FAM­ILY FIRST

Mur­doch to name heir and a spare to lead Fox

Los Angeles Times - - FRONT PAGE - By Stephen Battaglio and Meg James

It’s one of the world’s big­gest me­dia com­pa­nies, but Ru­pert Mur­doch re­minded ev­ery­one Thurs­day that it’s still a fam­ily busi­ness — and his two sons, James and Lach­lan, will be run­ning it soon.

Mur­doch, 84, plans next week to ask the 21st Cen­tury Fox board to name James as the com­pany’s new chief ex­ec­u­tive and Lach­lan as ex­ec­u­tive co-chair­man. Mur­doch would re­tain the chair­man ti­tle, and cur­rent chief op­er­at­ing of­fi­cer Chase Carey would begin wind­ing down his role in prepa­ra­tion for James and Lach­lan to even­tu­ally take full con­trol.

Although not un­ex­pected, the suc­ces­sion plan re­flects Mur­doch’s will to see his own blood run the com­pany he built out of a sin­gle news­pa­per in Australia 60 years ago.

James Mur­doch is in the pole po­si­tion, but Ru­pert Mur­doch clearly wants Lach­lan heav­ily in­volved in the com­pany. And if James should fal­ter, Lach­lan would be right there in a time-hon­ored tra­di­tion the Bri­tish call “an heir and a spare.” The chance of a mis­step can’t be ruled out. James Mur­doch’s rep­u­ta­tion was badly tar­nished in 2011, af­ter the ex­tent of the Bri­tish tabloid phone hack­ing scan­dal be­came public. James Mur­doch, 42, was in charge of Fox’s Bri­tish hold­ings dur­ing the phone hack­ing but his fa­ther beck­oned him to come back to New York, partly to dis­tance him from

the scan­dal but also to groom him for the larger role.

Com­pany ex­ec­u­tives and Lon­don-based me­dia an­a­lyst Claire En­ders con­tend that James Mur­doch has since demon­strated his ex­ec­u­tive met­tle.

Lach­lan Mur­doch, 43, has had his set­backs too. He left Fox in 2005, re­turn­ing to Australia, af­ter feel­ing the harsh sting of be­ing on the los­ing end of in­ter­nal cor­po­rate pol­i­tics.

But Ru­pert Mur­doch waged an un­re­lent­ing cam­paign to bring his el­der son back into the cor­po­rate fold. The new struc­ture does not in­clude a role for any of Mur­doch’s daugh­ters, in­clud­ing Elis­a­beth, who built a Lon­don-based in­de­pen­dent TV pro­duc­tion com­pany be­fore Fox bought out the firm.

The suc­ces­sion plan was de­tailed by peo­ple with knowl­edge of the mat­ter who were not au­tho­rized to speak pub­licly. Com­pany of­fi­cials de­clined to com­ment.

Fox is pub­licly traded, but the Mur­doch fam­ily con­trols 39% of the vot­ing shares, giv­ing them out­sized in­flu­ence on cor­po­rate de­ci­sions.

En­ders said she can see James Mur­doch in charge of the day-to-day op­er­a­tion while Lach­lan serves as “an in­sur­ance pol­icy” for the com­pany.

Jef­frey Cole, chief ex­ec­u­tive of the Cen­ter for the Dig­i­tal Fu­ture at the USC An­nen­berg School for Com­mu­ni­ca­tion and Jour­nal­ism, said the moves were not un­ex­pected.

“We’ve all known for 10 years that this was how the story was go­ing to play out,” he said. “The only ques­tion was whether Ru­pert was go­ing to wait un­til he was 90 to turn over the con­trol of his com­pany, and to his credit, he is not.”

The suc­ces­sion plan, which was put into mo­tion last year, by­passes the com­pany’s highly re­spected Chief Op­er­at­ing Of­fi­cer Chase Carey, who is ex­pected to re­main with 21st Cen­tury Fox as an ad­vi­sor through the end of his con­tract in 2016.

Although a fam­ily-first ap­proach to run­ning one of the world’s largest me­dia com­pa­nies may please the scions, it’s not al­ways at­trac­tive to Wall Street. The mar­ket al­ways viewed Carey as the tough, sen­si­ble manager who put the brakes on ideas that were not in the best in­ter­est of the share­hold­ers.

Tuna Amobi of S&P Cap­i­tal said in­vestors may be con­cerned about Ru­pert Mur­doch keep­ing ev­ery­thing in the fam­ily rather than look­ing out­side.

“This could rekin­dle some of those types of con­cerns,” he said. “It de­pends on what kind of role Chase will con­tinue to have at the com­pany, and for how long.”

Fox shares ini­tially fell about 1% on the suc­ces­sion news but re­cov­ered to close at $32.90, down six cents.

Carey is the sec­ond ex­ec­u­tive out­side the Mur­doch blood­lines to have the top job at Mur­doch’s com­pany elude him. Peter Ch­ernin — who had a highly suc­cess­ful run as chief op­er­at­ing of­fi­cer for Mur­doch’s News Corp. from 1996 to 2006 and even ex­tracted a highly lu­cra­tive long-term con­tract when he had in­ter­est from other me­dia com­pa­nies — de­parted with the knowl­edge that the CEO job was not in his fu­ture with the chair­man’s sons in the pic­ture.

The news of the sons’ as­cen­sion did raise ques­tions about the fu­ture of Fox News Chair­man Roger Ailes, who made it known through a re­port on Fox Busi­ness Net­work that he will con­tinue to re­port to Ru­pert Mur­doch de­spite cor­po­rate changes.

Although Ailes has not al­ways seen eye to eye with the Mur­doch sons, com­pany in­sid­ers say he has de­vel­oped a cor­dial re­la­tion­ship with them. An­a­lysts agree it would be in the best in­ter­est of the broth­ers and the com­pany to keep it that way. Ac­cord­ing to fig­ures from SKL Ka­gan, Fox News Chan­nel gen­er­ated $1.4 bil­lion in profit in 2014 — a stag­ger­ing 60% mar­gin — and Ailes’ con- tract is up in 2016.

“Roger is al­most like an in­sti­tu­tion in and of him­self, and you don’t have to be a rocket sci­en­tist to know the com­pany will do any­thing to keep him happy, es­pe­cially when re­tire­ment does not seem to be in his vo­cab­u­lary and when ca­ble net­works are the growth en­gine at the com­pany.”

The 21st Cen­tury Fox em­pire in­cludes Fox Broad­cast­ing Co., TV and film pro­duc­tion stu­dios, a ma­jor stake in Europe’s largest pay TV ser­vice BSkyB, and an ar­ray of high-rated ca­ble chan­nels, in­clud­ing Fox News, FX and Na­tional Geo­graphic. Both men are ex­pected to de­part from their fa­ther’s man­age­ment style.

“James is more rea­soned,” said one vet­eran ex­ec­u­tive in the com­pany who was not au­tho­rized to speak pub­licly on the mat­ter. “You can have a dia­logue with him. He doesn’t have Ru­pert’s de­meanor. He doesn’t pound a fist on the ta­ble and make declar­a­tive state­ments and there is no room for de­bate.”

En­ders said James Mur­doch has ma­tured over time.

“James had a very in­stinc­tive and ag­gres­sive way that has been tem­pered in the last four years,” En­ders said. “He has turned over a new leaf. That is why he is step­ping up to the big­ger job. He was work­ing di­rectly for Chase Carey in or­der to ab­sorb his wis­dom.”

Ja­son Kempin Getty Images

FROM LEFT, Lach­lan Mur­doch, Ru­pert Mur­doch and James Mur­doch at­tend a Tele­vi­sion Academy event at the Re­gent Bev­erly Wil­shire Ho­tel last year. The el­der Mur­doch’s suc­ces­sion plan ref lects his will to see his own blood run the com­pany that he built.

An­drew Gombert EPA

COO CHASE CAREY is ex­pected to re­main with 21st Cen­tury Fox as an ad­vi­sor un­til next year.

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