Rupert Murdoch's fractured empire

Mr Rupert Murdoch wants his elder son Lachlan (left, also seen with younger brother James) to be chief executive officer of New Fox.
Mr Rupert Murdoch wants his elder son Lachlan (left, also seen with younger brother James) to be chief executive officer of New Fox.PHOTO: AGENCE FRANCE-PRESSE

Disney's offer gives the media mogul the chance to establish his son Lachlan as the clear heir to his news businesses

LOS ANGELES • In late summer, Verizon Communications came to media mogul Rupert Murdoch with a surprise acquisition offer.

Verizon - locked in battle with AT&T, which was then finalising its US$85.4-billion (S$113.7-billion) takeover of Time Warner - wanted to buy pieces of Twenty-First Century Fox, Mr Murdoch's television and film conglomerate.

Representatives of the two companies secretly met at least once to discuss a merger.

Mr Murdoch, 86, shrugged off the talks as uninspiring, according to an associate who spoke on the condition of anonymity.

Verizon declined to comment, but the overture prompted Mr Murdoch to start thinking seriously - for the first time - about selling his Hollywood treasures.

Not only would a sale solve a business problem, it could also solve a family one.

Several months later, Mr Murdoch agreed to sell much of Twenty-First Century Fox to Walt Disney Co.

The proposed US$52.4-billion deal, which is subject to regulatory approval, has the potential to radically reshape the entertainment world, but it also has many wondering what the future holds for Mr Murdoch and the two sons who seemed to be on the cusp of taking over his vast media holdings.

Mr Murdoch had built an empire by divining where media was headed, and the landscape ahead troubled him, according to several people who speak to him or others close to him who insisted on anonymity.

Growth for Twenty-First Century Fox, with its mix of traditional cable networks and movie labels, would be increasingly difficult to deliver as technology giants such as Apple and Amazon pushed deeper into the film and TV industries, changing the way people access entertainment.

Netflix was already becoming big enough to outbid Fox and other old-line entertainment companies for scripts. Facebook was coming after sports rights.

Twenty-First Century Fox had tried to bulk up to remain competitive. But its attempt to buy Time Warner in 2014 had failed. Its recent bid to become the sole owner of Sky, the British satellite TV giant, has been stuck in purgatory.

In 2015, Mr Murdoch named his eldest son, Lachlan, executive co-chairman, giving father and son equal standing.

And he had installed his youngest son, James, as chief executive of Twenty-First Century Fox. The trio would govern as one big happy family, they all insisted.

But at times, James had grumbled that his role was limited, according to three people who know him who spoke on the condition of anonymity. His father did not relinquish much control and became more involved with the company's most important asset, Fox News, after the cable channel's pugnacious leader, Mr Roger Ailes, was forced to resign in 2016 following allegations of sexual harassment. (Mr Ailes died in May last year.)

Fox News, the company's financial engine and a hugely influential platform for Republican politics, has been the source of family friction. James, who holds some progressive views, has privately expressed embarrassment about some elements of Fox News, including its sometimes sceptical coverage of climate change, according to the three sources, a stance not shared by his more conservative brother and father.

The tension bubbled into public last August when James sent an e-mail message to a list of blind-copied recipients that repudiated United States President Donald Trump for his response to the violence in Charlottesville, Virginia. Mr Trump counts Mr Rupert Murdoch as a friend and informal adviser.

The dynamics of the Murdoch family are continuously shifting and outsiders are kept at a distance.

To Hollywood, the Disney deal looked like a family schism, with Lachlan, 46, solidly back in line to succeed his father as overseer of the family's remaining businesses and James, 45, without a clear future at Disney.

Associates of James, however, say he encouraged the deal, in part because he had grown weary of the dysfunctional push and pull with his brother and father.

The Murdochs declined to be interviewed for this article.

When Mr Rupert Murdoch told his sons Mr Robert A. Iger, Disney's chief executive, had called him to propose a takeover, James got on board rather quickly, according to four people briefed on the sale process.

Like his father, James saw the merits of the proposed deal. Mr Iger had expertly acquired Pixar, Marvel and Lucasfilm and used them to make Disney into a movie, theme park and consumer products juggernaut.

Adding most of Twenty-First Century Fox's businesses would transform Disney into a colossus with a real shot at competing against the Silicon Valley giants. And the Murdoch family would be Disney's biggest non-institutional shareholder.

Disney's offer also provided Mr Rupert Murdoch with the opportunity to establish the like-minded Lachlan as his clear heir, putting him in a position to eventually take over Fox News, which Disney was not buying, and the family's other company, the newspaper-focused News Corp.

Although Lachlan has not yet made a decision, Mr Rupert Murdoch has made it clear that he wants his eldest son to run what they are calling New Fox, which will house Fox News and the other businesses left behind by Disney, including the Fox broadcast network and a chain of TV stations. "I hope my son Lachlan will agree to be chief executive," Mr Rupert Murdoch said during an interview with Sky News last month.

That signals a return to his original succession plan, which went awry in 2005, when Lachlan abruptly left the family business after sparring with Mr Ailes.

He decamped to Australia, where he founded and ran a successful investment company. He returned to his father's side in 2014.

What James will do is a more of a mystery.

People close to him say he may try to strike out on his own. Unlike his brother, James has never worked outside the family businesses, other than the hip-hop record label he founded after dropping out of Harvard. His father bought it, bringing James into the corporate fold.

A senior job at Disney is also a possibility, but there were "no guarantees of any sort", Mr Rupert Murdoch said.

NYTIMES

A version of this article appeared in the print edition of The Straits Times on January 03, 2018, with the headline 'Rupert Murdoch's fractured empire'. Print Edition | Subscribe