Here’s Why News Corp Is Spinning Off Its Publishing Division

newspaperThe strength of News Corp’s (NASDAQ:NWS) cable division helped the media company more-than double its earnings in the last quarter.

In the three months ended in December, net profit rose to $2.4 billion, or $1.01 per share, from $1.1 billion, or 42 cents per share, in the year-ago quarter. The majority of the gain came from the acquisition of 50 percent stakes in Fox Sports Australia and Fox Sports Asia that the company did not already own. Along with net profit, revenue rose 5 percent to $9.4 billion and operating income increased 6 percent.

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This quarter’s results show the reasoning behind News Corp’s plan to break up its business. At the end of June, the company will spin off its publishing division from its entertainment business, which includes its 20th Century Fox film studio and Fox television assets, creating two separately listed companies.

Fourth quarter revenue for the publishing division – which is comprised of book publishers and newspapers like The Wall Street Journal and the Times of London – amounted to $2.1 billion, a relatively flat figure compared to the same period in the 2011. The stagnating results reflected lower advertising revenue at the company’s Australian publications, which was only partially offset by increases at its British publications…
Earnings would have been higher had News Corp not taken a $56 million charge related to an ongoing investigation into its alleged phone hacking at the British newspaper unit. The company took an $87 million charge for similar reasons in the previous quarter, and in fiscal 2012, the investigation cost the company $224 million in charges.

Fortunately, News Corp’s entertainment division proved to be a strong earner; the cable-network programming unit led the group, where revenue increased 18% to $2.6 billion. That group, including Fox News and FX, reported a 7 percent rise in operating income. Total cable programming expenses rose 26 percent, due to costs associated with acquiring rights to sporting events, but ad revenue grew 8 percent at its domestic channels and 29 percent internationally. The film division’s operating income fell from $393 million to $383 million this quarter because its profits from “Taken 2” and “Life of Pi” were not as high as those from last year’s “Rio” and “X-Men.” But News Corp’s television division received a boost from the political elections and reported a 19 percent increase in operating income, hitting $224 million.

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