By Keach Hagey
Media mogul Rupert Murdoch has been grooming his sons for years
to take the reins at his global entertainment empire. Now, that
leadership transition is becoming a reality.
Mr. Murdoch plans to step down as chief executive of 21st
Century Fox Inc. as early as this year, handing the title to his
son James, 42 years old, according to people familiar with the
matter. The elder Mr. Murdoch, who is 84, will stay on as executive
chairman at Fox, they said. His older son, Lachlan Murdoch, 43,
will be named executive co-chairman, the people said.
In taking on responsibility from their father, James and Lachlan
are being positioned to fill the shoes of a larger-than-life media
titan known for following his instincts and taking bold risks in
the course of building Fox into a $67 billion behemoth spanning
broadcast TV, cable-news channels like FX and Fox News and the film
and television studio.
The moves will further solidify the Murdoch family's role in
running Fox in coming years as the media giant confronts big
strategic questions. Among them: how to boost sagging TV ratings
and where to place long-term bets in the fast-changing Web
television landscape that is threatening the highly profitable
cable-TV business.
Chase Carey, who is currently the company's chief operating
officer, will stay on as an adviser to the senior Mr. Murdoch. Mr.
Carey, 61, has largely run day-to-day operations for years and has
been viewed as a reassuring presence for Wall Street within a
family-run company, which is why his contract status became a
hot-button topic last year. He has said that one of his biggest
responsibilities is to shepherd the next generation of leadership
for the company.
Because Mr. Carey's contract states that he must notify the
board by June 30 if he plans to exercise an option to leave six
months before his contract ends on June 30, 2016, investors have
been bracing for a transition. He was widely expected to exercise
that option, but a person familiar with the company's plans said he
has decided to stay with the company at least through 2016 as an
adviser to the senior Mr. Murdoch.
The timing of these moves hasn't yet been decided, and they
could happen as early as this year or as late as next year. The
matter of succession is on the agenda at the next 21st Century Fox
board meeting, the people said. Shares of Fox fell three cents to
$32.82 Thursday. News of the leadership change was first reported
by CNBC.
James is "an extraordinarily talented guy, and will be an honest
and honorable steward of the company," said Leo Hindery Jr., the
former CEO of John Malone's Tele-Communications Inc. who worked
closely with the Murdoch empire for decades and today serves as
managing partner of InterMedia Partners, a media private-equity
fund. "Three or four years ago, it would have been grossly
premature," he said, but he added, "It's been long enough."
In the new leadership structure, James and Lachlan Murdoch will
run Fox in a partnership very similar to the one currently in place
between the senior Mr. Murdoch and Mr. Carey, with one of them
focused on the long-term agenda and the other more focused on the
company's operations, though the roles will overlap, according to
people familiar with the matter. James Murdoch will be based in New
York, while Lachlan Murdoch will be based in Los Angeles.
Mr. Murdoch has clearly been setting up the plan to have his
sons inherit control at Fox and News Corp, his publishing company.
In March 2014, James Murdoch was promoted to co-COO alongside Mr.
Carey at Fox. At the same time, Lachlan Murdoch was tapped as
nonexecutive co-chairman at both companies. News Corp, owner of The
Wall Street Journal, split from Fox almost two years ago. Rupert
Murdoch is chairman of News Corp, and the Murdoch family has 39%
voting stakes in both companies.
James Murdoch joined News Corp. in the mid-1990s after founding
an independent hip-hop music label. He cut his teeth as an
executive running the company's Asian operations, Star, as chairman
and CEO of that unit from 2000 to 2003. The Star assets, especially
in India, have grown into a formidable piece of the Fox global
business. More recently, he had stints as CEO and chairman of
BSkyB, the U.K. satellite-TV venture--now called Sky PLC--in which
Fox has a 39% stake.
The biggest blemish on James's resume is his leadership of News
Corp.'s international division when the company was on the
defensive for the phone-hacking scandal at its U.K. newspaper unit,
in which journalists illegally intercepted voice-mail messages
during the reporting process. James took his post in 2007, after
the wrongdoing was alleged to have taken place, but he was
criticized for his management of the scandal and faced aggressive
questioning from British lawmakers probing the matter.
In 2011 he acknowledged approving settlements to phone-hacking
victims, saying he "did not have a complete picture" of what was
going on and calling that "a matter of serious regret." The scandal
wound up leading to the closure of News Corp.'s News of the World
tabloid, the resignation and prosecution of journalists involved,
and more than $500 million in settlements and legal fees. Neither
James nor his father was ever formally accused of wrongdoing.
At Fox, James will inherit his father's legacy as a trailblazer
whose ambition has known no geographic or aspirational bounds. The
elder Mr. Murdoch launched the Fox network, a brash addition to the
broadcast landscape, and took the cable-news world by storm with
the creation of Fox News. Last summer, he made a surprising bid for
Time Warner Inc. but backed off after the offer was rejected.
Now, James will have to steer Fox through its challenges and
find its next big act. He faces the formidable task of revitalizing
the struggling Fox broadcast network after the end of fading
ratings giant "American Idol." Meanwhile, the company's U.S. cable
channels--which account for more than two-thirds of operating
profit--are under pressure from increasingly popular online
streaming services, and decisions will have to be made about how
aggressive to be in offering content outside the pay-TV bundle to
"cord-cutters."
James Murdoch has shown a keen interest in digital media and ad
technology, and he has helped engineer some of the company's
investments in those areas, people in the company say. For example,
he spearheaded the $200 million acquisition last year of TrueX, a
company with technology that helps media companies offer consumers
more interactive online ads rather than relying on typical banner
and video ads. James had been on the board of TrueX.
"The two brothers will effectively run the company together,"
said Saad Mohseni, the chief executive of Moby Group, an Afghan
media company in which Fox has a stake. He said that James has
shown both shareholders and the market that he has "the depth and
capacity" to run a company the size of 21st Century Fox and
"understands new media, technology and competition from new
players," while "Lachlan has his strengths to help out."
For Lachlan Murdoch, the story line at the family-controlled
media properties has been more one of triumphant return. He took on
a more formal role at the companies last year, after quitting his
executive role at News Corp. in 2005, moving to Sydney from New
York and founding his own private investment company.
When he quit in 2005, he had been deputy chief operating officer
at News Corp. with oversight over two-thirds of the company's
global revenue. His investment track record has been mixed over the
years. One particularly good call was encouraging the family
company not to sell its stake in the small Australian real-estate
listings website REA Group about three years ago. The company's
market value then took off, notching a win for Lachlan.
Other investments didn't end so well, such as the backing of
Australian cellphone company One.tel, which collapsed after the
tech bubble burst. In 2010, Lachlan's investment company, Illyria,
bought a minority stake in Australian free-to-air broadcaster Ten
Network Holdings Ltd., where Lachlan was chairman for a period. The
company then struggled with poor ratings, losses and stock
declines.
Still, before returning to the U.S., Lachlan became a
high-profile figure in Australia's media industry, which has been
dominated for decades by the Murdoch and Packer families.
Write to Keach Hagey at keach.hagey@wsj.com
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