5 Things You Should Know About the Big Split at News Corp
Here are a few quick guidelines and caveats for understanding the News Corp board approval of a corporate split between the company's entertainment and publishing assets.
1) The company is putting premium spin on the notion that this is a long-considered and long-debated move, and that, therefore, it is not a direct response to the UK phone-hacking scandal. This is true only in the sense that executives in all large companies are always saying, usually wistfully, "what if?" And, obviously, given the options they hold, many of the executives around Rupert Murdoch have secretly wished for this.
But until now, or until the phone-hacking scandal came to dominate every aspect of News Corp's corporate consciousness, hell would have had to freeze over before Rupert would have let his papers go. What should be understood here is that the split is the just the most recent earthquake in the company caused directly by that affair – and, of course, not the last.
2) The prominent mention in the announcement of the board's decision that the split will take 12 months means that nothing is remotely settled yet. News Corp has a long history of announcing deals with great fanfair that are strategically advantageous at a given moment, but which then disappear in the welter of ensuing events. In other words, Rupert has been forced into this deal; but has now bought himself 12 months to undo or modify it. I would put the chances of this deal happening as described, as two cleanly separated companies, at no higher than 50:50.
It is surely on Rupert's mind that, if some version of split has to happen, to do the split in a way that will be most easy to reverse as soon as possible. (Of note: at one point in the 1990s, the entertainment division was a partially spun-off unit, subsequently reabsorbed.) It is also surely on his mind that, hoping against hope, were the hacking opprobrium to somehow recede, he might not have to go through with it at all.
3) Making Rupert Murdoch the CEO of the larger company has more ritual than operating significance. He could not, for obvious reasons, be made CEO of the much smaller company. On the other hand, it would be unlikely that he would stop doing what he has been doing for the past four years – spending the bulk of his time on the issues related to the smaller company – and suddenly return to the issues of the larger company. The operating issues of the larger company have been handled in a largely autonomous fashion by Chase Carey, and before that, by Peter Chernin.
Rupert stepping back into running the entertainment business (a business in which he has little interest) would not just add a whole new level of upset and dysfunction to the company, but would mean he would no longer have the time to attend to – one should add, compulsively – the last days of the newspaper business. When he bought the Wall Street Journal, his children described it as part of a retirement strategy for their father (their strategy, as much as his). This will not change. He will be called the CEO of the larger company, while spending his energy, and lavishing his love, on the smaller.
4) If this is, as I believe, something of a high-pressure game, if not an outright putsch, directed at a weakened Murdoch (and Murdochs), then there is blood in the water. So, rather than this being seen as a straightforward, logical, and advantageous transition for the company, it should be seen as setting the stage for vengeance, payback, and an ongoing fight for control. There are Rupert and his four adult children: they are pretty much incapable of not endlessly, and probably with dying breath, struggling for position and dominance – and retaliating against anybody perceived to have crossed them.
5) The fun is just beginning.