News Corp

News Corp is a global, diversified media and information services company controlled by the Murdoch family. Following a major corporate restructuring in 2013, the original News Corporation was split into two separate publicly traded companies. The high-growth television and film assets were spun off into a new entity called 21st Century Fox (which was later mostly acquired by The Walt Disney Company), while the publishing assets and other properties remained under the News Corp name. The “new” News Corp is therefore a very different beast from its predecessor. Its portfolio includes some of the world's most famous newspaper mastheads like The Wall Street Journal and The Times of London, the book publisher HarperCollins, the financial data and news provider Dow Jones, and a collection of valuable digital real estate businesses, most notably Australia's REA Group. For investors, understanding News Corp means looking past the famous newspaper brands and appreciating the collection of distinct businesses hidden within its corporate structure.

In 2013, the original media empire was cleaved in two. The move was a classic corporate Spin-off, designed to “unlock value” for shareholders. The logic was that investors were undervaluing the company's assets because the fast-growing, high-margin film and cable TV businesses were being dragged down by the perception of the slow-growth, structurally challenged newspaper division. By separating them, the market could supposedly value each company more appropriately on its own merits.

• 21st Century Fox (The Entertainment Co.): This new entity received the big-screen assets, including the 20th Century Fox film studio, the Fox broadcast network, and lucrative cable channels like Fox News and FX.
• News Corp (The Publishing Co.): The remaining company kept the global publishing empire, including newspapers in the US, UK, and Australia, the HarperCollins book publisher, and the Dow Jones financial information business. It also held on to a majority stake in the Australian digital real estate business, REA Group.

This separation is crucial. When analyzing News Corp today, you are analyzing the publishing and information services company, not the company that owned the Fox film studio.

For value investors, News Corp is a fascinating case study. It's often viewed as a classic holding company whose market value doesn't reflect the true worth of its individual parts. This requires a deeper dive into its key assets and the unique risks associated with its ownership structure.

The public perception of News Corp is often dominated by its legacy newspapers. However, a significant portion of its value comes from high-quality digital and data businesses.

• Digital Real Estate Services: This is arguably the crown jewel of the company. News Corp owns a majority stake in REA Group, the dominant online real estate portal in Australia, and 100% of Move, Inc., which operates realtor.com® in the United States. These businesses benefit from powerful Network Effects and are high-growth, high-margin operations that are far more valuable than traditional media assets.
• Dow Jones: This is much more than just The Wall Street Journal. The Dow Jones segment is a premium professional information business, providing financial news and data services like Factiva, Dow Jones Newswires, and risk & compliance data. It competes with giants like Bloomberg L.P. and S&P Global and generates stable, recurring revenue from professional subscribers.
• Book Publishing: HarperCollins is one of the largest book publishers in the world. While not a high-growth industry, it is a relatively stable business that can generate consistent cash flow.
• News Media: This segment contains the famous newspapers. While some, like the New York Post, face the traditional challenges of print media, others, like The Wall Street Journal and The Times, have successfully built strong digital subscription models, proving that high-quality, differentiated content can still command a price.

You cannot analyze News Corp without discussing its governance. The company is effectively controlled by Rupert Murdoch and his family through a Dual-class Share Structure. The family owns a large portion of the Class B shares, which carry voting rights, while the majority of publicly traded Class A shares have no votes. This means public shareholders have very little say in the company's strategic decisions. This structure gives rise to what investors call the “Murdoch Discount.” The term refers to the theory that the company's stock trades at a persistent discount to the underlying value of its assets. This discount exists because investors demand a higher margin of safety to compensate for the governance risk—namely, that the Controlling Shareholder might make decisions (like acquisitions or executive compensation) that benefit the family rather than all shareholders.

Because it is a collection of distinct businesses, News Corp is a textbook candidate for a Sum-of-the-Parts (SOTP) Valuation. This is a process where an analyst values each business segment individually as if it were a standalone company.

1. Step 1: Value the stake in REA Group based on its public market price.
2. Step 2: Value the Dow Jones business using valuation multiples from comparable financial data companies.
3. Step 3: Value HarperCollins and the other divisions similarly.
4. Step 4: Add up the values of all the parts.
5. Step 5: Subtract corporate-level debt and other liabilities.

Frequently, the resulting SOTP value per share is significantly higher than the company's actual stock price, or Market Capitalization. This gap between price and value is what attracts value investors to the stock.

Investing in News Corp is a bet that the market is mispricing its collection of assets. The thesis is that you are buying a portfolio containing excellent digital and data businesses for a price that is weighed down by the negative perception of the newspaper industry and concerns over corporate governance. The key challenge is patience. The “Murdoch Discount” could persist for a long time, and the catalyst needed to close the gap between the stock price and the intrinsic value of the assets is not always clear. An investment in News Corp requires a belief in the quality of the underlying businesses and a tolerance for the unconventional ownership structure.