Shareholders have been pushing for some time for a spinoff of the slower-growth publishing division after a phone hacking scandal hit its British newspapers, sending shock waves through the group and forcing News Corp to pull its biggest-ever acquisition of the pay-TV group BSkyB.
A final decision on the split has not been made, the News Corp-owned paper said, and the Murdoch family is not expected to lose its effective control of any of the businesses involved if the plan goes ahead.
News Corp's Chief Operating Officer Chase Carey said in May that the management and board had discussed spinning off its publishing business following investor pressure but that they did not have any plans to push ahead with it at the time.
Murdoch had earlier opposed the move and as recently as May released a statement saying the group was not considering spinning off its British newspapers to protect the rest of the empire. But the Journal reported that he has recently warmed to the idea, citing one person familiar with the situation.
The publishing division includes the HarperCollins book publisher, the education arm and newspapers including The Wall Street Journal, the Times of London, the Sun, the New York Post and The Australian.
The remaining film and television businesses would include 20th Century Fox film studio, Fox broadcast network and Fox News channel. The entertainment business would dwarf the publishing unit, with assets in the entertainment division generating revenues of $23.5 billion in the year to June 2011, compared with $8.8 billion for the publishing business.
Analysts believe investors and some management will feel emboldened by the hacking scandal to push for a change at the company, where the 81-year-old Murdoch has long been seen as the main block to a spinoff of the newspapers.
The Australian-born tycoon made his name by buying newspapers in Australia and then the News of the World, the Sun and the Times newspapers in Britain and talks often about his love for newspapers and the publishing industry.
Analysts in London said the move would make sense and would be welcomed by investors, who saw the value of the company plummet last year at the height of the phone hacking scandal, before recovering this year to four-year highs helped by a share buyback scheme.
Shares in News Corp in Australia closed up 2.6 percent On Tuesday.
London-based analyst Ian Whittaker at Liberum Capital noted that a spinoff of the publishing division could enable News Corp to make another bid for BSkyB once the hacking scandal has died down.
"It's credible and it makes sense, given that the newspaper part has been the scandal-hit element of the business," he said. "It also suggests that they may even have another tilt at Sky in the medium term. I imagine it would be seen as positive by the shareholders outside of the family."
News Corp pulled the $12 billion bid for the 61 percent of BSkyB it did not already own last July under a weight of public outrage sparked by the admission that staff at the News of the World tabloid had repeatedly hacked into phones to source salacious stories.
The scandal reverberated throughout the wider New York-based media conglomerate and disrupted what was thought to be a smooth plan for Murdoch to be succeeded as CEO by his youngest son, James.
It has also revealed the close relationships in Britain between the government and News Corp executives. Police have arrested over 50 News Corp staff and public officials while the former head of the British newspaper division Rebekah Brooks, a close confidante to Murdoch, is awaiting a trial for interfering with the police investigation.
Julie Henderson, a spokeswoman for News Corp. declined to comment while a spokeswoman in London also refused to be drawn on the report.