The move comes as Britain’s communications regulator, Ofcom, enters the final stages of its review of whether satellite television firm BSkyB — of which News Corp holds a 39% stake — is “fit and proper” to hold a broadcast license.
The separation of News Corp’s tainted newspaper division from the lucrative television and film assets might appease regulators, analysts said.
“I’m not saying it completely ameliorates Ofcom’s concerns. But I think it helps,” said Canaccord Genuity analyst Tom Eagan.
The phone-hacking probe in the UK has caused News Corp to abandon its bid for full control of BSkyB. A split could help the company avoid being forced to sell off its remaining stake in BSkyB, worth some $6.9bn.
The US-based conglomerate did not specify which businesses each company would contain.
The Wall Street Journal, News Corp’s flagship US newspaper, reported that the company is considering separating the newspaper and book publishing businesses from the entertainment arm, which includes Fox News Channel, its broadcast TV network, and the 20th Century Fox film studio.
The entertainment arm is far more profitable. It accounted for about 75% of the company’s revenue and nearly all of the operating profit in the first nine months of the fiscal year.
Bernstein analyst Todd Juenger said the split would allow the company to invest more in the growing entertainment field “without the baggage of publishing”.
A former News Corp executive familiar with internal company deliberations says such a split has been talked about for years, although discussions gained new momentum in the wake of the phone-hacking scandal which erupted last summer.
The split would allow Murdoch to keep control of his prized publishing operations through his voting shares while pleasing investors who have viewed the newspapers as a drag on shareholder value.