Fox’s master and commander

Synergy helps Rupe machine rock

Corrections were made to this article on Aug. 14, 2003.

If you’re looking for the real Magic Kingdom, try knocking on Rupert Murdoch’s door.

At a time when Disney and AOL Time Warner stand as poster children for the philosophy that bigger-ain’t-always-better, the renegade’s global communications empire is thriving as never before.

It’s not uncommon for an entertainment conglom to have one or two standout divisions. Lose the AOL, and Time Warner’s doing just fine.

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But under the leadership of chief operating officer Peter Chernin, News Corp.’s TV, film and publishing units — though not without individual weaknesses — are all firing on overdrive.

The imminent addition of DirecTV will add a whole layer of potential profits to the company’s already-shiny bottom line.

Other congloms have tried to achieve growth via the dreaded S-word (that would be synergy), only to discover that consumers won’t watch a bad TV show no matter how many times it’s flogged on your online service or hyped at your theme park.

In Rupe’s kingdom, units work together nly when it makes sense.

Rather than the usual layers of bureaucracy, CEOs of various units communicate directly with one another at least once a week, allowing for quick decision-making. Except for the pages of the New York Post, Murdoch’s political views don’t impact policy.

Most execs, certainly Murdoch and Chernin, seem secure and comfortable in their posts. Neither has anything to prove; their only goal is making tons of cash for shareholders.

Perhaps the key to News Corp.’s success: When it comes to making creative decisions, being bold is the rule rather than the exception.

“The biggest daily challenge for any of these companies, every single day, is the quality of our creative product,” Chernin says. “It’s worth focusing on every minute of every day. If we make great product, we’ll be just fine. And if we don’t, we’ll get what we deserve.”

That focus seems to be paying off:

  • Under the leadership of Sandy Grushow, the Fox network is breathing down NBC’s neck in the race for No. 1 among adults 18-49. After several years in the wilderness, the net seems to have reclaimed its brand as the home of hip comedies and dramas, while maintaining its status as the leader in buzzworthy reality skeins (“American Idol,” “Joe Millionaire.”)

  • The risk-taking at 20th Century Fox and Fox Searchlight are paying off. The film division is headed for a second consecutive record-breaking year at the box office.

  • On the cable front, Roger Ailes-led Fox News Channel continues to expand its hefty lead over the competish, while once sleepy FX has established a rep as basic-cable’s version of HBO (though it recently lost its programming muse to NBC). Fox’s collection of regional sports nets and cablers such as National Geographic Channel also continue to grow.

  • News Corp.’s group of broadcast stations continues to add billions to the bottom line as duopolies in key markets like N.Y. and L.A. deliver more profit. Power of the station group makes Fox TV Stations prexy Mitch Stern one of the most powerful persons in television, since he can almost single-handedly determine the syndie fortunes of a network show.

  • The TV studio, while still searching for a megahit on the scale of “The X-Files” or “The Simpsons,” is discovering it can make more money by producing fewer shows. 20th’s vast library of past hits is also being mined for hundreds of millions more in found coin via Fox Home Entertainment, easily the leader in TV-on-DVD sales.

News Corp.’s overall health seems directly linked to Murdoch’s growing confidence in Chernin’s abilities as a manager.

While Murdoch is firmly in control of News Corp.’s destiny, he has let Chernin establish himself as the guiding strategist and chief overseer of the company’s various creative concerns.

WB Network chairman-CEO Jamie Kellner, a founding father of Fox Broadcasting, says Chernin and former FBC chief operating officer Chase Carey are the only No. 2’s Murdoch has ever truly clicked with.

“Rupert’s found someone he trusts and is comfortable with,” Kellner says. “Murdoch’s not a Hollywood insider, and he needed an insider. Chernin’s been the guy who’s carried out that role for him.”

While Murdoch hops around the globe managing his company’s myriad interests — occasionally stopping to acquire a new toy, such as DirecTV or Telepiu — Chernin is free to focus on what truly matters to an entertainment-driven company: content.

He seems to relish his role as a cheerleader-in-chief, encouraging divisions to take chances while still maintaining fiscal prudence.

On the film side, that means greenlighting ambitious projects like this fall’s “Master and Commander,” but taking on a partner to share the risk.

At the network, development execs eschew anything too conventional, striving for a slate of edgy fare and really edgy fare. Reality smashes such as “Idol” are used to promote fledgling scripted skeins.

And while nobody in the company kids themselves into thinking they’re Artists — the bottom line is the bottom line — Chernin’s creative chiefs aren’t former agents or lawyers. They’re execs who have hands-on experience producing a feature, developing a series, cutting a promo.

“This is a company that is incredibly consumer focused, and we believe at our core that’s how you become successful: you do a better job providing a product to consumers,” Chernin says.

“It’s not about making better deals or coming up with new business models.”

What’s more, while other congloms seem to cycle through new execs every two years or so, the team running most of News Corp.’s major business consists almost entirely of company vets. Many have been with Murdoch for at least a decade.

“With maybe one exception, they have all grown up with the company,” Chernin says. “Virtually all our key executives have been with the company for 10, 15 years. There’s a continuity of management.”

Chernin notes that he and Murdoch have hands-on experience running multiple divisions at News Corp.

“I’ve done the network, I’ve done the movie studio, I’ve been in the cable business,” he says. “There’s a shorthand (with Murdoch) and with me that comes from both of us having moved around the company so much.”

As a result, Chernin generally does not micromanage, company execs say.

Chernin still signs off on big-budget pics. He’s in the room when the broadcast network decides which shows will debut in the fall. He doesn’t hide his displeasure when he feels his execs are headed in the wrong direction.

But Chernin gives his execs plenty of freedom to run their companies.

“The style around here is, in a sense, like good parenting,” says Fox News Channel topper Roger Ailes. “You can go for their help, but they aren’t second-guessing you at every turn.”

Sometimes that means letting execs screw up.

Just as Murdoch bemoans Hollywood’s recent bout of sequelitis, Chernin has instilled in his execs the idea that creative boldness and consumer focus are the keys to success.

That may be one reason why Gail Berman, prez of entertainment at the Fox network, watches most of her dailies on a 13-inch TV.

“It’s how most of our viewers watch,” she says.

It’s why Fox, under Chernin’s watch, invested in risky pics such as “Titanic” or the upcoming “Master and Commander.” Or why the New York Post never runs a 50,000-word expose in the pursuit of a self-aggrandizing Pulitzer.

Critics argue that News Corp. profits by catering to the crass side of consumer instincts.

This was the company that ushered in a new era of gross-out comedies on the bigscreen with “There’s Something About Mary” and regularly revels in jaw-dropping reality concepts like this summer’s hit “Paradise Hotel” (AKA “Let’s Get Drunk and Screw on National TV”).

Yet whatever News Corp.’s sins, it has plenty of company in the corporate confessional.

Viacom’s MTV makes Fox Broadcasting look like PBS and, while Chernin admits Fox’s low-budget “From Justin to Kelly” was a case of corporate mis-focus, it pales compared to the mega-bucks flops like Warner Bros.’ “Pluto Nash.”

In any case, Chernin says “being critically acclaimed is not how we’re looking to define ourselves.” Instead, he urges his execs to put themselves in the place of potential customers when deciding which pics or pilots to greenlight.

“The last thing you want, the kiss of death, is when you see something that looks like, ‘Been there, done that.’ I know this about even myself: You’re looking for what looks different or cool or interesting.

“When we do that, that’s when we have success,” Chernin says.

(Michael Schneider, Claude Brodesser and Pamela McClintock contributed to this report.)