The Murdoch media tour: Spinning the spinoff

Super Bowl winners head to Disney World; moguls with a new corporate agenda go on a media tour. In the hours following the formal announcement early Thursday morning that News Corp. (s nws) (s nwsa) will split into publishing and media/entertainment, Chairman and CEO Rupert Murdoch hit all the business news nets, starting with his own Fox Business Network. He’s also done interviews with the Financial Times, among others. Some of the themes and answers echo the talking points in the announcement and the follow-up staff memo from Murdoch. I’ll be updating this throughout the day but so far what stood out from the rest?


Lachlan Murdoch may yet end up running one of the companies some day but his father smacked down speculation that he will be the publishing CEO post-spin. FBN’s Neil Cavuto, did the house interview but also asked some of the same questions many of us would. Cavuto inquired about the fate of sons Lachlan, who left the company but is not on the board, and James, the deputy COO who was hit hard by the hacking scandal. Murdoch quickly reminded him (as he did another interviewer later) that he also has a daughter involved with the company. Cavuto shrugged that off and asked again about expanded roles for Lachlan and James. Murdoch’s reply:

“Well, they have to earn it, and they have to want it.”

He added, “Lachlan is very happy running his own businesses in Australia. And he loves living there. So we’ll see.”
Pushed on Lachlan as publishing CEO, Murdoch replied: “I think that is highly unlikely.” Cavuto didn’t ask the same question about James, and he seems to have forgotten about Elisabeth, who came back to News Corp. when it acquired her Shine production company. She has yet to join the News Corp. board as planned.
Murdoch’s succession plans have long been a concern and a matter of great interest, especially for investors. During an interview on CNBC, Murdoch, 81, passed up a chance to talk up Chase Carey as his successor, opting first for a flippant “you’ll have to talk to my board after they bury me” — before admitting there probably would come a time when he shouldn’t run the company. Carey, deputy chairman and COO of News Corp., is slated to be president and COO of the media and entertainment company; Murdoch touted him as his successor last year. But now he’ll need two.
What about James? Faber asked if James Murdoch, who has been under fire for his management of UK publishing unit News Int. as part of the hacking scandal that broke last July, has a damaged reputation now that would keep him from following his father. Murdoch defended his son, saying that if anyone’s reputation had been damaged, it was his own.


And what about a CEO for publishing? (Someone not involved suggested to me this week that the best punishment for James, whose greatest success has been with BSkyB and other pay TV, would be to give him that job.) Murdoch said repeatedly that the expected length of the process, about a year, provides “plenty of time to make up our mind who actually will be CEO at my right hand.” He told Bloomberg News, ” We’ll be working exactly as we are today for approximately 12 months, and within that time, I will make my choice. … Unless there’s something very extraordinary I think it would be internal.”
That would seem to make Lex Fenwick, the new CEO of Dow Jones, a leading contender. Murdoch called Dow Jones the “center” of the new company, stressing its global expansion plans and paying digital subs. He also told CNBC he was considering a name change for the Wall Street Journal to WSJ.
Murdoch insists the publishing company not only can survive on its own, but can grow, telling Bloomberg’s Liu: “It will have a positive cash flow from day one with the assets going into it and it will have no debt. It will also have cash reserves. We have as a company very large reserves of cash in the bank earning next to nothing.”
Some of those billions are being used for the share buyback that helped the stock price improve following the hit from hacking and the loss of the deal to buy the rest of BSkyB.
He told CNBC: “We throw off plenty of cash in Australia but we reorganizing so we’ll throw off more. We’re making cash in Britain, not as much as before because News of the World is gone and we started the Sunday Sun. Dow Jones is very cash positive.”
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Although revenue has been shrinking, the publishing division is firmly in the black without assets like investments in Australian pay TV being added. What about cost cutting? That’s already been going on at various properties. Murdoch told Liu, “We are going through a reorganization in Australia, which will result in cuts; we have some reorganizing starting in Britain. Here at the Wall Street Journal, we’re going to be as efficient as we can, of course. I would say net net around the world, we’ll be increasing our numbers and increasing our costs — and hopefully increasing our revenues.”
The new company will have enough to keep investing and experimenting but Murdoch told the Financial Times each paper ultimately will be expected to stand on ts own:

“You’re not going to see any print losses tolerated anywhere. We may start something that’ll take three years to turn a profit, or we’ll have maybe a bad time.”

The patron saint of paywalls

Murdoch wants to be viewed as the patron saint of paying for content, claiming that he was the first to say people should pay for digital news. It’s a dubious claim, even within his own company given that the WSJ’s subscription plans far predate News Corp.’s ownership — and that he initially promised to make completely free.
But he is passionate about it and about experimenting with it, investing $30 million in The Daily, the digital-only tabloid that launched on the iPad, implementing paywalls at the Times of London and Sunday Times, charging for apps, and earlier, selling Kindle subscriptions.

Why now?

Murdoch freely admits that he was the roadblock all along but it doesn’t sound like there was an “a ha moment” that changed his mind the split. His COO Chase Carey and CFO Dave DeVoe were among those internally who have pushed for the change, long urged by some investors and analysts. He told Cavuto, “They (Carey and DeVoe) look at the markets and I don’t — to the same extent. What brought me to it was after resisting … I’ve been 58 years building a company, gradually. …I realize the logic of it and how all the companies would be managed better, would be a lot better in every way.”
At CNBC, he added, “Frankly, I finally considered it, pros and cons. A couple of months, several weeks ago, I finally reached the conclusion I was right about it.”
It was time to change. The performance of other companies post-split helped sway him. “I think we’ve seen it at IAC … there’s now a Diller premium,” he joked with Faber. That’s a reference to a term — “Diller discount” or, in this case, a “Murdoch discount” — where the value of a company is depressed because of the majority shareholder’s control.

No, Britannia

Murdoch continues to resist linking the decision to the situation in England, when the uproar over phone hacking at the newspaper subsidiary dovetailed with efforts to buy the stake in BSkyB — and derailed it. News Corp. pulled the bid rather than face a regulatory decision on whether a company led by Rupert and James Murdoch was morally fit to own the pay TV operator, even after public apologies and the closing of the lucrative but damaged News of the World. Both were called to testify in various British proceedings and the fallout continues. Numerous ex-employees have been arrested.
But the events of the past year clearly soured him on investing much more in Britain. He first let loose with Cavuto (see the video clip at the top), telling him about BSkyB: “No, I think we have moved on in our own thinking from that. There were billions and billions of dollars and if Britain didn’t want them we have good places to put them here. I am much more bullish on America than I am about England.”
His repeated negative comments about investing in England plus his decision to be CEO of the larger company rather than the newspapers quickly led to conclusions that he was giving up on the papers there, too:

After listening to a few Murdoch variations, I think the message was aimed primarily at shutting down talk of a renewed BSkyB bid post split. But his attitude could come back to haunt. I also wouldn’t read Murdoch being chairman but not CEO of publishing as a sign that he’s pulling away.
But it is the pending end of an era.


One media outlet Murdoch has skipped so far: Twitter. The last time he tweeted out to his nearly 259,000 followers was June 24 and it was to scold Mitt Romney for his failures as a campaigner.