News Corp Scandal One Year Later: Where Does The Publishing Arm Go From Here?

This time last year, Rupert Murdoch's UK media empire was thrust into the biggest newspaper scandal in recent memory when police alleged journalists at the News Of The World had hacked into the voice mails of murdered schoolgirl Milly Dowler. A year ago today, on July 7th, 2011, Rupert's son James Murdoch announced the News Of The World would be shut down. Fast-forward 51 weeks, and Rupert is making headlines of a different sort as he announced the split of his global conglomerate News Corp into two companies, effectively fencing off the tainted UK publishing assets ' though he contends that was not the motive. While Murdoch will serve as chairman and CEO of the entertainment businesses on one side, with Chase Carey as president and COO, there is no management in place for the publishing side. Dow Jones and The Wall Street Journal will be at the forefront of the new operation. But who will run it? And, can the scandal ever become yesterday's news?

Names floated to take the reins include Tom Mockridge, a longtime News Corp employee who is now chief executive of News Corp's press arm, News International ' a role he took when scandal-stained Rebekah Brooks resigned last year. (Brooks is now facing charges of conspiracy to pervert the course of justice.) A note from Enders Analysis says 'we would be surprised' if Mockridge 'was not among the key candidates to run the publishing company.' But, Ken Doctor, media analyst for Outsell and Newsonomics, thinks it would make sense if the new chief 'came from in or around Dow Jones.' Chief exec of Dow Jones, Lex Fenwick, joined the company from Bloomberg in February and although Doctor tells me 'he does seem like a longshot,' it's worth remembering that 'this is all happening in a year. They don't need to appoint someone for at least nine months. Fenwick has a long track record in the industry. He's new at Dow Jones and he's making major changes. If Rupert likes the cut of his jib in 6-9 months,' Fenwick could be the man.

Other names stirring speculation include Wall Street Journal managing editor Robert Thompson who in 2011 was described by The New Yorker as 'perhaps Rupert Murdoch's only close friend.' Doctor says that although Thompson is an editor rather than a businessman, 'He's a Murdoch editor and there's a world of difference there.' Another possibility is Joel Klein who oversaw News Corp's internal Management and Standards Committee which was set up in the wake of the scandal. Last month, the MSC management structure was overhauled, freeing Klein to transition back to a full-time role as EVP and CEO of News Corp's education division.

Lachlan Murdoch, who had long been the presumed successor to his father at the head of News Corp, is still a non-executive director, but has his own media interests in Australia. While Rupert last week said it was 'highly unlikely' Lachlan would run the publishing division, he told the Twittersphere on Sunday that 'the door will always be open for him.'

Regardless of who runs the publishing division, analysts are agreed that the company will need to be able to develop its digital revenues as the global newspaper business continues to suffer. 'If my reading is correct, the publishing arm starts with zero debt and will have some investment money to develop digital publishing,' Enders senior analyst Douglas McCabe tells me. As an essentially B2B organization, The Journal has been isolated from much of the trouble in the newspaper market. It had 552,288 paying digital subscribers as of March 2012 and in 2011, print and digital circulation revenues were up 12% year-on-year with print and digital ad revenues up 11%, according to Enders research. Publishing took a hit, however, largely thanks to the shuttering of the News Of The World which had been pulling in an estimated $230M annually.

Murdoch said himself that Dow Jones is going to be the center of the new spinoff company and Doctor points out, 'The growth is in Dow Jones and Dow Jones is in New York which is where the companies will still be headquartered. And that tells you they will invest in Dow Jones. That's the growth story they're going to tell as it becomes a separate company.' Especially given that the UK print woes are far from over. This week, a private detective facing civil litigation for allegedly hacking phones for News Of The World, was ordered to reveal the identity of his higher-ups. That could lead to further exposure for News Corp if it can be shown that hacking was widespread and that senior journalists were aware of the practice. 'We will see prosecutions and investigations last at least another two years,' contends Doctor who says he can see Murdoch ultimately exiting the UK print business (even if the entertainment company still makes a run at BSkyB later on). 'They floated the idea of putting the papers into a trust; I think that might happen. If you look at the new company, you have Dow Jones and that's a great story, but it is totally weighed down by papers with a big loss.' Doctor adds that Murdoch's political influence in Britain 'is plainly not going to come back.' Another possibility, he allows, is that a stubborn and sentimental Murdoch could say, 'We're not giving up. We're going to make a rapid transition to a more digital operation' ' and put down a billion dollars of his own money to pay for it.

For Panmure Gordon analyst Alex De Groote, the publishing business will have to come with 'a fat dividend,' to please shareholders. 'You can't pretend it has a good growth story, but it could be flat.' Either way, 'People's memories of the whole Milly Dowler phone hacking situation don't fade or die and will still be very relevant,' years from now, he tells me. The publishing company is going to require plausible management. 'The smart money is on a neutral appointee. You want somebody whiter than white.'