TWX) to spin off its cable systems and AOL (AOL) units in recent years, as the company focuses on content creation over distribution. Meanwhile, Viacom (VIA) spun off CBS (CBS) in 2006, in a move to focus on cable programming over broadcast media.

Currently, reports indicate France's Vivendi is also looking to separate its amalgam of broadcast, telecom and video games assets.

In the case of News Corp., the phone-hacking scandal and related arrests of top executives involved with the company's British newspaper business appears to be driving Murdoch toward a separation of its low-margin HarperCollins and newspaper publishing businesses from higher margin cable, broadcast and movie-studio units.

If News Corp completes that spinoff it may mask that the split, "probably should have happened a while ago because of how poorly the newspaper business has performed," says Martin Pyykkonen, an analyst at Wedge Partners.

Pyykkonen says the phone-hacking scandal, which has led to over 50 arrests, including ex- News of the World editor Andy Coulson and former News International CEO Rebekah Brooks, would be seen as a catalyst for what is ultimately a business decision that could draw a a fuller share valuation for News Corp's array of assets.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,071.22 -41.93 -0.24%
S&P 500 1,977.80 -5.05 -0.25%
NASDAQ 4,505.8520 -6.3420 -0.14%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs