Chernin's escape clause

Murdoch was the visionary, rushing around the world snapping up the media properties that have turned News into an omnipresent global media powerhouse. Chernin, News' president and chief operating officer, was the man who made Murdoch's vision work.

His has been a reassuring presence, the safe pair of hands to which News could be entrusted if, heaven forbid, Murdoch's seemingly boundless energy ever waned. With Murdoch turning 78 next month, Chernin was the obvious, indeed only, successor if anything happened to Murdoch. He was regarded as the one person other than Murdoch who might be able to hold the sprawling empire together.

Now he is going and it is all Murdoch's fault, for two reasons. One is that he made it unappealing for Chernin to stay; the other is that it made it remarkably attractive for him to go.

Chernin, who turned the fledgling Fox broadcasting and film operations into financial powerhouses and spearheaded News' drive into online businesses, has made no secret over the years that he would like to run News. After a 20-year career at the group and more than a decade as Murdoch's most senior lieutenant, that was a reasonable ambition and one supported by the group's institutional investors.

However, Murdoch has dynastic ambitions. He has made it clear that he wants one of his children to succeed him and ensure the family continues to direct its affairs. At various times different children have been favoured – once Lachlan was the heir apparent, today it is almost certainly James. Meanwhile, Chernin's ambitions were blocked.

At the same time his contract provided compelling reasons to leave. Chernin has been one of the most powerful and well-paid executives in Hollywood, indeed in the US. Last year he collected about $US29 million in remuneration. But there was a potentially even more lucrative element to his contract, one that made his departure compelling.

Apart from the $US40 million or so of entitlements earned over two decades with News, Chernin had a provision in his contract that required Fox, should he leave the group, to buy at least two films a year from him for the next six years at a price at least as favourable as any deal the studio had with any producer in 2004, which was a good year for Fox blockbusters. His scrip-based compensation would also continue to vest and he would still be entitled to use of the News' corporate jet and limousines.

That was an option too good for the 57-year-old to refuse, particularly as it doesn't appear to preclude him from taking up a senior executive position elsewhere. He is regarded as one of, if not the best, media executives in the US.

Probably the only way Murdoch could have kept him was to offer him the post he was never going offer to someone outside the family.

Chernin's departure will unsettle investors because there is no clear successor in place. As Murdoch said, his contribution to News has been ''immeasurable.'' That was underscored by the announcement that, for the moment, at least, Murdoch himself will take charge of the businesses that reported to Chernin.

While the loss of Chernin and the vacuum it opens up below Murdoch in the News structure is potentially destabilising, it also strengthens the family's grip on the group.

Had anything happened to Murdoch, there would have been a massive institutional push to install Chernin as chief executive. Without him on the scene, Murdoch's desire that one of his children succeed him is less likely to be challenged.