In my world, one of the great sports of the New Year is going to be watching Rupert Murdoch de-hitch his newspapers from his entertainment companies. Seldom, in a business context, has a man of such stature and accomplishment and at so advanced an age been asked not just to reinvent himself, but to prove himself all over again.
He may retain the CEO title for his entertainment company, but nobody doubts that his heart and time will be invested with his papers.
Murdoch's stand-alone newspaper company is his naked being. In a sense, it undoes one of his guiding business principles: building profitable businesses to cover the ever-faltering fortunes of his newspapers, the business he most loves. (There is a further justification in holding newspapers: they gave him the clout to help build the other businesses that make the big money.)
But his world now devolves more and more to the newspapers alone, at just the point in time when newspapers alone are the most vulnerable they might ever be.
There are three key indicators that will give an indication of what kind of island Murdoch has pushed himself off on – or been banished to. They will show up in the filings, anticipated early this year, necessary to make his newspapers an independent company:
First, the actual business results of the papers, being, individually, so much smaller than other business units, have long been wrapped in a goodly amount of smoke – but now that clears. Some of the great money pits of the media industry ought to be open soon for all to see. The New York Post, for instance, has likely not made money in more than 40 years – and most observers guess it is losing well north of $60m a year.
The Wall Street Journal, and its radical remake into a general interest newspaper, has, without much information as to its actual performance, generally been judged a success. How will that change – and how will regard for the new company's just appointed CEO, Robert Thomson, who has been running the Journal, change – if the Journal's losses are shown to be vast?
Second, because the new company is so exposed, it will depend on a dowry from its rich parent: so how much? Of the substantial cash on hand in the current company, how much does the newspaper company get?
This will likely be in the form of a division of cash assets; a continuing credit line from the larger company to the weaker one; and other financial engineering backstops and links. It is in this way that Murdoch will try most to dilute the effects of separation of the two companies and the isolation of his papers.
Third, while this has so far been billed as a spin-off of the newspaper assets from the larger mothership, what we need to see are the nature of the mechanics of the split: that is, who is really splitting from whom. A possible tip-off, which came unheralded last month, was that the theoretically new company will continue with the name News Corp, and the theoretical mothership company will be the Fox Group.
In part, this is probably sentiment: Rupert holding on to this true patrimony. But it may be too that the spin-off is happening in reverse, Fox Group being jettisoned from News Corp. The advantage here is that the myriad legal liabilities, in the UK, and potentially mounting exposure to the US justice department connected with the hacking and bribery scandals in the Britain, would be left with the newspapers that caused the problems.
In a wave of the hand, the Murdoch family's wealth might now be safely secured in the Fox Group, and the newspapers left to pay the piper.
But this is not mere sophistry and corporate trickery. This is, in all its implications and drama and ambition, a last stand.
Whatever Murdoch has been, or ever wanted, or, arguably, deserved to get, is now in play. And by all reports of where Murdoch has been going, and who he has been talking to, he means to try to make this work – that is, to triumph over the hand he's been dealt.
Already, he has implemented draconian cuts in his Australian newspaper operation. The Australian papers are (save for the Australian itself) still substantially profitable, so he needs their cash flow to buoy the markets he cares more deeply about.
He seems about to make a bet that the US newspaper market has hit bottom; that, at the very least, the LA Times and the Chicago Tribune are good deals to be had. Indeed, that's his other, unheralded skill – a savant-like brilliance when it comes to manufacturing and distribution efficiencies in the newspaper business – with which he believes he can grow margins very quickly.
And he seems genuinely focused on trying to figure out what the newspaper business will be post-deluge, the new "newsonomics", in my friend Ken Doctor's word. (Ken, a leading thinker about the fate of newspapers, had not told me Murdoch has consulted him, but I'm sure he has: he's consulting everybody.)
Murdoch's two most immediate problems remain the New York Post and the Times in London – with the Wall Street Journal's likely losses also keeping him up at night. At the Journal, at least, there is an argument about the franchises it can build and the world of data in can exploit. And the Times has some wiggle-room if it becomes part of a seven-day operation lead by the Sunday Times. And, if need be, it can be sold to any number of eager buyers.
There are no such arguments or wiggle-room or buyers for the New York Post. Its immediate fate will be a good indication of whether this new News Corp is a death spiral, or, if Mr-Don't-Look-Back is actually ready to be as ruthless and unsentimental as he has so often been – though never with the Post.
Still, Murdoch may be as Murdoch as he has ever been, but that does not make him more than a newspaper man from the 1950s and 1960s trying to retail his skills in a new world. (The Daily, the recently closed digital experiment that he personally oversaw, was just that: a tone-deaf, middle-market paper on a tablet.)
Indeed, Murdoch has over the past four years demonstrated his best newspaper skills and tricks, devoting a disproportionate, if not extraordinary, amount of his business time to overhauling the Wall Street Journal. Next week, I'll look at how well that's worked for him.