Can the New News Corp. Overcome the Old Skeptics?

Can the New News Corp. Overcome the Old Skeptics?

The new News Corp. has a lot to prove as a stand-alone company.

This News Corp. is the product of a split between the former media conglomerate also known as News Corp., which then consisted of one company containing ample entertainment, broadcasting, and print-media assets. When the old News Corp. CEO Rupert Murdoch chose to divide it into two separate companies, with trading commencing on July 1, the new News Corp. inherited the print-journalism assets, including The Wall Street Journal and the perennially money-bleeding New York Post, as well as book publisher HarperCollins and Dow Jones (for which I worked, as a media columnist at MarketWatch, from 2007 till early this year).

The other component, 21st Century Fox , encompasses such broadcasting brands as the Fox News Channel and the Fox filmed-entertainment unit.

OK. Got that straight? Old News Corp., boasting those more promising properties, good. New News Corp., consisting of worrisome print components, not so good.

It is no secret that U.S. newspaper companies have had a tough time adjusting to the digital revolution, as the dailies' advertising dollars have slowed down and managements have groped with the challenge of monetizing the Internet.

Like many media observers, I'm fascinated to see whether this operation can overcome the stigma of being closely identified with the bad, "old" media of print journalism and publishing.

21st Century Fox shareholders sure aren't complaining, though. Murdoch's decision to put the less desirable print properties into a separate company is in step with the broader media ecosystem. Just last month, Gannett acquired Belo to add broadcasting strength and reduce its dependence on the newspaper business. For its part, Tribune also recently gobbled up TV operations, enabling it to reinvent itself as a strong local TV entity, as it ponders a potential sale of its daily newspapers.

Murdoch, the CEO of the "old" News Corp. and the head of 21st Century Fox, has pledged that the new entity will succeed. Murdoch has a stake in it, as he will be the chairman of both companies.

When he announced the plans for the split, Murdoch said the move would "unlock the true value of both companies and their distinct assets, enabling investors to benefit from the strategic opportunities resulting from more focused management of each division."

Skeptics, however, assert that when Murdoch created these two entities, the more attractive movie and television-related assets were assigned to 21st Century Fox. Meanwhile, the comparatively less appealing and slower-growth properties were lumped together at the new News Corp., under the direction of Robert Thomson, who was promoted from his position as editor of The Wall Street Journal.

Not only were the print assets financially worrisome before the split, but they were also capable of causing Murdoch and the company tremendous embarrassment worldwide. Two summers ago, News Corp. print journalists in London were found to have hacked the phones and violated the privacy of private citizens. In fact, many believe that the fallout from this scandal paved the way for the News Corp. split, as a way to keep the attractive broadcast assets apart from the troublesome print ones.

So far, at least, in the early returns, we see that since the July 1 trading of the stocks commenced, News Corp. shares rose 2.9% while 21st Century Fox shares jumped 5.5% by July 24 and the Standard & Poor's 500 increased 5%.

For his part, Thomson stressed that the new media conglomerate would "cultivate a start-up sensibility even though we already work for the world's most established and prestigious diversified media and information services company."

Thomson's strategy is to get the most out of his prized asset, The Wall Street Journal. News Corp. is intent on creating value around its news assets and editorial content, the backbone of the company. To do that, News Corp. must find ways to make more money from the Journal by leveraging its prestige in the marketplace.

The Journal already possesses a clientele of well-heeled readers, which is why it was able a few years ago to take the bold step of diversifying its news offerings from beyond business and finance to become more of a general-news paper, in the style of The New York Times.

Having accomplished that objective, Thomson and his team must now come up with ways to leverage the prestige of the Journal on mobile devices and tablets, and in other digital ways.

The Journal is coming to the new company from a position of strength. As of May 1, it was bucking the trend of declining circulation numbers in the U.S. newspaper world, remaining the nation's biggest newspaper. Going by the average weekday circulation figures, as of March 31, it boasted 2.4 million in total print and digital subscribers. This represented a 12% jump from the previous year, based on a report by the Alliance for Audited Media. These data encompassed 898,102 online customers.

Wall Street will be following the new company to measure how well it can survive on its own, without the cushion of the strengths of 21st Century Fox, such as its cable capabilities and a movie studio that has lifted all boats in the past with blockbusters like Avatar and Titanic.

Dow Jones CEO Lex Fenwick was not long ago a senior executive at Bloomberg, and he well understands the inner workings of his ex-employer, one of Dow Jones' most heated foes. Dow Jones' new DJX project, which has acquired the nickname "The Bloomberg Killer," is intended to go forcefully against Bloomberg and Thomson Reuters. It will offer a wire service that supplies subscribers with a two-minute jump on news exclusives of the Journal and additional Dow Jones journalists.

Journalism points aside, there is another tantalizing question that Wall Street is pondering: What role will Rupert Murdoch play in the new News Corp.? Naysayers fret that Murdoch will be so busy at 21st Century Fox that he won't be able to give that much of his attention to News Corp.

Public comments I've seen are more inclined to champion 21st Century Fox than anything else, as a testament to Murdoch's vision. "By divesting its less attractive legacy business, Fox has become a pure-play entertainment company with fantastic assets in its cable channels," Gabelli & Co. analyst Brett Harriss told Reuters a few weeks ago.

That's great news -- if you hold shares in 21st Century Fox.

If you happen, however, to be a holder of News Corp., the best you can do is wait and see.

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