What to Expect as News Corp. Dives Into Business of Education

Hiring of Ex-Schools Chancellor Klein Signals Interest in Paid-Content Curriculum

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NEW YORK (AdAge.com) -- Are you ready for News Corp. to help teach your children?

Joel Klein
Joel Klein
Hearst Magazines Chairman Cathie Black got most of the attention last week when she was named the next New York City schools chancellor, succeeding Joel Klein as the head of a $23 billion public-education system with 1.1 million students. But Mr. Klein's new job at News Corp., advising Chairman-CEO Rupert Murdoch on getting into the education industry, may eventually prove more captivating, both for education and the media business.

Ms. Black, after all, is going to build on eight years of work by Mr. Klein and Mayor Michael Bloomberg, who will still make the big calls on public education. But Mr. Klein is going to seek opportunities in education, an occasionally polarizing area where some people don't like to see private companies tread, for News. Corp., an occasionally polarizing media behemoth whose assets include Fox Broadcasting, Fox News, 20th Century Fox and The Wall Street Journal.

Although the Washington Post Co. set a precedent for a big media outfit getting involved with education, News Corp. is likely to do it very differently. The Washington Post Co. makes most of its revenue, 62%, from its Kaplan education division, and most of its education revenue from higher education programs offering bachelor's, master's and other degrees and certificates.

But the higher-education business is poised to contract as a result of government regulations focusing on excessive student debt loads, said Ariel Sokol, an analyst covering the Washington Post Co. for UBS. "I sincerely doubt that you're going to see new entrants in this space any time soon," he said.

And, of course, Mr. Klein has spent his tenure as schools chancellor working on education from kindergarten through 12th grade. So it's most likely that Mr. Murdoch and News Corp. are eying the same turf, where the business opportunities include charter schools, virtual schools and technology-based teaching and learning aids.

The immediate best bet is that News Corp. will seek possible investments in technology platforms that schools, public or private, can adopt to help students learn -- a kind of paid-content business, which is one of Mr. Murdoch's big media priorities.

Mr. Klein referred to those kinds of products last week during the press conference introducing Ms. Black as his successor. "As recently as yesterday I was in Brooklyn, looking at a really great learning platform that our kids are engaged with and that our teachers love," he said. He was visiting a kindergarten in Brooklyn that uses Time to Know, a digital curriculum system offered by a private company of the same name.

"To me that's the future and I want to be at the center of it," Mr. Klein said. "That's why I've accepted an offer from News Corp. to become an executive vice president in the chairman's office and a member of their board of directors."

Whether outsiders will welcome News Corp. into the education business is another question. "There is a reasonable debate to have on education, about what we need to do, about the federal government's role in the process," said Ari Rabin-Havt, VP-research and communications at Media Matters, so relentless a critic of Fox News that George Soros gave it $1 million last month explicitly for that reason. "Fox News as an entity gets in the way of those debates."

Fox News host Glenn Beck has certainly criticized the school system. "Sell a car if you have to," he told viewers earlier this year. "Get your kids out of this indoctrination or our republic will be lost."

Mr. Klein needs to "publicly confront" Fox News' "heated rhetoric" on education if he wants to be taken seriously, Mr. Rabin-Havt said.

An equity analyst covering News Corp. was also skeptical. "We want our kids to be educated in as impartial a manner as possible," he said. "Regardless of Fox News' slogan, they clearly have a very strong political bent, and Rupert Murdoch clearly has a very strong political bent." A News Corp. spokeswoman declined to comment.

But an education-industry veteran said he didn't think politics would enter any News Corp. educational products. "I don't believe they're going to be doing curriculum development that would have a conservative right-wing slant," said Steven Pines, executive director at the Education Industry Association. "There are built-in speed bumps that would correct for what might be considered editorializing."

The education industry will welcome News Corp.'s entry, Mr. Pines said, who suggested that Mr. Klein could help reduce the tension between public educators and private companies entering the sector. "Klein could help calibrate or set that tone, particularly among his former superintendent colleagues," he said. "He was a very effective chancellor for eight years, so he's got a lot of currency in the bank. And now he's joining News Corp. -- a company with a big checkbook and name and lots of media outlets at their disposal."

Analysts' reactions to the business prospects for News Corp. were muted at best. "I would say that it surprised me to hear of this plan," said Michael Nathanson, head of United States media and telecom equity research at Nomura. Without more specifics from News Corp., he said he wasn't sure what to make of it.

Another analyst said he hoped News Corp.'s investment in education remained as modest as possible. "Is there anything about education, if you're an expert at running media companies, that's going to make you an expert in running an education business?" asked Douglas Creutz, VP at Cowen & Co. "No. If I'm an investor and want to invest in education companies, I'll go and do it directly. I don't need News Corp. to do it for me."

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