Can News Corp. heir apparent James Murdoch emerge from the Watergate-style phone-hacking scandal with his ambitions intact?
The 39-year old executive, who successfully ran BSkyB and Star TV before being appointed News Corp. deputy COO and CEO of News Corp International, has long been considered most likely of the Murdoch offspring to take over the News Corp. mantle.
But his dramatic admission that he played a central role in the deepening scandal by signing off on six-figure payments to the victim of illegal phone hacking has raised serious questions about his judgment.
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“I take James’ claims that he knew nothing about the payments and that he only found out about the full extent of the activities recently at face value,” says analyst Claire Enders, CEO of Enders Analysis in London. “But that’s what will count against him. . . . At the very least there are questions about why he didn’t take the allegations that he basically confirmed in his statement more seriously when they first appeared [in The Guardian]. Why weren’t they investigated?”
Assuming that Murdoch is not charged in the ongoing criminal inquiry, he is also likely to be held accountable for the fact that the unfolding debacle has derailed News Corp’s all-but-concluded deal to take full control of BSkyB. All three British political parties have come out in opposition to the deal and the fallout has wiped billions of dollars off News Corp. and BSkyB’s share price.
The BSkyB deal is his calling card in relation to the succession. “It was the business he had run successfully and it is his deal,” says Enders. “Not being able to buy BSkyB would very much count against him.”
Certainly the unfolding story has rattled analysts on Wall Street. BTIG analyst Richard Greenfield has expressed “fear of what we do not know and what may or may not come out next . . . how far up the News Corp. executive ladder current revelations will lead.”
Some analysts are still betting that James will survive, including Wunderlich Securities analyst Matthew Harrigan. He argues that other executives, such as Dow Jones CEO Les Hinton and Rebekah Brooks, seem more likely to take the fall than anyone named Murdoch. “There is still lots of time,” he adds. “Remember Rupert’s mother Dame Elizabeth is still alive. This is a long-term dynastic transition.”
Should James succumb to the scandal, it is unclear whether another Murdoch might eventually take the reins at News Corp. “Rupert Murdoch has got a real problem here,” says analyst Hal Vogel, president of Vogel Capital. “It is not likely that Elisabeth or Lachlan can step in — they’re not up to speed and not involved, so [they have] no credibility.” Vogel believes the scandal could hasten the succession question. Rupert “might not recover and be bounced up to a ceremonial spot,” he says. In that case, he still believes that James would take control.
But executives with considerable experience at News Corp.’s film studio are far less skeptical about Elisabeth, the 42-year old CEO of global production company Shine Group, which was acquired by News Corp. earlier this summer. “She has developed a real understanding of creative content” and is “much better suited [than James] to integrate distribution with content,” says one.
“This could easily push her back to the front of the line. They just bought her company, she returned to the board, she’s had tremendous success. She’s victorious when the other two [Murdoch children] have faltered.”
James has not ingratiated himself with executives at Fox — two independently use the words “officious” and “arrogant” to describe him — and one says that the outlines of the scandal so far would appear to raise a simple question about him: “Are you stupid or guilty?”
Another adds, “No matter how much shit we have to take at the company, if it brings down James, we’re thrilled.”
But Bill Mechanic, former chairman of the Fox studio, believes Rupert intends to stand by his embattled son. “The one thing he’s going to try to protect is James,” Mechanic says. And Murdoch probably believes that he can succeed. “He’s been a rogue for his whole life,” Mechanic says. “Why would he have to kowtow to anybody?”
But Mechanic says he, too, is impressed by Elisabeth, who many suggest is far more personable and well-rounded than her chilly younger brother. “I always said if she was male, there wouldn’t have been any issue” about her being the successor to Rupert,” says Mechanic. The only obstacle, in his opinion, is that her father is “so old world.”
Email: Mimi.Turner@thr.com
Kim Masters contributed to this report.
