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News Corp’s $2.5 billion reasons to invest

Rupert Murdoch’s News Corporation (ASX: NWS) plans to gift its spinoff publishing company with no debt and US$2.6 billion in cash.

News Corp announced the plan in a regulatory filing on Friday. The media company is planning to split off its publishing business from its entertainment business, which includes 20th Century Fox film studio, Fox broadcasting network, and the Fox news channel. The entertainment business will be called the Fox Group, while the publishing business will retain the News Corp name.

The cash injection will likely entice investors into a declining newspaper publishing business, but will also give the group firepower to pick up other publishing assets. Time Warner is splitting off Time, which offers magazines such as Sports Illustrated, Fortune, the Times and People, and is expected to become a stand-alone listed company later this year, valued between US$2 to US$3 billion.

With its proposed strong balance sheet, the new “News Corp” could quite easily buy Time.

News Corp said in the filing that the publishing company’s assets were worth US$18.6 billion, and include The Wall Street Journal and a 50% share in Australian pay-TV operator Foxtel. The other 50% is owned by Telstra Corporation (ASX: TLS).

Despite those assets, the publishing company has assets that are declining in value and faces a tough task in halting the descent. Advertising revenues are moving online, as print newspapers face declining circulation. No print media businesses are immune, and our own Fairfax Media (ASX: FXJ) and APN News and Media (ASX: APN) also face an uphill struggle in turning their businesses around.

Foolish takeaway

Publishing companies are looking at several ways of monetising their strong brands, and moving their print papers online. Pay-walls are being setup, so readers will have to pay up to view digital articles, printing presses are being consolidated and costs are being drastically cut. It remains to be seen whether current efforts will be enough for publishers to regain their former glory.

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The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in Fairfax.

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