When News loses its head

With Rupert Murdoch turning 80 he is now far closer to the end of his remarkable journey than to its beginnings. When he eventually departs News Corporation it will trigger significant changes to the way the group is managed and structured.

For nearly 60 years Murdoch has completely dominated the group he built from a single newspaper in Adelaide, micro-managing one of the world's biggest and most powerful media companies and operating it as a personal fiefdom (See News Ltd's untypical umbilical, March 11). It is almost impossible to imagine News Corp without Murdoch.

Rupert himself, of course, has imagined it. He has secured his family's voting control of the group, which stands at about 40 per cent, and with the planned acquisition of daughter Elisabeth's Shine Group for $670 million has ensured that three of his children will be on the News Corp board (see Feuds that shaped family Murdoch, March 11).

James Murdoch has been positioned as his heir apparent and given increasing responsibilities to prepare him for the role. Despite some speculation that Elisabeth was being brought back within the News Corp fold to compete for the job with James, she is said to have no designs on it and, indeed, has declared her support for James.

If all goes according to Rupert's plans, he will remain chairman and CEO of News for some time to come – long enough to give James time to gain the credibility to ensure a seamless succession. If something were to interrupt that plan, deputy chairman and chief operating officer Chase Carey would be the caretaker until James was deemed ready.

That's what Rupert wants and, within News Corp – and often without – what Rupert wants Rupert generally gets. If he weren't around, however…

Murdoch has built an empire rather than a business.  He's never been particular concerned about shareholder returns (see News Corp – the investor experience, March 11) but has been driven by ruthless ambition and a lust for power that have been framed by an evolving longterm vision of a global media conglomerate.

He is unique and has been granted enormous latitude by the market and investors because News Corp today really is a company that he built. It is most unlikely his successors will be given that same latitude.

While the family probably does have the voting power to ensure one of its own succeeds Rupert when the time comes, it can't be taken for granted that the market or the company will passively accept a simple transfer of power within the family.

James is assembling the kind of CV that would provide the credibility to defuse criticism and resistance. He is chairman of News Corp's European and Asian operations – some of which are lagging (See Murdoch and the poisoned China chalice, March 11) – and appears to be on the verge of pulling of a major coup with the acquisition of the non-News shareholdings in BSkyB.

What he doesn't have – and needs to have – is experience within the heart of News Corp, its Fox film and television businesses in the US.  An attempt to provide James' older brother Lachlan (then the heir-apparent) with that experience ended in a collision between Lachlan and the powerful head of the Fox businesses, Roger Ailes, which ended with Lachlan leaving the company.

If James is deemed under-qualified, there will be tension between the family and other shareholders, and perhaps within the board and senior management, if the family attempts to dictate the succession.  He has to be given the opportunity to demonstrate his ability to manage and compete with the corporate carnivores in the US if there is to be a smooth succession.

Whether it is James, or Carey or someone else who succeeds Rupert, it is likely that News Corp will be transformed.

Rupert loves newspapers, partly because they are in his blood and he understands them and their audiences intimately, but also because of the personal and corporate power they have traditionally conferred. The influence of newspapers is diminishing in a digital age, along with their audiences and profitability (See Rupert's online reckoning, March 11).

Neither James nor Carey have had any meaningful hands-on experience in newspapers and they are unlikely to share Rupert's passion for print or be given the latitude that has allowed vanity purchases like The Wall Street Journal or the propping up of perennial loss makers like The New York Post.

After Rupert, whomever succeeds him, there is likely to be a significant restructuring of the group to focus on its global and integrated film and TV businesses, with loss-making print media businesses sold or closed, and a far greater and more conventional emphasis placed on shareholder returns rather than on the growth of the empire for growth's sake.

Rupert has been the visionary, the dictator and the glue that has held the vast collection of News Corp's media assets together – especially when times were tough (See The day Murdoch broke the banks, March 11) – and kept the egos and ambitions of a hoard of aggressive executives under control while disregarding any shareholder discontent. When the era ends there is potential for a destructive power struggle and a surge in shareholder activism.

For News Corp, life after Rupert will never be the same.  Not that he shows any signs that he plans any imminent departure from the corporate scene.

Click here for Business Spectator's full Rupert Murdoch birthday special.