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Schumpeter: The art of the spin-off

May 2, 2013

IN THE entertainment world spin-offs are the offspring of hit shows. You take popular characters and give them their own programmes, or mature franchises and give them a new twist. Thus ?Friends? gave birth to ?Joey? and ?Are You Being Served? to ?Grace and Favour?. Such spin-offs usually flop.In business, spin-offs are the offspring of established companies. You take a division and turn it into a free-standing firm. Thus Bristol-Myers Squibb, a drug firm, spawned Zimmer, a maker of artificial joints, and Tyco, a conglomerate, sired ADT, a maker of security systems. These spin-offs have a much better record.So far this year there have been 11 big American spin-offs, a number that has steadily inched up in recent years, according to Spin-Off Advisors, a consultancy. Two more loom: Time Warner is preparing to jettison its magazine business, which includes Time, and News Corporation is preparing to spin off its publishing division, which includes the Wall Street Journal, the Sun and the Times of London.Investors like spin-offs because they prefer focused companies to diversified...

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