Rupert Murdoch News Corp 21st Century Fox

Rupert Murdoch may be stepping down from Fox, but he won't relinquish his grip on his media empire

By Paul Connew | Media Expert

June 12, 2015 | 9 min read

Plus ça change, plus c'est la même chose. Or maybe not?

Rupert Murdoch

Rupert Murdoch

That's the dilemma confronting media analysts and investors in the wake of the news that Rupert Murdoch is to step down as chief executive of 21st Century Fox.

So is this really a changing of the guard, or more a cosmetic shuffling of the pack with the legendary, controversial 84-year-old tycoon – dubbed 'The Last Media Mogul' by The Economist – still the controlling hand behind the global media empire he built?

There seems little doubt that the news of the changes at the top of Fox was meant to emerge after a New York board meeting next week, but a mysterious leak to America's CNBC network on Thursday prematurely sprung it on a surprised media world.

The most obvious interpretation is that it represents a strategic ploy by the wiliest old fox of all to secure the dynastic family future he's always envisaged for the global giant he created. His son James takes over the day-to-day, hands-on reins at 21st Century Fox, while his older brother Lachlan becomes executive co-chairman alongside Rupert himself.

It's a move likely to trigger further opposition from those 'dissident' US shareholder groups who have previously challenged the leadership structure at the Murdoch empire. Their hostility will doubtless be heightened by the fact that the highly-rated chief operating officer Chase Carey – favoured as Rupert's successor by some shareholders – will also be stepping down, although remaining an 'adviser' for a year or so.

The net result is that the high command is now occupied totally by people with the surname Murdoch. That's likely to be the subject of challenge at the next company AGM from some shareholder blocs, but you'd be a fool to bet your shirt on 'The Last Media Mogul' failing to see them off again.

Unusually and contentiously for a globally-listed US corporation, the Murdoch family owns just 12 per cent of the company while controlling 40 per cent of its voting shares and will almost certainly be able to count on sufficient support from non-family investors to thwart the anticipated 'revolt'.

So what does it all mean in terms of the eventual succession in a family empire that has sometimes been far from harmonious?

For James Murdoch it represents the latest step on a spectacular comeback trail after he quit Britain in 2011 with his reputation battered and bloodied by the phone-hacking scandal and a mauling report from MPs on the Commons media select committee.

Since then, James – a particular target of shareholder dissidents – has been quietly rehabilitating himself as co-chief operating officer at Fox ('shadowing' Chase Carey) and his new role effectively hands him operational control at Fox, answerable only to his father and brother Lachlan.

Whatever those dissident shareholders think, James's appointment is likely to be welcomed by many in the TV and movie arena. These are the youngest Murdoch brother's forte areas and those who worked for him when he was CEO at Sky in Britain speak genuinely of a dynamic and innovative boss.

Ironically, James's problems arose when his father switched him to head up his UK newspaper division, something that didn't naturally appeal to him, didn't truly interest him and which, say some, resulted in a square peg in a round hole scenario and a hands-off approach that contributed to the mishandling of the phone-hacking scandal that engulfed the company.

James's appointment to head up the newspaper division was intended – by his father – to be part of the succession grooming process. Instead it almost destroyed his younger son and – at one stage – might even have imperiled the whole empire's future.

Ironically, the phone-hacking crisis (and the damaging impact on James) led to a corporate reconciliation between Rupert and his oldest son, Lachlan, who had fallen out with company executives – including his father – and quit the firm in the US in 2005 to pursue his own business interests back in Australia. One result of that was his father beginning to view James as his corporate heir apparent.

Now, with the potential threat of corporate prosecutions on both sides of the Atlantic lifted and civil settlements of phone-hacking claims largely completed, Rupert Murdoch apparently feels the renewed confidence to revive his long-term succession plans.

But Murdoch-watchers predict that – in a significant switch – it is now Lachlan rather than James who will emerge as the most powerful Murdoch and his father's ultimate successor.

Certainly that's likely to play better with the newspaper wing of the empire. Lachlan is seen as more sympathetic than James (or Chase Carey) to Rupert's abiding passion for newspapers. Strong whispers out of New York maintain that James was sympathetic to Carey's call for Rupert Murdoch to unload his newspaper interests altogether in the hacking scandal aftermath and concentrate totally on the vastly more profitable Fox entertainment division.

Instead, Murdoch senior would only agree to splitting up the empire two years ago, creating 21st Century Fox and moving it away from the far less profitable NewsCorp publishing arm, which includes the Times, Sunday Times, the Sun, the New York Post, Wall Street Journal, some of Australia's best-known newspaper titles and the HarperCollins book publishing giant.

Insiders suggest that Rupert Murdoch has become 'more detached' from the Fox side of the business in recent months, despite its dominant position in corporate profit terms with revenues of $32bn from blockbuster movies like the X-Men franchise, the Fox news and entertainment channels, the National Geographic Channel, the Big Ten Network, Star television in Asia and a TV production arm (originally created by daughter Elisabeth) behind shows like MasterChef, Big Brother and American Idol.

By comparison, News Corp's profits halved from $506m to $237m in the year up to July 2014.

Significantly, the boardroom changes will again bring the future of Fox's near 40 per cent stake in Sky television into sharp focus. To the reputed chagrin of James Murdoch, his father prudently pulled out of his £8bn bid to take over Sky completely in the political/regulatory firestorm that erupted amid the phone-hacking fallout.

Some Fox sources suggest that James strongly favours reviving that ambition. And Rupert Murdoch would probably support the move – provided it stood a realistic chance of overcoming remaining political/regulatory hurdles.

With a Tory majority government (helped, to some extent, by loud support from the Murdoch newspapers during the election campaign), Labour and the Lib Dems licking their electoral wounds and Ed Miliband and Nick Clegg relegated to the backbenches, the climate might just be right to renew the Sky bid. If not, the Murdochs will doubtless consider the advice of those in the company who advocate flogging off its existing Sky stake and investing it on global expansion outside the UK.

Interestingly, however, there are those who predict another legacy of the boardroom changes will see Rupert Murdoch taking a closer interest in his original passion for newspapers, not least in the UK. He slipped quietly into the UK more often during the build-up to the election and it's been reported demanded that the Sun took a more aggressive approach to Ed Miliband. Certainly the Sun's tone – hardly simpatico to the Labour leader at any stage – toughened up even more after Rupert's input!

Inevitably, too, it has fuelled speculation that Rupert's own 'red-top protege', former Sun editor and News International CEO Rebekah Brooks, could be poised to make a spectacular comeback to a senior role in the company. Following her acquittal at the Old Bailey phone-hacking trial, Brooks is back in the company fold in a somewhat unclear capacity but few doubt Murdoch senior still regards her highly and views her more as an asset than a liability. Even if that's not, perhaps, the unanimous opinion of the wider Murdoch clan.

Those of us who have worked as executives both for and against him know that recent figures showing that the Mail on Sunday's circulation has overtaken that of the Sun on Sunday, the Daily Mail outselling the Sun on Saturdays and closing fast Monday-Friday will be the equivalent of a red rag to an old red-top bull.

He may be 84, but he's reportedly still in good health and raring for a fight. If nothing else, that could well mean 'The Last Media Mogul' concentrating his personal fire on the British newspaper front while his 'boys' get on with running the show at Fox –while he keeps a patriarch's eye on their progress.

It's a fascinating scenario media-watchers worldwide will be studying closely. Rupert Murdoch might not agree, but it sounds the stuff of a box-office blockbuster movie. But who'd be brave enough to play the role of The Last Media Mogul?

Paul Connew is a media commentator and PR adviser and former national newspaper editor who has worked both for and against the Murdoch empire on both sides of the Atlantic

Rupert Murdoch News Corp 21st Century Fox

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