Peter Chernin has become so synonymous with Fox’s film and television operations it’s hard for the town to imagine doing business at Fox without him. Now they’ll have to, and so will Rupert Murdoch.
As the biz was recovering from Oscar night, news of Chernin’s exit early Monday set off a flurry of speculation about the inevitable changes in store for the Fox lot. Murdoch, in confirming Chernin’s resignation as of June 30, said he would now oversee Chernin’s direct reports at News Corp.’s L.A.-based businesses. It was made clear to News Corp.’s top brass that Chernin would not be directly replaced as News Corp.’s prexy and chief operating officer.
But insiders said some sort of reorganization would be forthcoming in the next few months to streamline the number of direct reports Murdoch will inherit.
As part of the post-Chernin shuffle, Fox Filmed Entertainment co-chairmen Jim Gianopulos and Tom Rothman are expected to be given expanded responsibilities. Fox Networks Group chairman-CEO Tony Vinciquerra may also be in line for additional oversight of parts of Fox’s TV operations.
Company sources cautioned that Murdoch was focused on streamlining his direct reports but doing it in a way that would maintain stability among the company’s senior execs, most of whom have been in their posts for years. Murdoch said he would work closely with Chernin during the next four months to “ensure an effective transition.”
There’s much speculation internally that although Murdoch very much wanted Chernin to stay on for at least another few years, his departure now clears the way for Murdoch scion James Murdoch to come in as his father’s No. 2 within a few years. James Murdoch, who’s CEO of News Corp.’s Europe and Asia operations, has seen his turf expand steadily within the company during the past decade. Daughter Elisabeth Murdoch, who runs the successful U.K.-based Shine Group film and TV venture, is also seen as a likely candidate to one day run News Corp.’s entertainment ops.
Although Chernin’s contract renewal talks were highly public in recent months, the timing of Monday’s announcement caught even senior execs on the Fox lot by surprise. The timing was triggered by a News Corp. board meeting set for today in Gotham, at which Murdoch would have been under pressure to address Chernin’s future with the company.
Chernin, who served as chairman-CEO of Fox Group but also steered other aspects of News Corp.’s global operations, will set up a Fox-based production shingle, to be financed by the company through the rich exit terms in his existing contract.
Chernin was not immediately available for comment. Those who know the exec said he had long been frustrated because he knew he would never ascend to the top job at News Corp. since Rupert Murdoch intends for his successor to be one of his children. James has been the front-runner for the past few years.
Chernin also was known to have disagreed strongly with Murdoch’s drive to expand the company’s newspaper holdings with the acquisition of Wall Street Journal parent Dow Jones in 2007 for $5 billion. The New York Times is widely believed to be Murdoch’s latest object of pursuit.
But the mogul’s affinity for the newspaper biz — detailed in a curiously timed story in Monday’s New York Times — has dented News Corp.’s bottom line and share price significantly in the past year. Earlier this month, News Corp. reported its worst quarterly numbers in three years, posting an operating loss of $7.6 billion compared with income of $1.4 billion in the year-earlier quarter. A prior charge of $8.4 billion due to writedowns of several assets, including the $5 billion acquisition of Dow Jones, foreshadowed the grim report.
Despite the choppy waters of the newspaper biz, Murdoch-watchers were highly skeptical that the News Corp. chief would devote himself to the day-to-day management of the company’s Hollywood-centric businesses.
“Rupert Murdoch doesn’t like the entertainment business. He will get only so far with it before wanting to return to more direct oversight of newspapers,” opined Michael Wolff, author of last year’s Rupert Murdoch bio “The Man Who Owns the News.”
Meanwhile, Chernin was said to be ready to trade in the daily grind of running a public company — at a difficult time for the media biz overall — for a more entrepreneurial and focused effort that would be his own fiefdom.
Chernin first joined News Corp. in 1989 as prexy of programming for Fox Broadcasting, when Murdoch’s ambitious startup was still in its infancy. He came to the company after stints as a film exec at Lorimar and as head of programming at pay cabler Showtime.
Chernin has been president and chief operating officer of News Corp. since 1996; he joined the company in 1989 as prexy of programming for Fox Broadcasting Co. He was promoted to chairman of the 20th Century Fox film studio in 1992 and upped to prexy-COO of News Corp. in 1996.
Chernin has often been among the highest-paid media execs without a chief exec title. For the fiscal year ended last June, he netted $28.8 million, topping even Murdoch. His exit package with the company calls for him to have a six-year production pact with Fox; the company is obligated to buy at least two films a year from his shingle.
In the past 18 months, Chernin played a showbiz statesman role in helping the congloms navigate tricky contract negotiations with the DGA and the settlement of the WGA strike.
“Peter’s contributions to the company over the past two decades have been immeasurable,” Murdoch said in a statement.
Chernin said in a statement that his resignation was “a difficult decision for me.” He hailed Murdoch as “bold, entrepreneurial, innovative, creative and incredibly supportive.”
Chernin has long been a well-regarded media exec on Wall Street. On a down day for the markets overall, News Corp. shares dropped 4.3% in trading Monday to close at $6.39.
Murdoch seemed to be trying to rally his troops in a lengthy memo he sent to the company’s 64,000 employees on Monday. Murdoch detailed Chernin’s departure as well as his view of the imperatives for the company at a time of turmoil in world financial markets and for the media and entertainment biz.
“We are in the midst of a phase of history in which nations will be redefined and their futures fundamentally altered,” Murdoch wrote. “Many people will be under extreme pressure and many companies mortally wounded. Our competitors will be sorely tempted to take the easy beat, to reduce quality in the search for immediate dividends…. The direction of the business now and over the next few years will define the character of our company for decades.”
Murdoch’s memo also said the company would be looking for ways to streamline its administrative functions, to achieve cost savings and to remove bureaucratic obstacles between divisions.
“Many of you have told me how hungry you are to work more closely across our companies. Many of us have been frustrated by the things that can get in the way of that. From systems that don’t talk to each other to incentives that struggle to capture the opportunity and aspiration of our total group,” he wrote. “These obstacles are obvious to us all. There will be a streamlined management structure between our Los Angeles-based business units and the rest of the company.”