Sunday, February 20, 2011

The Murdoch in Waiting (Media King to transfer powers to Son Soon)

As Rupert Murdoch nears 80, many see his son James as the heir apparent

ON a night in late January when he should have been in the Swiss village of Davos, James Murdoch went to dinner here with his father, Rupert, and several journalists from The Sun, the tabloid that the Murdochs have owned since 1969.
In the private room at Wheeler’s of St. James’s, father and son politely argued about the lesser of the public controversies swirling around the Murdoch empire: the firing of Andy Gray, the chief soccer pundit for their Sky Sports network, for making sexist comments.
“Can we stop firing people for making a joke?” Rupert Murdoch asked.
James Murdoch defended the decision to fire Mr. Gray and later stood up, tapped a glass and reminded the gathering that it was 25 years ago that his father had busted London newspaper unions, a seminal event in both British labor history and the historical narrative of the Murdoch media kingdom, the News Corporation.
Unmentioned that evening was the deepening investigation into the practice among journalists at The News of the World, another Murdoch tabloid, of hacking into the voice mail of the famous. The scandal alone would not have caused James Murdoch to cancel his trip to the World Economic Forum in Davos. (It was not, as the British press would have it, Rupert Murdoch who was scheduled to be in Davos.) Rather, it was that the uproar might threaten the single biggest deal in the News Corporation’s history: a $12 billion takeover bid for British Sky Broadcasting. The deal has been facing opposition in both the British media and the government, and some of the criticism has come from some longtime Murdoch allies.
The perennial speculation is whether James Murdoch, 38, will one day run the News Corporation. But the pertinent fact is that as the chairman and chief executive of its businesses in Europe and Asia, he already runs a large and growing part of it. If the Sky transaction is approved, the businesses reporting to James Murdoch would account for roughly half of the News Corporation’s annual revenue.
James Murdoch has risen higher in the company than his older siblings, Lachlan, 39, and Elisabeth, 42, who went to work for their father and later left acrimoniously. With Rupert about to turn 80, the issue of succession has taken on more importance. He may never name a sole heir; his preference, executives say, is to have all three involved. He has unsuccessfully sought to bring Lachlan back to the company, but as soon as this week could announce a deal to return Elisabeth to the fold, by buying her television production company, Shine.
Now James faces his greatest test: whether he can put an end to the phone-hacking scandal — without the company facing more troubling revelations, an embarrassingly high amount in damages or the collapse of the takeover of Sky. The News Corporation already controls a 39 percent stake of Sky, and James remains its chairman after serving as C.E.O. from 2003 until 2007. (The takeover, if successful, would let the News Corporation finally consolidate Sky’s growing profits on its balance sheet.)
James Murdoch is trying to succeed at the company his father built, but he is a very different character: more blunt, more bureaucratic and less able to smooth ruffled feathers. He has his father’s aggressiveness but not his tactical sense or temperance.
Ultimately, the deal for Sky could be undone by the tabloid sensibilities of the News Corporation, a heritage for which he seems to have little affection. But he faces this challenge at a time when he has become a steadier presence in the company, having emerged from a period of corporate infighting, particularly in 2009 and early 2010. Then, his efforts to involve himself in News Corporation entities outside his purview alienated several longtime executives and raised tensions between New York and London, according to several executives who spoke on condition of anonymity to maintain relationships with the family.
JAMES MURDOCH declined to speak on the record for this article. He put forward numerous people who know him well to speak on his behalf, and he asked others, including longtime friends from his childhood in New York City and time at Harvard, not to speak. (One of his best college friends, after first agreeing to speak, e-mailed with the note: “Sorry for not getting back to you earlier. As you probably figured out, the P.R. people at News Corp are handling this.”) Many others spoke without first seeking James’s permission.

Through nearly two dozen interviews, on and off the record, with people who have worked directly with him or are close to him personally, a portrait emerges. It suggests an aggressive, ambitious executive who has cemented his stellar reputation in the pay-television business in Asia and Europe, who at times has made assertive plays for expanding his power base within the company, who has nurtured a brand of conservative politics that often puts him at odds with the profit center that is Fox News, and who has shown an eagerness to play in the corridors of power in ways noisier than his father’s more subtle maneuverings.
Tom Stoddart/Getty Images
The Murdochs at London’s National Portrait Gallery in 2007. From left, James, Elisabeth, Rupert (also in portrait) and Lachlan.
Karl Jeffs/Getty Images
Rupert Murdoch and Prince Walid bin Talal of Saudi Arabia, the company’s second-largest shareholder after the Murdochs.
“There’s an intensity to him,” said Frank Luntz, the Republican pollster, who has worked for James. “The guy’s got intensity wrapped around energy.”
That James works from a standing desk in his office in London — sitting is less efficient in getting work done — adds to the image of him as a tightly wound executive, as do his black belt in karate and his hobby of competitive cycling. So does the way he offers his business card to visitors: with a two-handed thrust, as they do in Asia, where he once ran the company’s regional television business out of Hong Kong. And so does the episode, well told in the British press, of him showing up last April at the office of The Independent, a rival paper, to berate its editor for running advertisements critical of the Murdoch empire’s supposed influence in British elections.
Another business acquaintance, Saad Mohseni, an Afghan media mogul who has worked with James in establishing Farsi1, a joint venture to beam satellite television into Iran, said: “He expresses himself. He swears if he needs to; he gets aggro.”
During 2009 and into 2010 — a period that saw the exit of Rupert Murdoch’s longtime deputy, Peter Chernin — the perception within the New York headquarters of the News Corporation was that James was being overly aggressive in positioning himself to be his father’s successor.
That sense was amplified by James’s close relationship with Prince Walid bin Talal of Saudi Arabia, the company’s second-largest shareholder after the Murdoch family. The two men met almost nine years ago, aboard the prince’s yacht in Cannes, France. The relationship blossomed during meetings in London and the Middle East and culminated last year with a Murdoch investment in the prince’s media company, Rotana, and an interview with Charlie Rose in which the prince said James should succeed his father.
The comments irritated Rupert Murdoch and other senior executives. Rupert, according to one of the executives, felt the prince had overstepped a line, while others in the News Corporation saw the comments as evidence of James trying to pressure his father on succession — even though the prince, in an interview late last year with The New York Times, said he had never spoken about succession with James.
In the interview, Prince Walid said Rupert laughed off the Charlie Rose interview, telling the prince, “I am going to stay until I am 130 years of age.”
The prince explained that “I’m not saying Rupert should leave now” and that he believes James “has the full potential to succeed Rupert.”
“James is really a Rupert Murdoch in the making,” he added.
While James Murdoch has little interest in having his words distilled through a journalist’s pen, he is not shy about offering unfiltered views of the world. In 2009, he gave the prestigious MacTaggart Lecture at the Edinburgh International Television Festival — a talk that is still recalled for its broad attack on the BBC and the public subsidies it enjoys. It was a clarion call for free markets that cited Darwin, Tolstoy and the international banana market.
James took particular aim at the effect that free news from the BBC online was having on other news outlets. “Dumping free, state-sponsored news on the market makes it incredibly difficult for journalism to flourish on the Internet,” he said. “Yet it is essential for the future of independent journalism that a fair price can be charged for news for people who value it.”
In the fall of 2009, James decided to have The Sun — which has had enormous historical influence on British parliamentary elections — switch allegiances from the Labour Party, led by Gordon Brown, to the Conservative Party and David Cameron. The paper made the endorsement early in the election cycle, just as Labour was holding its party conference. It was an aggressive move that rankled even his father, who had been close to Mr. Brown.
According to one of the executives who spoke on the condition of anonymity, Rupert Murdoch ultimately backed Mr. Cameron but objected to the timing and manner of The Sun’s endorsement. Now that perception of closeness to the government of Mr. Cameron has caused trouble for the pursuit of Sky, putting pressure on the government to block the transaction. (Doing little to allay that concern in the British press was a dinner that James had with Mr. Cameron in late December, at the Oxfordshire home of Rebekah Brooks, the chief executive of News International, the News Corporation division that runs the London papers, and former editor of The Sun.)
“The phone-hacking story and this transaction have no connection at all but in the political context and in the context of the narrative of the Murdochs in the U.K.,” said Claire Enders, a media analyst in London who owns her own firm, Enders Analysis. Ms. Enders is a vocal opponent of the Sky deal, and wears her political stripes prominently. “I’m a liberal,” she said. “I’m a pacifist. I’m a feminist.” She also gave up her American citizenship in protest of the Iraq war.
“We have had 30 years of Murdochs in this country, 30 years of closeness with prime ministers, ministers and senior M.P.’s,” she said.

IF you were raised by a man whose place in newspaper history is rivaled perhaps only by William Randolph Hearst, some people will take your measure by how much ink is in your veins. On this score, those who know James Murdoch often note that he does not relish the newspaper culture the way his father does. He seems to take no delight in the company of reporters and in the sort of gossip that permeates the newspaper world and that his father both traffics in and relishes.
“James shows no sign at all of liking journalists,” said Emily Bell, director of the Tow Center for Digital Journalism at Columbia University and a former reporter at The Guardian in London who covered the Murdochs. “In fact, it’s quite the opposite.”
She continued, “James grew up in a bubble where his experience with the press was not really running it but seeing his family picked apart by it.”
Internally, executives say James Murdoch understands the future of media and the declining role of newspapers, at least in the financial sense. He has also taken a leading industry role in pushing to charge for news content online, putting The Times of London behind a paywall last year. The company’s four London newspapers — The Sun, The News of the World, The Times and The Sunday Times — offered paid apps for the Apple iPad before their competitors.
“Rupert is iconic for most journalists in the world because he has invested more money for a profession we adore, so to compare anyone to him is unfair,” Ms. Brooks, the head of News International, said in an interview in London. (She also recounted details of the January dinner.)
Ms. Brooks added: “James was brought up going through the papers in the house. You can’t grow up in that household like that and not have a special place in your heart for newspapers. It is part of their heritage.”
But James Murdoch has a singularly different take on the profession that defines his father. Rupert Murdoch wanted to make journalism sell. James’s job is to make it pay. “That ethos has seeped into the company with everything we do,” Ms. Brooks said. The company, she said, now pays little attention to circulation figures, but instead speaks in the language of pay television. The preferred metric is average revenue per user.
“When James came over from Sky, he said, can you give me the data on your readers?” Ms. Brooks recalled, adding that now “we think about the newspaper business like a subscription business.” That means News International goes deep into market research of the sort James learned to conduct while running Sky. When Ms. Brooks was promoted from editor of The Sun to chief executive of News International, James insisted that she attend the London School of Economics, a request that she said never would have been made by Rupert Murdoch.
But what James Murdoch did inherit from his father is a corporate self-image of the brash outsider crashing the establishment — a pose that James maintains despite being born into one of the wealthiest media families on earth. In a 2009 interview with Der Spiegel, the German magazine, James said, “We are always the outsider, as a challenger who tries to be better and more efficient than the established players.”
JAMES MURDOCH joined the News Corporation in 1996, after the company bought his critically acclaimed yet money-losing record label, Rawkus Records. He had dropped out of Harvard to run the label, whose best-known artist was Mos Def.
James’s persona at the time would never have predicted the technocratic, management-school style he later adopted. “If you had to stereotype James at the time, he was anti all that,” said Jason Hirschhorn, a former president of MySpace, another News Corporation holding, who went to high school with James at Horace Mann, a prep school in the Riverdale section of the Bronx. He recalled meeting James for the first time: “He was wearing Converse high-tops, military shorts, his head was buzzed and he had an earring.”
It wasn’t until 2007, when James took charge of the businesses in Europe and Asia, that he had responsibility for any newspapers. He had spent most of his career overseeing pay-television businesses, first in Asia and then, for four years, as the chief executive of Sky.
To chart James Murdoch’s career path is to gain a view of the News Corporation’s vast global reach — a presence that goes far beyond the Fox News-dominated perspective that many Americans have of it. Of course, in the United States and London, the News Corporation is a power unto itself, in some cases more powerful than the so-called establishment it professes to disdain. But elsewhere, from India to Italy, from Germany to Iran, its self-narrative as the outsider is actually true.
In Italy, the company’s Sky Italia has taken on establishment media in the form of Mediaset, the family empire of Prime Minister Silvio Berlusconi. The News Corporation invested about $1.9 billion in Italy before Sky Italia turned around, and analysts expect the unit to make about 200 million euros this year.

“I know the News Corporation in the U.S. and the U.K. is considered the Big Brother,” said Maria LaTella, a magazine editor in Milan who hosts a Sunday-morning talk show on Sky. In Italy, she said, the News Corporation represents “the dissenting voice, the voice of freedom.” Mr. Berlusconi has called the News Corporation in Italy a friend of the “left.”
Sky Italia’s investments in original productions, particularly the gangster drama “Romanzo Criminale,” about Italian mobsters in the 1970s and ’80s and their links to state intelligence agencies, have been praised in the press for revitalizing the Italian creative scene. At a multiplex in Rome last year, James Murdoch was host for the premiere of the show’s second season and used it partly as an occasion to speak about the country’s economic doldrums and its government controls over the economy.
And in Munich, after facing doubts from those who said Germans would not warm to paying for television, and after investing nearly $1.5 billion over the last three years, News Corporation executives see glimmers of hope that Sky Deutschland is turning around as Sky Italia did. The German Sky still loses money, but it is no longer losing subscribers, having added more than 130,000 in the fourth quarter last year.
IN 2000, at the age of 27, James Murdoch was dispatched to Hong Kong to run the News Corporation’s Asian television service, Star, which was ailing at the time. It was there that he first made a major mark on the company. When he arrived, Star’s ambitions were to serve audiences across the region, in China, Taiwan, Indonesia, India and so on.
China was becoming increasingly resistant to foreign media, and James decided to focus almost solely on India — long before American media companies were clamoring to increase their business there. The company’s channels in India — where it also owns a stake in a satellite platform — are now the most-watched in the nation, and it is the fastest-growing market among the businesses James oversees.
According to Media Partners Asia, a consulting firm, the News Corporation’s Asian businesses will generate $1 billion in revenue and $250 million in operating profit this year. When James Murdoch joined Star, the News Corporation was losing money in Asia. (This year, executives say, the company’s television business in India could generate more profit than News International over all. It is a stark metric that underscores the declining importance of newspapers, and the rising importance of pay TV, in the company’s general financial health.)
James Murdoch’s success at Star did little to blunt accusations of nepotism when, in 2003, he was appointed chief executive of Sky in London. “The press was still calling him the guy with the earring who was investing in indie music and had dropped out of Harvard,” said Jan Hall, who runs the JCA Group, a recruitment firm, and was hired by the Sky board to conduct the C.E.O. search that ultimately picked James.
“I really tried hard to get away from people who had reasons to be kind to him, and no one said anything different,” Ms. Hall said. “Fundamentally, they all felt he got the genes — the Rupert genes.”
In his first investor presentation at Sky, James Murdoch laid out bold investment plans and set a goal of increasing the number of subscribers from 7.4 million to close to 10 million. Sky’s share price promptly plummeted nearly 20 percent. But by the time he left, in 2007, Sky’s subscriber numbers had soared, and James was credited with improving technology and revitalizing the Sky brand.
James Murdoch has displayed a knack and interest for aspects of the media business that little concern his father — particularly marketing and communications. Early on at Sky, he hired Mr. Luntz to conduct market research and focus groups. At one session, in West London, a group of people were discussing what the Murdoch name meant to them. Watching behind a mirror were James and other executives.

“The Murdoch name has detractors, not just in America but in Britain,” Mr. Luntz said. “Some were very harsh, so blunt were their attacks. Ten Sky executives watched in embarrassment as person after person tore into the Murdoch name.”
Then James stepped into the room and engaged them about their comments. “He went in and they were shocked,” Mr. Luntz said. “Most C.E.O.’s would not step into a room of hostile customers.”
According to Mr. Luntz’s polling, the Sky slogan that was developed under James’s leadership, “believe in better,” has sometimes been seen as the second-most-powerful corporate motto, after Microsoft’s “Where do you want to go today?” And in 2009, Management Today magazine named Sky as Britain’s most-admired company.
Even Ms. Enders, the analyst who is critical of the Sky takeover bid, said of James Murdoch: “He is, in my opinion, as it relates to BSkyB, a business genius.”
ALONG the way, James Murdoch has epitomized the same conservative temperament as his father when it comes to free markets. But on other issues, particularly environmental ones, he is at odds with modern-day conservatism.
In London, he holds dinners that bring together environmental advocates, academics and executives. In the summer of 2008, James held a dinner for Fred Krupp, the head of the Environmental Defense Fund, an advocacy group based in New York. The event was attended by Boris Johnson, the mayor of London, and Tony Hayward, then the chief executive of BP.
James Murdoch told the group that the News Corporation’s own environmental efforts had saved it $35 million. On such matters, he has cast himself as a Teddy Roosevelt-style conservative and has sought to link environmental protection with sound business practice.
The liberal media watchdog Media Matters has crusaded against Fox News’s coverage of the climate issue, having released e-mails it obtained last year in which a Fox editor told staff members: “Given the controversy over the veracity of climate change data ... ... we should refrain from asserting that the planet has warmed (or cooled) in any given period without IMMEDIATELY pointing out that such theories are based upon data that critics have called into question.”
James Murdoch’s views raise the question of whether he would interfere with Fox News’s coverage if he were running the News Corporation. In an interview published in 2009, he said: “All of the climate-prediction models suggest we’re on the worst-case trajectory, and some cases worse than the worst case. That’s my depressing take on it.”
On other stages, particularly at the Edinburgh lecture, he has been a loud proponent of deregulated markets and laissez-faire economics, making him a lightning rod in certain corners of the British media.
“He became a champion for the free market in the media, and not everyone likes that,” Ms. Hall said. “Not everyone wants a free market as he would champion.”
The company’s Iranian venture also appeals to James as a way to spread the gospel of freedom and openness into a closed society. Executives say it is profitable — advertisers include a ski resort outside Tehran — and the company plans a second channel, aimed at Iranian women.
Farsi1 is also completing a deal to carry reruns of “The Oprah Winfrey Show,” the last new episodes of which are being filmed this year now that Ms. Winfrey has started her own cable network, and is searching for a Farsi-speaking woman to be the voice of Oprah.
The deal is awaiting word on an application from CBS — which distributed Ms. Winfrey’s show — to the Office of Foreign Asset Control of the Treasury Department, to gain a waiver from sanctions on Iran.
AS father and son left Rupert Murdoch’s London apartment on that late January night to have dinner with the staff of The Sun, a reporter from The Independent newspaper was outside, waiting to ask about the latest in the phone-hacking scandal. Such was the magnitude in the British press of Rupert Murdoch’s visit to London.
The Independent even kept a tally of the words that nine national newspapers devoted to the scandal the next day: 12,585 in total, with the left-leaning Guardian leading the way with 4,703. The Sun devoted 41 words to the story.
Ian Hargreaves, a former editor of The Independent and now a professor at Cardiff University, wrote that week: “Murdoch, and his ambitious son James, have put themselves at the center of public controversy in a manner which, in their own eyes, must represent serious miscalculation.”
The argument that James and his executives mishandled the investigation is commonly held not just among some journalists but also in the highest reaches of the News Corporation. Executives paid out-of-court settlements, and initially blamed one rogue reporter for the whole affair, even though The News of the World has said it has since dismissed an editor after finding “material evidence”’ linking him to allegations that it intercepted celebrities’ phone messages. Although James was not overseeing News International when the hacking occurred, he did approve the settlements and is responsible now for putting the scandal to rest.
The Sky Broadcasting deal, meanwhile, hangs in the balance. The News Corporation is waiting to see whether the deal will be referred to Britain’s Competition Commission for a review that could take six to nine months. If that happens, the News Corporation would have to decide whether to simply pull the offer, as executives suggest it might.
James Murdoch’s future claim to the throne will be enhanced — or clouded — based on how events transpire in London over the next weeks and months.

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