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News is good news

Murdoch, Chernin keep Fox empire thriving

It’s not uncommon for an entertainment conglom to have one or two standout divisions. But the latest News Corp. earnings unveiled Wednesday attest to the fact that Rupert Murdoch’s communications empire is thriving on multiple fronts.

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

So, how do they do it?

For one thing, in Rupe’s world, units don’t forcibly synergize: They work together only 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.

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

And 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 said. “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:

  • The Fox network under Sandy Grushow 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 watercooler reality skeins (“American Idol,” “Joe Millionaire”).

  • The risk-taking at 20th Century Fox and Fox Searchlight are paying off. Both film divisions are 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 New York and L.A. deliver more profit. Power of the station group makes Fox TV Stations prexy Mitch Stern one of the most powerful people 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. Twentieth’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.

Confidence in Chernin

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. 2s Murdoch has ever truly clicked with.

“Rupert’s found someone he trusts and is comfortable with,” Kellner said. “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.

Focus on consumers

“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 said. “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 said. “Virtually all our key executives have been with the company for 10, 15 years. There’s a continuity of management.”

And while Chernin signs off on big-budget pics and the fall network schedule, he typically gives his execs plenty of freedom to run their companies.

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

And 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.

Chernin 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 said.