{"id":1941,"date":"2012-07-04T10:50:42","date_gmt":"2012-07-04T00:50:42","guid":{"rendered":"http:\/\/blogs.unsw.edu.au\/knowledgetoday\/?p=1941"},"modified":"2012-07-04T10:50:42","modified_gmt":"2012-07-04T00:50:42","slug":"murdoch-news-corp-split","status":"publish","type":"post","link":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/blog\/2012\/07\/murdoch-news-corp-split\/","title":{"rendered":"The Murdoch Factor in News Corp.\u2019s Split Personality"},"content":{"rendered":"

From the Knowledge@Wharton today\u00a0blog<\/a>.<\/strong><\/p>\n

Rupert Murdoch\u2019s move to split News Corp. into entertainment and publishing businesses may unlock the value he seeks. But the big imponderable in that shift could be Murdoch himself and his tainted legacy, say Wharton management professors Lawrence Hrebiniak<\/a> and John Kimberly<\/a>.<\/p>\n

\u201cMurdoch overseeing both companies actually may be a drag on performance,\u201d notes Hrebiniak. The phone hacking scandal<\/a> involving News Corp.\u2019s defunct newspaper, News of the World,<\/em> and other group publications has \u201cdefinitely hurt Murdoch\u2019s image and perceived effectiveness as a leader,\u201d he adds. The newspapers\u2019 employees were accused of phone hacking and bribery in publishing stories between 2005 and 2007.<\/p>\n

Hrebiniak says Murdoch\u2019s \u201cpast mistakes still are fresh in many peoples\u2019 minds.\u201d He refers to criticism that News Corp. overpaid in its August 2007 purchase of Wall Street Journal<\/em> publisher Dow Jones from the Bancroft family for $5 billion. \u201cAs head of both companies and CEO of the entertainment division, [Murdoch] could easily stifle and overwhelm the creative thinking, influence, and strategic autonomy of the chosen head of the publishing business when these capabilities or skills are most needed to turn the business around,\u201d notes Hrebiniak. \u201cMurdoch should take a step back and reduce his active management role.\u201d<\/p>\n

Murdoch could still oversee both businesses, Hrebiniak adds, but needs to appoint new CEOs for each of the two divisions, and become a hands-off executive. Those CEOs could then focus on strategic opportunities and challenges \u201cwith a fresh vision, without excessive Murdoch influence or interference.\u201d<\/p>\n

News Corp. also has to contend with the overhang of Murdoch\u2019s legacy, and two key components of that are unclear, according to Kimberly. First, he wonders how history will view the man as a business leader given the stain of the hacking scandal and the questions it raised about Murdoch\u2019s personal integrity. Second, how well would Murdoch\u2019s empire fare once he is gone, Kimberly asks. \u201cArguably, the most important challenge facing any leader is building an organization that can thrive in his or her absence.\u201d<\/p>\n

The phone hacking scandal has \u201cseverely tarnished\u201d Murdoch\u2019s personal reputation, and its economic consequences will not be known for some time, Kimberly notes. The fallout from the incident also led\u00a0Murdoch\u2019s son and heir apparent James Murdoch to step down as chairman of British satellite and broadcasting company BSkyB (of which News Corp. owns a 39% equity stake) this past April.<\/p>\n

Unshackled by the Murdoch style and legacy, News Corp.\u2019s split will bring some obvious benefits, experts say. For one, it allows for separate strategic attention to the two very different businesses of entertainment and publishing. \u201cEach business can focus more directly on its own industry forces, competitive problems and opportunities,\u201d Hrebiniak says.<\/p>\n

Hrebiniak also suggests that with a more sharply focused entertainment business after the split, Murdoch could revive his attempt to complete his ownership of BSkyB, which is the biggest pay TV broadcast company in the U.K. and Ireland. The phone hacking scandal forced Murdoch to withdraw his bid last year to buy the remaining equity in the firm. Hrebiniak points to the immediate increase in the stock value of both News Corp. and BSkyB shares after the split announcement as indicative of the value investors see in the move and what might follow.<\/p>\n

But News Corp. still faces major challenges after the separation, which is expected to be formalized over the next year after regulatory approvals. Hrebiniak notes that not all of its entertainment businesses have high growth prospects and profitability. The company\u2019s cable business is doing well \u2014 much better than broadcast and satellite TV. \u201cBut the split won\u2019t guarantee increased growth and profitability for the entertainment side of the business; serious strategic and execution issues won\u2019t be overcome automatically,\u201d Hrebiniak says.<\/p>\n

In steering the newly separate publishing business, News Corp. will need major efforts to reduce costs and avert further slippage in already thin profit margins, according to Hrebiniak. He doesn\u2019t see that as an easy task, given the many competitive challenges to publishing.<\/p>\n

The split, in fact, raises more questions about the future of News Corp.\u2019s publishing business than the entertainment arm, according to Kimberly. He notes that the publishing business is the \u201chistorical core\u201d of Murdoch\u2019s empire, and that he is understandably very attached to it. \u201cBy spinning it off, and by painting an optimistic picture of its future, he is playing a very risky game,\u201d says Kimberly. \u201cIf he wins, his judgment is vindicated and some reputational capital will be rebuilt. If he loses, he loses big.\u201d<\/p>\n

<\/p>\n

This blog was previously posted in Knowledge@Wharton today\u00a0blog<\/a>: The Murdoch Factor in News Corp.\u2019s Split Personality<\/a><\/span><\/span><\/em><\/div>\n","protected":false},"excerpt":{"rendered":"

From the Knowledge@Wharton today\u00a0blog. Rupert Murdoch\u2019s move to split News Corp. into entertainment and publishing businesses may unlock the value he seeks. But the big imponderable in that shift could be Murdoch himself and his tainted legacy, say Wharton management professors Lawrence Hrebiniak and John Kimberly. \u201cMurdoch overseeing both companies actually may be a drag […]<\/p>\n","protected":false},"author":336,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[14652,12307,14651],"class_list":["post-1941","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-entertainment","tag-murdoch","tag-news-corp"],"_links":{"self":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/1941","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/users\/336"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/comments?post=1941"}],"version-history":[{"count":2,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/1941\/revisions"}],"predecessor-version":[{"id":1943,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/1941\/revisions\/1943"}],"wp:attachment":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/media?parent=1941"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/categories?post=1941"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/tags?post=1941"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}