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#14712 - 12/16/17 07:22 PM Rupert Murdoch's succession turns ugly
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Rupert Murdoch's succession turns ugly
by Neil Chenoweth

James Murdoch turned 45 on Wednesday. His father Rupert spent James' birthday working on the final details of the deal with Walt Disney Company that will write his son out of the family empire.

The Murdoch succession was always going to be ugly.

Remarkably, in the same week, Frank Lowy and Rupert Murdoch both announced that they were selling down, leaving most of the empires they have built in the hands of professional managers.

Disney CEO Bob Iger has provided a Hollywood ending for Rupert Murdoch's global empire, with the deal to buy $US69 billion of assets from 21st Century Fox.

For Murdoch, that ending is somewhere between tragedy, an awkward rom com or a whodunnit.

There are conflicting accounts about the personal drivers for this remarkable family in the Disney deal. Some sources insist that James embraced the proposed sale, and convinced other family members to sign on. Others see it as damage control.

"James and I have had a lot of conversations about the future of the two companies," Iger said at the press conference announcing the deal. "He will be integral to us integrating these two companies over the next few months. During that time he and I will talk about whether there is a role for him here or not."

That suggests that James at least has embraced the change. Yet whatever the process, the deal speaks of a rupture between father and son, another friction point in this most combustible of families.

It seems clear that James' time at Fox is at an end. As for a job at Disney, Bob Iger's comment is a firm maybe.

Of course this is a family business, which offers infinite potential for rapprochement, including the return of the prodigal son to the Murdoch project.

In the meantime James' status is in limbo. He is in the tricky position of being out the plane door but still fumbling to make sure the parachute opens.

Or failing that, making a Bold New Start somewhere else, as it has been reported.

Walking away

For his part, with this deal Rupert is walking away from most of what he has been building for more than 30 years. He's selling most of 21st Century Fox's assets: the Hollywood studio; the television production arm; most of the cable networks; the 39 per cent stake in UK satellite broadcaster Sky; and Star in India.

The question is why. Not that he agrees with the premise.

"Are we retreating? Absolutely not," Mr Murdoch said at the same press conference. "We are pivoting at a pivotal moment."

Murdoch is also calling it quits on the grand succession plan he has followed for decades, which saw his sons finally run the grand worldwide empire he had made for them.

That reality lasted 17 months. On June 30 last year, the last non-Murdoch senior executive, Chase Carey, stepped down from 21st Century Fox leaving James Murdoch as chief executive and Lachlan Murdoch as co-chairman with Rupert.

The Disney deal, whatever else it is, is an acknowledgement that today Murdoch no longer wishes or believes his sons capable of running the whole empire.

Lachlan is still on board, to run the cable assets and television stations that remain with Fox, which may be joined with the newspaper assets in News Corporation.

Lachlan is Rupert's sole successor because, with James gone and older sister Elisabeth leaving Fox three years ago, he's the only Murdoch offspring left.

Years of controversy have made the younger Murdochs adroit in fashioning a media narrative.

The media coverage has been full of the business reasons for Murdoch's decision - most commonly his ostensible realisation that Fox needed to "bulk up", to achieve "scale" to fend off the challenge from Amazon and Netflix.

It's media analysts' reasoning. It's a perfectly valid motive for Disney's investment, and it's the reason Disney's share price was up 9 per cent by Wednesday, since the first reports emerged last month.

It's so not Rupert Murdoch. Rupert has always scorned analysts. The argument might be more plausible if the assets he is holding on to - the Fox television stations, sports and news interests - were not even more vulnerable to new media than the assets he is selling.

"All of this has a whiff of desperation," said Doug Creutz, a New York media analyst at investment manager Cowen & Co, told the Los Angeles Times. "For Fox, it doesn't make sense. They would be cutting the heart out of their content creation business."

For Rupert, it's all personal

The reality is, business for Murdoch is personal - he built his empire by sweat and toil, by gambling, by brilliance and a ruthless corporate culture. And he almost never sells assets.

The biggest sale he has made previously was in 2006 when he sold the controlling stake in DirecTV to John Malone for $US11 billion. But that was in exchange for cancelling Malone's 19 per cent voting stake in News Corporation. The deal was about saving the succession from Malone.

Of course there's a delicious irony for Murdoch in selling his assets to Bob Iger at Disney, because their value was created chiefly at Disney's expense.

Back in 1997 when Murdoch was at his peak, he outplayed Disney's Michael Eisner all over the park, as he set up the regional sports deals, bought up Hollywood's top television production teams and even beat a higher bid by Eisner to secure Pat Robertson's Family Channel, all in a six-month period.

Then there is Murdoch's other big sale. Four years after buying the Family Channel for $US1.7 billion, he sold it to Disney for $US5.3 billion (he used the money to pursue DirecTV).

Scoring once more against the Mouse House may be Rupert's only consolation.

Where did his succession problems start?

It's a family that places importance on gestures and symbols. When Lachlan moved to California two years ago he took over his father's old office on the Twentieth Century studio lot (which reportedly will stay with Fox).

Earlier this month Rupert Murdoch made headlines when Californian wildfires briefly threatened his Bel-Air winery on the outskirts of Los Angeles.

But what was Rupert doing with a winery, when he had owned one of LA's most spectacular Beverly Hills homes, Misty Mountain, since 1986?

He had sold it for $US30 million in the wake of his divorce from Wendi Deng. James owns it now, with its commanding views.

Lachlan always the chosen one

Lachlan, born just 15 months earlier than James, was always the designated heir.

Family friends describe James' childhood as the frustrated younger brother, regularly scheming to take a higher place at the dinner table, or to change bedrooms.

Not for James, the mid-career crisis that saw Lachlan storm out of News Corp in 2005 and spend years estranged from his father. Nor did he sell any of the shares distributed to the children in 2006.

James was getting on with business, running Star TV in Hong Kong, then transforming UK satellite broadcaster BSkyB (now renamed Sky).

It was bad luck that when Rupert bought Dow Jones in 2007, he brought Les Hinton, the head of News Corp in the UK across to run it - which meant that James was elevated to Hinton's old job.

James was desperately uninterested in newspapers, focusing instead on News Corp's satellite operation across Europe and Asia. He was all across the numbers.

His offence - at least in the public view - was to ignore the looming hacking scandal that ultimately saw the closure of the News of the World and cost News more than £1 billion in payouts and legal costs. The scandal was a product of the newspaper culture that his father had helped create. By ignoring it, James arguably became complicit; but if he had tried to challenge it, he would never have won.

James has none of the sociable manner that Rupert and Lachlan can turn on. When he gave the 2009 MacTaggart Lecture in Edinburgh he argued in a swipe at the BBC that "the only reliable, durable and perpetual guarantor of independence is profit".

"Profit without purpose is a recipe for disaster," his sister Elisabeth responded in her 2012 MacTaggart lecture, another example of how this family talks to each other through public comments.

James fell out with his father, to the extent that the Murdochs consulted family counsellors. When James and Rupert agreed to meet to patch up their differences in early 2011, they did it in the Azores, because it was halfway between the US and Britain.

But all of this seemed to be behind them when Lachlan and James took the helm last year - Lachlan as co-executive chairman with Rupert of News Corp and co-chairman of 21st Century Fox, with James as CEO of Fox and a director of News.

Chase Carey, the former CEO, left on June 30 last year. James and Lachlan moved on Fox News chairman Roger Ailes a week later, setting up an external inquiry into reports of sexual harassment by Ailes, who was gone two weeks later.

Lachlan had personal history with Ailes. His exit would be one of the few matters the brothers agreed on.

Rupert, who turns 86 in March, had become progressively more disengaged with the operation of his empire, previously leaving Fox largely to Carey.

While Murdoch had bursts of interest - as when he took over as chairman of Fox News after Ailes - he appeared not to have the concentration span for prolonged engagement. Nor the wish to engage closely with business, after his marriage to Jerry Hall in March last year.

His sons were in the ascendant. In decision after decision, he came to accept outcomes that he had previously opposed. They wore him down.

Or perhaps it was just James that wore him down.

James' travails in bidding for Sky Plc in the UK in some way mirror Rupert's decade-long quest to control DirecTV. But it became another reason to disparage James.

When Lachlan mis-played his bid to take over the Ten Network in Australia this year it was overlooked, as many of his stumbles have been.

Succession is a sore issue in Australian media families. When Kerry Packer was alive, no matter how sick he grew, was there ever any question who was in charge?

When Rupert was in Australia in his formative business years he saw the way, when Sir Warwick Fairfax grew too old to run the John Fairfax media group, his children had forced him to step down.

Rupert Murdoch would never go gently into that long goodnight. And then there was the risk to Lachlan, the Heir in Chief.

The two brothers have always been fiercely competitive, but in the long term there seemed little doubt who would come out on top.

James has always been seen as smarter, more capable, with the stronger work ethic and way hungrier than Lachlan.

Who leaned on who?

And then there is the family break-up story as a whodunnit. Where did the idea to bring the house down come from? Who has been talking to Rupert?

When he was a regular on Twitter it was easy enough to read what Murdoch was thinking, and deduce the last person he had just been talking to. But he gave up Twitter for Jerry.

At some point Rupert Murdoch decided, or someone convinced him, that James was not up to the job, that it would be better to sell to Disney and let professional managers look after the bulk of the family fortune. And James meanwhile also resolved on a split. This is the meaning of the "pivot".

Murdoch famously has no friends. Chase Carey remains vice chairman of Fox and he would have a view on James. Jerry Hall is now a very different kind of gatekeeper for Rupert. And the wider family politics are always turbulent.

What does seem clear is that Rupert would not have moved without Lachlan's support. And it's not a decision you make without pain.

So what now?

James' version is that he wanted a change, that he wasn't pushed, he jumped. Rupert and Lachlan, arguably the family members with the least television skills, are left to run Fox stations and the remaining cable networks. They'll bring in a manager, a down-market Chase Carey.

The Disney deal is a $US12.9 billion bonanza for the Murdochs. But almost all of that is tied up in trusts for decades. The family may yet decide to sell down its Disney stock, but that's a major unknown.

James personally holds Fox stock now worth $US82 million (he put the other half of his family shares into a charitable trust he set up after the hacking scandal, at the suggestion of his sister Elisabeth).

It's not a lot to fund a brave new start, if the Disney job doesn't pan out. Then again, while his father carved out one of the biggest media empires in the world, Rupert was already 54 when he hatched the first really big US deals in 1985 that forged that empire.

James is a 45-year-old stripling. Time is still on his side.

Read more: http://www.afr.com/business/media-and-ma...s#ixzz51RgJu5fh
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#14766 - 12/24/17 03:30 PM Re: Rupert Murdoch's succession turns ugly [Re: Admin]
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