News Corp (NWSA) Split: A Brighter Future for Publishing?

Last week, Gannett announced the acquisition of Belo Corp. (NYSE:BLC) in a massive $1.5 billion deal. Through this, Gannett Co., Inc. (NYSE:GCI)will double its broadcast network of stations. The company is moving into higher margin operations and despite the debt-financed acquisition, it is sticking with its $300 million buyback program, which I believe shows the management’s confidence in the company’s cash position.

The New York Times Company (NYSE:NYT) has been struggling with declining print and advertising revenue. To offset the negatives coming from the changing market dynamics, the New York Times has adopted a digital model. I believe that so far, the management has been able to effectively implement the new strategy aimed at increasing its foothold in the digital world, which was shown in its recent numbers.

The company has recently reported an 18% rise in total circulation and an impressive 41% increase in digital circulation, although home-delivery circulation remained weak showing an increase of just 0.5% for the six months ending March 2013. However, a recent article at Politico has highlighted  an internal crisis centered around executive editor Jill Abramson. The company is franchising the New York Times brand and moving forward in the online world, but I am not sure if its future includes Abramson.

News Corp (NASDAQ:NWSA)’s executives insist that by separating the two units, they will be able to properly focus on the publishing business and will be able to turn it around. This it plans to do by increasing subscription costs, launching a new service that offers the latest content first to the premium customers, and by investing in mobile growth.

My Foolish take

On the other hand, the advertising revenue in general has moved toward electronic media, which is why I am not optimistic about the future of the print-media focused publishing and newspaper firms.

News Corp (NASDAQ:NWSA)’s current publishing operation is running  on an obsolete business model in which most of its content is basically a rehash of other articles from the leading news agencies, such as Reuters, and gives little value to the readers.The phone hacking scandal has also tarnished its reputation.

Moreover, the company’s track record with new publication ventures, particularly in the online world, is far from glittering. This was evident in the failure of its tablet focused publication called “The Daily” – which charged its users for information which was already available all over the Internet for free.

However, the positive in the division of the business is that the publishing arm will no longer drag down the earnings of News Corporation, and I believe this makes the entertainment-focused 21st Century Fox a much better firm.

Sarfaraz Khan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Sarfaraz is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article News Corp Split: A Brighter Future for Publishing? originally appeared on Fool.com and is written by Sarfaraz Khan.

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