Dec. 7 (Bloomberg) -- News Corp. promoted James Murdoch to run the media company's operations in Europe and Asia, putting him in line to succeed his father, Rupert Murdoch.

James Murdoch will step down as chief executive officer of British Sky Broadcasting Group Plc, the U.K.'s biggest pay-TV provider, and rejoin the board at New York-based News Corp., the companies said in separate statements. Jeremy Darroch, BSkyB's chief financial officer, was named CEO.

In his new role, James Murdoch, 34, will oversee Asian broadcaster Star Group Ltd., U.K. newspaper unit News International and Sky Italia. The promotion is part of a wider shakeup that included the appointment of News International head Les Hinton as CEO of Dow Jones & Co. following completion of News Corp.'s $5.2 billion takeover.

``This is the next, critical step in a very logical transition,'' said Larry Haverty, who owns $7 million in News Corp. stock at Gamco Investors Inc. in Rye, New York. ``Rupert gave him a very tough assignment and he passed it with flying colors.''

Before James Murdoch joined as the youngest CEO of an FTSE 100 company in November 2003, BSkyB lost a total of 1.9 billion pounds ($3.9 billion) in 2001 and 2002. Shareholders were initially skeptical about whether he was ready. BSkyB more than doubled annual net income and increased sales more than 40 percent since he joined. He managed to hold off main competitor Virgin Media Inc., which has lost money for the past two years.

Larger Role

James Murdoch will succeed Rupert Murdoch, 76, as non- executive chairman of BSkyB. The elder Murdoch, a director of BSkyB for 18 years, is leaving the board.

Before today, the broadcaster's shares climbed 16 percent on the London Stock Exchange this year, more than the 4.3 percent gain in the FTSE-100 Index. The stock fell 3.1 percent to 586 pence at 11:02 a.m. News Corp. Class A shares, down 1.7 percent this year, rose 54 cents, or 2.6 percent, to $21.12 in composite trading on the New York Stock Exchange yesterday.

``I was skeptical when he took over. There wasn't a track record, he was very young,'' said Martin Mabbutt, an analyst at Nomura Securities in London, who rates BSkyB ``neutral.'' ``The reality is that the meetings I've had with him, he's very professional. He deserves the reputation he's got.''

James Murdoch is taking a larger role at News Corp. as profit increases from higher affiliate fees at Fox News cable channel and Sky Italia. News Corp. is also exploiting MySpace's spot as the world's most-popular social-networking Web site to generate advertising sales.

Dow Jones Shakeup

News Corp. shareholders vote next week on the Dow Jones takeover, which will add the Wall Street Journal to Rupert Murdoch's newspaper and TV empire. Dow Jones CEO Richard Zannino said yesterday he'll step aside once the sale is completed.

James Murdoch's new role may be critical in Europe and Asia, where he previously headed Star, as Rupert Murdoch seeks to expand the Journal's international editions, publications he's described as ``a lot less than satisfactory.''

``These regions are very important,'' said Michael Nathanson, an analyst at Sanford C. Bernstein & Co. in New York, who recommends buying News Corp. shares and doesn't own any. James has ``done a good job at BSkyB. He's dealing with competitive pressures.''

James Murdoch will be based in London and takes up his role immediately. He will report to News Corp. Chief Operating Officer Peter Chernin.

`Considerable Credibility'

Under James Murdoch, BSkyB has stepped up marketing to compete with cable operator Virgin Media. BSkyB signed up more than 1 million high-speed Internet customers since starting the service in August 2006, bundled with TV and phone offerings.

``James Murdoch as CEO had built up very considerable credibility and investor goodwill and Darroch is clearly his choice,'' Paul Reynolds, an analyst at Deutsche Bank in London, said in a note to investors. Reynolds rates BSkyB ``hold.''

The younger Murdoch's ascent also comes amid his father's plans to scrap subscription fees on the Journal's Web site and expand national coverage to take on the New York Times.

Times of London editor Robert Thomson will become publisher of the Journal, replacing Gordon Crovitz, who is expected to write a column for the newspaper's editorial page, the Journal reported yesterday, without saying where it got the information.

Hinton, 63, is chairman of News International, which publishes the Times and the Sun. Zannino, 49, said yesterday in an interview he had no regrets about leaving and would like to be a CEO again in the future. He was part of a team of negotiators who convinced the Bancrofts to sell their controlling stake in Dow Jones after the family initially rejected Murdoch's offer.

Media Dynasty

Turning the News Corp. reins over from father to son may be a ``five- to 10-year process, the way Rupert thinks,'' said Haverty at Gamco, which has 14.4 million shares of News Corp. among its $30 billion in assets.

BSkyB said it would begin a search for a chief financial officer to replace Darroch, who had been in the post since 2004.

Rupert Murdoch started off in 1953 when he inherited a daily newspaper with a circulation of 75,000 in Adelaide, Australia. He then set out to build an empire with newspapers, satellite- television and movie studios spanning the globe.

Murdoch traded his Australian passport for U.S. citizenship in 1985, a move that exempted him from restrictions on foreign ownership of U.S. TV stations and paved the way for the purchase of Fox Entertainment Group Inc., which includes the 20th Century Fox film studio.

Six Heirs

Rupert Murdoch has six children: Prudence, Lachlan, James and Elisabeth from his first two marriages. He also has two young daughters with Wendi Deng, a former executive from his Asia Star TV who he married in 1999.

Lachlan Murdoch, the eldest son, unexpectedly quit as chief operating officer of News Corp. in July 2005 and moved to Australia with his wife Sarah and son Kalan. When at News Corp., Princeton University-educated Lachlan, 36, was groomed to succeed his father by being responsible for Fox Entertainment's U.S. television stations group and the U.S. print businesses, which include HarperCollins Publishers and the New York Post.

Elisabeth Murdoch, 39, was a managing director at BSkyB until 2000 and now runs U.K.-based Shine Group. She plans to buy Reveille, the U.S. studio behind the ``Ugly Betty'' and ``The Office'' television shows, for $200 million, the Financial Times reported Dec. 1, citing people familiar with the situation.

To contact the reporters on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net; Gillian Wee in New York at gwee3@bloomberg.net.

Last Updated: December 7, 2007 06:05 EST