Should Rupert Murdoch decide he really is a newspaper guy, rather than the multimedia mogul his post atop News Corp. (NASDAQ:NWSA) presumes him to be, he's in a great position to offer clarification.
First, he executes the "good News Corp./bad News Corp." split that Sanford C. Bernstein & Co. analyst Michael Nathanson has been recommending. Second, he takes "bad News Corp." private to tinker with its print assets until hitting upon a formula that recasts the pan-media titan as newspapers' savior.
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Qualifying as "good" in this scenario is News Corp.'s film, cable networks and direct-broadcast satellite operations, as well as social-networking site MySpace. This group, which accounts for about 80% of operating income, promises the sort of growth capable of satisfying News Corp.'s long-suffering shareholders.
Designated as "bad" -- in addition to newspapers, naturally -- are News Corp.'s television stations and a few other laggards in Murdoch's far-flung empire. "These 'bad assets' are not quite free," Nathanson reports, "but are getting very close." So close, in fact, that Murdoch wouldn't need much help taking this post-split stub private.
Granted, an MBO of "bad News Corp." could require the sale of all 300 million News Corp. shares that Murdoch and his family currently own. So be it. The exchange would leave him with The Australian, The London Times, New York Post, The Wall Street Journal and a slew of other dailies the Global Citizen unabashedly adores.
What's more, once freed from the quarterly drumbeat of Wall Street, Murdoch could experiment in private not only with the offline and online components of news content but with pricing strategies as yet unexplored. The Wall Street Journal and WSJ.com are two levers of obvious interest to pull. Yet Murdoch would have access to many others, too, including the combination in select markets of local newspapers and local TV news.
One can only imagine the additional interest the experimenting would command were it extended to include, by way of acquisition, both The New York Times and the Los Angeles Times. After all, compared with the $5.6 billion Murdoch paid for The Wall Street Journal's parent in 2007, the $2.1 billion enterprise value presently accorded The New York Times' parent company has to have him thinking what a great present it would make for his 78th birthday on March 11.
As for who would replace Murdoch at "good News Corp.," that's easy too. Few doubt the split would have president and COO Peter Chernin still planning to leave the company in June. - Richard Morgan
