Splitsville: News Corp re-orgs into separate publishing and entertainment businesses

Rupert Murdoch is splitting News Corp, the multinational corporation behind Fox Network, Sky News, the Wall Street Journal, and 20th Century Fox, into two businesses, separating the publishing and entertainment divisions. He will remain firmly in charge as chairman of both and CEO of the entertainment business.

The news broke this morning as Murdoch’s memo about the change to the world’s second largest media conglomerate and third largest entertainment company hit the Internet, full of the typical bravado that accompanies such corporate shufflings:

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… you and I have built together into one of the largest, most innovative media companies of our time.

That very size and breadth has created an opportunity to separate News Corporation into two global leaders in their own right — we will wow the world as two, as opposed to merely one.

The corporation as a whole has a market cap of $53 billion, and 51,000 employees, with net revenue for the last 12 months of $3.4 billion, according to WolframAlpha. It is based in New York.

Realistically, better focus in each division should lead to improved business results, and that’s exactly what Murdoch is claiming as a rationale: “We must realign and reorganize in this moment of opportunity so that we can heighten our focus and be faster, more nimble, and more adaptable to change.”

In addition, Murdoch explained that he believes News Corp’s publishing assets are undervalued by Wall Street and that this split is the means to realize their true potential:

“Our publishing businesses are greatly undervalued by the skeptics. Through this transformation we will unleash their real potential and be able to better articulate the true value they hold for shareholders.”

Murdoch will personally be taking the lead as the CEO of the entertainment business, which he expects will continue to grow strongly:

Today, our creative content businesses have never been stronger. Our distribution assets, globally, are on full throttle. These businesses, at the core of an independent media and entertainment entity, will innovate and grow even faster.

But there is no news on who will be taking personal leadership of the publishing business.

While reading the announcement, I had to think of a great quote on corporate reorganizations from a first-century Roman general, of all people:

We tend to meet any new situation by reorganizing; and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency, and demoralization.

Unfortunately, it was probably faked by a journalist in the 1950s.

However, reorganizations are difficult and challenging things. News Corp intends to take a year to complete this one. The challenge will be to maintain focus and execution within each division even while the corporation is being re-architected around them.

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Here’s the full text of Rupert Murdoch’s memo:

Dear Colleagues:

It is with much enthusiasm and personal pride that I share with you today’s news regarding our plan to drive towards the next, transformative phase of this organization you and I have built together into one of the largest, most innovative media companies of our time.

That very size and breadth has created an opportunity to separate News Corporation into two global leaders in their own right — we will wow the world as two, as opposed to merely one.

I believe our leadership is born out of a spirit of innovation. We have never accepted the status quo. We have always been driven by the belief that we can do better — deliver a better product for our audiences and provide better performing businesses for our shareholders. Our success has come from our speed, flexibility and creativity in responding to changing markets, in combination with our commitment to serving our customers’ needs.

Our publishing businesses are greatly undervalued by the skeptics. Through this transformation we will unleash their real potential, and be able to better articulate the true value they hold for shareholders. Our aim is to create the most ambitious, well-capitalized and highly motivated publishing company in the world, consisting of the largest collection of our news and publishing brands, as well as our groundbreaking digital education group; we will also work to create the world’s top media and entertainment company, encompassing our premier broadcast and cable networks, leading film and television production studios and highly successful pay-tv businesses.

Much of our foundation already exists — because of you. We have the creative minds. We have the assets. We have the brands. But we must realign and reorganize in this moment of opportunity so that we can heighten our focus and be faster, more nimble, and more adaptable to change. When we began this journey 60 years ago in Adelaide, we made a commitment to provide great journalism, while also entertaining our consumers. In news, information, data, literature, and digital content, no company has devoted the resources, the passion, or enjoyed the success we have. That will not change. The most important guarantee to free societies, free markets and free minds is free speech. Knowledge has changed the course of history in every society, and we believe that being a creator and distributor of information is not just the right thing to do, it’s good business. The failure of other publishing companies to embrace the future has itself created opportunities for us around the world. Our publishing company will deliver on the promise of a well-informed society as we aggressively grow our business across borders and new global platforms.

On the media and entertainment side, we have a reputation for inspiring and entertaining millions of imaginations every day. We have a history of empowering truly visionary, creative talent to take chances that have redefined the landscape again and again. Today, our creative content businesses have never been stronger. Our distribution assets, globally, are on full throttle. These businesses, at the core of an independent media and entertainment entity, will innovate and grow even faster.

The most valuable commodities in the world today are information, analysis and education, with infinite potential through the growth of technology and digital platforms to accelerate the improvement of world living standards.

Today there are 30 million tablets in use in the U.S. and 75 million worldwide. In five years’ time, there will be at least 75 million tablets in the U.S. and 375 million in the world. Smartphones will get far smarter and grow rapidly over the next 5 years, from 120 million active phones to 225 million in the U.S., and from 835 million to 1.7 billion in the world. These technologies will permeate all parts of life — including education — and it is my firm belief that these two companies will be best positioned to compete in this rapidly evolving global economy and distribute our premium content on these platforms.

Over the years, I have become accustomed to the noise of critics and naysayers…and pretty thick-skinned! Remember what they said when we started the Fox Network, Sky, Fox News and The Sun? These experiences have made me more resilient. And they should you, as well. And time and time again, we persevered, creating new businesses, new products, telling new stories, informing and educating the public in new ways — and giving jobs to thousands more people.

I am extremely excited by this big change. It is a testimony to our entrepreneurial spirit and determination to educate, inspire and entertain millions of families across the globe.

I will personally be leading the creation of our new companies and will serve as Chairman of both organizations and as CEO of the media and entertainment company. Chase Carey will continue to partner with me on leading the media and entertainment business, by serving as President and COO. We are busy working on other important details and will inform you as they become available.

Lastly, each of you will make this possible. I will forever be grateful for your loyalty, hard work, creative thinking, and most of all, for your support in making this transition a successful one. We have much work to do as we grasp the great opportunities that lie ahead.

I cannot express how much I appreciate all of your hard work up to this point, and for the promise of your continued creativity as we lay the foundation stones for these two great companies. Each will be unified in their spirit, in their determination, and in their dedication to touching and enhancing lives around the world.

Best regards,

Rupert Murdoch