Rupert Murdoch prepares for post-Chernin role

Rupert Murdoch is the undisputed ruler of the nation-state that is News Corp. No CEO has been more intertwined and publicly associated with his company’s business than Rupe, at least not since Ted Turner left the scene some years back.

But even media titans need a strong support system, and last week Murdoch was put on notice that he will soon lose his ablest lieutenant. The news that Peter Chernin will step down as prexy and chief operating officer of News Corp. as of June 30 promises to unsettle Murdoch’s world at a time when his conglomerate is already facing myriad challenges.

Murdoch’s decision to take the operating reins himself and not directly replace Chernin could make News Corp.’s far-flung operations a very unruly entity for him to run at a miserable time for the media and entertainment biz overall. Without the strong buffer, diplomatic skills and moderating influence that Chernin exerted on the boss — he’s proud of having talked Murdoch out of many a bad deal over the years — and the division heads he managed, News Corp. could descend in to warring factions.

The tensions may run especially high on the 20th Century Fox lot, which is in for a post-Chernin reorganization in the near future.

“There’s a lot of places where friction can happen at this company,” says a Fox insider. “Peter was really good at getting all of us to settle those issues.”

Murdoch himself alluded to the high level of ambition among his senior managers in a lengthy memo he sent to employees after Chernin’s departure was formally announced. Murdoch said there would be a “streamlined management structure” for the L.A.-based operations, which had been firmly under Chernin’s control, and the rest of News Corp.

“Many of you have told me how hungry you are to work more closely across our companies,” Murdoch wrote. “Many of us have been frustrated by the things that can get in the way of that.”

Chernin’s departure after 20 years was spurred in part by the simple reality that the CEO gig would never be his, given Murdoch’s dynastic vision of handing the company to one of his adult children. Plus, Chernin has one hell of a movie and TV production deal and a $40 million parachute, among other perks, waiting for him per his contract.

Murdoch had clearly not expected to face the prospect of running News Corp. without Chernin this soon. Despite the company’s solid roster of experienced executives, there’s no obvious immediate heir apparent to the chief operating officer role in the company.

James Murdoch has been the front-runner among his siblings for several years now, given his track record of running BSkyB and News Corp.’s Europe and Asia operations. But at 36, he’s seen as still being a little too green for the COO slot. As his older brother Lachlan learned earlier this decade, getting too much authority too soon, even if your last name is Murdoch, in News Corp.’s ground zero (the U.S.) can be hazardous to your executive career.

For now, Rupe is promising to “streamline” the management structure of News Corp.’s Los Angeles-based businesses to cut down on the number of direct reports he will inherit from Chernin.

The scenario that emerged last week had Fox’s film chieftains, Jim Gianopulos and Tom Rothman, taking on additional responsibility for overseeing the television production units 20th Century Fox TV and Fox Television Studios, both of which had reported to Chernin.

Fox Searchlight prexy Peter Rice could also see his domain expand on the film side as Gianopulos and Rothman’s plates grow. (Rice’s unit coincidentally was in the spotlight when the Chernin news broke on the heels of Searchlight’s “Slumdog Millionaire” winning the best picture Oscar.)

On the TV side, Tony Vinciquerra, CEO of Fox Networks Group, is expected to take on oversight of Fox Broadcasting Co. and some of Fox’s international channels. Vinciquerra already had oversight of Fox’s domestic cablers, other than Fox News Channel. Roger Ailes, the chairman of Fox News, may also see his turf expand. Ailes’ purview already encompasses the company’s 27 TV stations, the MyNetworkTV venture and the Twentieth Television syndication unit.

On paper, Ailes reported to Chernin, but company insiders point out that the exec has Rupe’s ear in more ways than one, starting with the fact that his office is close to Murdoch’s at News Corp.’s Manhattan HQ.

But none of the top Fox execs are shrinking violets, which has led to speculation in the biz that fireworks are inevitable as they all adjust to the post-Chernin order.

There’s also no shortage of palace intrigue revolving around Murdoch’s long-term intentions regarding James, who is the only Murdoch offspring with an exec post in the company at present; Lachlan and their older sister, Elisabeth. (Rupert’s eldest child, Prudence, has never pursued an exec role at the company. He also has two young daughters, Grace and Chloe, by his current wife, Wendi Deng.)

James’ post as the London-based CEO of News Corp.’s Europe and Asia operations — including BSkyB, Star TV and UK newspapers the Times, Sunday Times, Sun and News of the World — gives him a power base. During his tenure as chief of BSkyB, James countered the cries of nepotism that greeted his appointment by pushing the satcaster deep into broadband and telecom services and generally meeting ambitious growth targets.

In 2006, James orchestrated a stealth deal that invited comparisons to his father’s swashbuckling style when he beat rival Virgin Media in the chase to buy a 17.9% stake in UK TV giant ITV. ITV’s share price collapsed soon afterward, and the deal has run in to regulatory trouble that could force BSkyB to sell more than half of its shares at a steep loss. But, on the other hand, in Murdochian style, James’ gambit prevented a competitor from strengthening itself.

James was involved in his father’s pursuit of Wall Street Journal parent Dow Jones, which so far has been a big drag on News Corp.’s bottom-line and raised snickers on Wall Street itself about Rupe’s affinity for the newspaper biz. Chernin was known to have disagreed strongly with the $5 billion acquisition sealed in late 2007.

One scenario of fevered speculation within News Corp. has James working behind the scenes to ensure that his father does not directly replace Chernin so as to hasten his ascent to the No. 2 post, on the assumption that the elder Murdoch will quickly tire of the day-to-day grind and look to his son for help.

Fuel for this theory was provided when Rupe decreed, as part of a lengthy memo to employees sent after Chernin’s exit was announced, that all human resources execs will now have a dual report to their division heads and Beryl Cook, News Corp.’s chief human resources officer. Cook, who reports to Rupe, is close to James Murdoch, having worked for him at Star TV and at BSkyB before moving to her current post in June 2007.

While James has been front and center, Elisabeth can’t be overlooked as a possibility for a major role at News Corp. down the road. She worked at Fox and BSkyB in the 1990s but left the family fold in 2000 (after being passed over for the CEO job at BSkyB) to launch a London-based film, TV and digital production shingle, Shine Group. Through a series of acquisitions, the company has grown into a major player in the U.K. and, more recently, the U.S. thanks to its purchase last year of Ben Silverman’s Reveille.

Shine’s success as an indie has cemented Elisabeth’s credentials as an exec on her own turf. She is said to have recently turned down her father’s offer for a seat on the News Corp. board, in part because it would raise significant conflicts of interest, per the U.K.’s Byzantine media regulations, that could adversely affect Shine’s ability to do biz.

Those close to her say Elisabeth, who is married to leading PR executive Matthew Freud, is enjoying her prominence at Shine and is too settled with her children in London to consider a move to News Corp. in the short term.

Lachlan, meanwhile, is a News Corp. board member, along with James. Lachlan, now settled with a young family in Sydney, has been a private investor in a range of ventures — from toy makers to Indian soccer teams — since making a hasty exit from News Corp. in 2005.

Lachlan had a solid run as head of News Corp.’s Australian operations in the late 1990s but stumbled in the first half of this decade after he was appointed deputy chief operating officer under Chernin. He’s widely known to have butted heads with both Chernin and Ailes — two powerful forces that not even his lineage could overcome.

No matter what happens with the Murdoch heirs, the next few years are sure to be full of intrigue and change for Murdoch’s troops. The boss admitted as much in his lengthy memo, which he cast against the larger drama of the economic downturn and turmoil in the global marketplace.

“We are in the midst of a phase of history in which nations will be redefined and their futures fundamentally altered,” Murdoch wrote. “The direction of the business now and over the next few years will define the character of our company for decades.”

(Steve Clarke in London contributed to this report.)

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