The long handover
"I have no doubt that Lachlan's strategic sense and his passion for media and for knowledge will greatly assist Robert [Thomson] and me as we lead the company over the coming decade."
With those words, delivered in an internal memo this morning, News Corp. chairman Rupert Murdoch put to bed years of intense and often zigzagging speculation about when and how he would organize a succession strategy for the company he's spent most of his life transforming into one of the world's most powerful media conglomerates. The act was not performed naïvely: Murdoch is aware that in the current context, this is a pronouncement.
That the crown apparently goes to his eldest son, Lachlan Murdoch, was both a surprise and not one: Lachlan is a Murdoch, and returns to the fold at the age of 42 as non-executive co-chairman of News Corp. and its sister corporation, 21st Century Fox, of which Rupert Murdoch is chairman and C.E.O. The appointment comes a little less than a decade after conflicts with company brass prompted Lachlan's exit, as deputy chief operating officer, from what was then a single, family-controlled entity.
Lachlan's younger brother and one-time News Corp. heir apparent James Murdoch has meanwhile been elevated to the role of co-chief operating officer of 21st Century Fox. He shares the title with, but reports to, Chase Carey, a key Murdoch lieutenant who will work with James to "set the strategic direction and drive momentum across the Company's global portfolio of assets," including lucrative film and television brands like 20th Century Fox and Fox News Channel, according to a company news release.
Everything in the last year of Rupert Murdoch's life suggested the timing: his divorce from third wife Wendi Deng, and the successive denouement in the U.K. phone-hacking scandal that ultimately led to the separation of his assets into separate publicly-traded companies. This is the beginning of an inevitable transitional period in which Rupert's family line will consolidate power in preparation for that moment—perhaps in the relatively near future, given the advanced age at which Rupert has continued to run his business—when the 83-year-old will no longer be either alive or fit to run the two companies himself.
As such, there are many tea leaves for Murdoch watchers to read as they consider what today's news means for the future of News Corp.—publisher of The Wall Street Journal, New York Post and newspapers in Britain and Australia—and 21st Century Fox, as well as for some of the power players who rank high on both food chains.
"It makes their futures uncertain in the long-term," a former News Corp. executive who knows the Murdochs well told Capital, referring to bigwigs like Carey, Fox News chairman Roger Ailes and News Corp. C.E.O. Robert Thomson, who's practically family but possesses no Murdoch blood nonetheless. "It's a reminder that this is a family company, and job security is really reserved for the family."
Ailes, whose antagonistic relationship with Lachlan has been the stuff of magazine articles and gossip items for years, certainly seems like someone whose career could be winding down; if not because he himself is a septugenarian in poor health, then because it would be hard to imagine the bellicose Fox News boss reporting to Lachlan if the younger Murdoch were to fully take over from his father in another few years.
Lachlan's distaste for Ailes' wildly profitable but endlessly controversial cable news machine is no secret, and Ailes, during his last few contract negotiations, has sent a message through interviews that he has been thinking of retirement. He used those comments as leverage in his negotiations.
"If Lachlan is to take over, it would signal to me that Roger Ailes will leave the company probably right around when his contract expires in 2017," said David Folkenflik, author of the book Murdoch's World, a close-up inspection of the company and the family, that was published this past fall.
There are also implications for the rest of the family. With Lachlan and James accounted for, what future role (if any) does Murdoch have in mind for his daughter, Elisabeth?
In 2011, News Corp. acquired Elisabeth's successful television company, Shine, a move that was seen as a way of bringing her back into the family's corporate orbit.
But as The New Yorker's Ken Auletta writes, "A prominent name is missing from Wednesday’s announcements that Rupert Murdoch is elevating his sons. ... The absent name belongs to Elisabeth.
"With News Corp. now split into two companies, one television-centered and the other print-based, it appeared as if there would one day be two chairmen and two C.E.O. positions to divide among the three Murdoch siblings who are engaged in the company," Auletta continues. "[W]ere this a story covered by one of Murdoch’s tabloids, the screaming headline would be 'The Jilted Daughter.'"
PERHAPS THE MOST INTENSE SPECULATION GOING FORWARD will be about Carey.
"Chase Carey's hugely successful role running 21st Century Fox is now massively downgraded. Most contracts lets C.E.O.s walk for that," Neil Chenoweth, a Murdoch chronicler and newspaper columnist in News Corp.'s native Australia, wrote on Twitter. "Of course the other possibility is Murdochs grew wary of Carey. Rupert Murdoch always hated News Corp. execs to get more attention than him."
Murdoch, never one to mince words, memorably told investors during an earnings call in August 2011 that “if I went under a bus,” Chase Carey would take his place.
In fact he repeatedly used a variation on that line on other analyst calls and at investor conferences, where shareholders and the press clamored to get a sense of his plans for succession. While the “S” word was never uttered, Murdoch's suggestion that Carey would take his place jostled uncomfortably against the long-held assumption that one of Murdoch’s children would someday replace him.
Carey, with more than 25 years as a confidant to Murdoch at News Corp., DirecTV and now 21st Century Fox, probably knew this as well as anyone.
The Harvard M.B.A., who first joined News Corp. in 1988 to become C.E.O. of Fox broadcasting, has been as regular a face to media investors over the last 30 years as anyone in the business. Inside News Corp. and 21st Century Fox he has always been regarded as a consummate professional executive, the ying to Rupert Murdoch’s sometimes eccentric yang.
Most notably, he was able to garner the respect of people who otherwise wanted little to do with each other. He was Rupert’s most trusted adviser, yes, but he also had the respect of people like Ailes. As Gabriel Sherman’s book, The Loudest Voice in the Room reported, Ailes did not get along well with many in the News Corp. executive suite, including Carey’s predecessor, Peter Chernin.
It is therefore telling that following the promotions of James and Lachlan, Ailes’ Fox News unit continues to report to Carey and Rupert, while the Fox Networks Group, under Peter Rice, now reports to James.
Over the last few years Carey has been a mentor to James Murdoch, whose standing was harmed by his proximity to the phone-hacking scandal, guiding him as he assumed more influence in his father’s company. In February 2011, at the Guggenheim Museum on Manhattan’s Upper East Side, News Corp. launched “The Daily,” an iPad newspaper that would be shuttered a short while later, in December 2012. James and Carey were at each other’s side the entire morning. In the lobby of the museum after the unveiling, Carey was seen introducing James to guests at the event. (It's worth noting, as Folkenflik pointed out, that Carey has privately said he would never report to James.)
At 60 years old, Carey still probably has some years left in him. He's a professional executive, cut from the same cloth as heavyweights like NBCUniversal's Steve Burke, Viacom’s Philippe Dauman or Disney's Bob Iger. They all have M.B.A.s (or in Dauman’s case a J.D.) and work alongside “visionary” creative leaders.
The work and hours are hard, but the payoff is big. Iger plans to retire next year at age 64 (there are rumblings inside Disney he may extend his contract to 2016), and Burke is still spry at 55, but often these professional executives do end up leaving their posts to either retire or do more leisurely work, as Chernin has done with his own production company. Media moguls with a creative streak, like Rupert Murdoch, CBS’ Les Moonves, Sumner Redstone and Fox News’ Ailes, tend to keep working as long as they possibly can.
Lachlan, the new heir apparent to Rupert, does not have the same relationship to Carey that James does.
In other words, Carey respects Rupert, and Wall Street respects Carey. Carey may not be the next C.E.O. of 21st Century Fox, but his presence there sends a big message to investors that things will chug along smoothly.
Carey’s ability to soothe investors and executives at the company make him very difficult to replace, so keeping him in the company becomes all the more important, should Lachlan step in for his father.