Under pressure from News Corp’s upper management, Rupert Murdoch has lately agreed to divide News Corp up into two corporations—one that contains the corporation’s entertainment assets, and the other to contain its newspaper and publishing assets—including “Big Six”/”Agency Five” publisher HarperCollins. Murdoch will remain in charge of both new companies.
Attempting to put the best spin on it he could, Murdoch said the split would “create the most ambitious, well-capitalized and highly motivated publishing company in the world, consisting of the largest collection of our news and publishing brands, as well as our groundbreaking digital education group”.
And HarperCollins CEO Victoria Barnsley seems optimistic about it as well, saying, “My gut feeling is that it is good news—we will be a bigger fish in a smaller pond . . . We will have more clout. I think we will have more investment, which will be good for all of us.”
But if you look behind the cheerful façade, you have to wonder whether this is really as good news for the publishing side as they say it is. As a piece in the New York Times points out, this could be seen as winnowing out all the unprofitable newspaper businesses so that the more lucrative entertainment arm would no longer have to bear the burden of the papers’ lack of profitability:
The split is a logical and elegant one: one company for the stuff that makes a lot of money and another one for the stuff that doesn’t make much. Some of the analysts I spoke to last week used “GoodCo” and “BadCo” as shorthand for the bifurcated enterprise.
There are rumors various parties might be interested in buying HarperCollins, but at the same party where she made her optimistic statement above, CEO Victoria Barnsley denied there was anything to them.
Even if, as a book publisher, HarperCollins is in a much better position than the newspapers, it could still find itself having to carry water for those papers it’s bundled with. And if the Department of Justice price-fixing settlement proves as disastrous for publishers’ profit margins as the Authors Guild and other detractors claim, will HC’s position weaken still further?