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.

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