Last Post for a Murdoch Heir

Lachlan Murdoch's surprise resignation somewhat clarifies News Corp.'s dynastic succession. But what does the younger man have in mind?

By Ronald Grover

It was a wistful Lachlan Murdoch who exited News Corp. (NWS ) on July 29, setting off rumors on both sides of the Atlantic that Rupert Murdoch's eldest son had fallen out with the media world's most powerful baron. "This was a very difficult decision," Lachlan wrote in an e-mail to News employees the day he resigned as deputy chief operating officer of the $21 billion a year media behemoth.

Looking back at his days "cleaning presses on the old Daily Mirror in Sydney" to running the company's New York Post and its TV station group, the 33-year-old Lachlan also wrote that he "knew from around the time I could walk that I wanted to join this great team of people."


  The younger Murdoch said he had pondered his future for "many months" before deciding to head back to his native Australia with his model wife, Sarah, and 8-month-old son, Kalan.

But what would prompt the fast-rising son of a media mogul to quit so abruptly? No one at News is saying publicly, though insiders say father and son got along well. The problem was that Lachlan got tired of running units inside the News Corp. while his younger brother, 31-year-old James, ran his own company in London -- the BSkyB satellite service, in which News Corp. has a 35% stake.

The handwriting on the wall was that James was the likely successor to Rupert, when -- or perhaps if -- the mogul ever steps down. Rupert has been CEO since his father died in 1952, when he began turning a single, failing newspaper in provincial Adelaide into the world's most global media empire.


  Not that it looks like anyone will be taking over anytime soon. Indeed, the 74-year-old patriarch has said he'll stick around as long as his board thinks he's capable -- and he jokes that his 96-year-old mother is still "sharp as a tack."

The company did not respond to questions, other than issuing a statement in which Lachlan thanks his father "for all he has taught me in business and in life." The same statement quoted Rupert as saying he "was particularly saddened by my son's decision," and thanking him "for his terrific contribution to the company."

Lachlan's departure won't likely crimp News Corp.'s style or hurt its operating prospects. Although he was in charge of running The New York Post, Lachlan was known around the press room less for his financial acumen than his penchant for turning over a hot news tip.


  And News is humming along, with hot cable channels like fx lifting earnings, and its fast-growing satellite services in Britain, Asia, and Italy. Its movie division is turning out hits like The Fantastic Four -- one of the only summer blockbusters. News Corp. Chief Operating Officer Peter Chernin will likely take over the TV station group, and Rupert himself can probably be expected to lavish even more attention on his beloved New York Post.

Merrill Lynch analyst Jessica Reif Cohen, who rates the company a buy, projects that News Corp., will earn $1.96 billion in 2006, a 28% hike from 2004. Lachlan's departure, she wrote in a report, will have "minimal impact on News Corp.'s operations." Still, Wall Street doesn't like uncertainty, even if it doesn't see any clouds. The company's stock fell 23 cents, or 1.3%, to $17.34.

What Lachlan's departure does, however, is clarify News Corp.'s succession plans for whenever Rupert decides to leave. For now, his successor in the event of something unforeseen is Chernin, the affable News Corp. president who controls the company's Hollywood and TV operations.


  But down the road, younger son, James, who has run BSkyB since 2003, is the Murdoch son to watch. The 31-year-old is considered more in Rupert's mold, an entrepreneur with strong people skills.

And James had pushed hard in recent weeks for the company to increase its presence on the Internet, which won over his dad in a big way. On July 19, News Corp said it would pay $580 million to buy Intermix Media, which owns various online properties, including the fast-growing site, which has become the sixth-most-viewed domain in only months (see BW Online, 7/19/05, "News Corp.'s Place in MySpace").

With BSkyB's subscriptions numbers growing, it's James job to lose. That is, of course, unless Lachlan's older sister, 37-year-old Elisabeth, who resigned in 2000 as BSkyB's No. 2, decides to go to News Corp. (Prudence, an older half-sister to Lachlan, James, and Elisabeth, is not involved in the business.)


  Elisabeth is currently running a TV production company in London, but there's been some scuttlebutt that Rupert might want her back. Then again, Lachlan, who will retain his slot on News Corp's board, could also decide somewhere down the road he wants to return.

For now, Lachlan seems content with his decision to head back to his homeland, wife and son in tow. Likely he has something to prove to his dad -- and like his sister will launch a business to show his true mettle. It's the Murdoch way. But don't be surprised if one, or perhaps more, of the wandering Murdoch clan members head back to the mothership down the road.

Grover is Los Angeles bureau chief for BusinessWeek

Edited by Patricia O'Connell

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