In a milestone moment for 21st Century Fox, the long-awaited generational transition of the Murdoch family is under way as James and Lachlan Murdoch will formally be handed the management reins of their father’s media and entertainment empire.
In an exec overhaul to be unveiled shortly, James Murdoch will be named CEO of 21st Century Fox while Lachlan Murdoch will become executive chairman alongside their father, Rupert Murdoch. Chase Carey is stepping down as chief operating officer but will remain with the company through May 2016 in a still to be defined role.
Rupert Murdoch’s vision for the transition is that James and Lachlan will jointly run the company, in the same way that Rupert Murdoch and Carey have run the company together for the past few years. However, sources emphasize that even with James taking on the CEO title, Rupert Murdoch will remain actively involved in the day-to-day management of the company. “He’s not going anywhere,” a source said of the 84-year-old media titan.
Reps for Fox declined to comment beyond a statement: “The matter of succession is on the agenda at our upcoming, regularly scheduled board meeting.” That meeting is expected to take place on Tuesday. One of the many questions spurred by the succession plan is what the reporting structure will be for James and Lachlan.
CNBC was first to report word of the impending shakeup. Fox insiders have been hearing rumors about movement for James and Lachlan for weeks. Lachlan is expected to move to Los Angeles from his current home base in Sydney while James remains in New York.
The timing of the news caught most on the 20th Century Fox lot by surprise Thursday. By day’s end, studios staffers had yet to receive any official communication about the media story of the day. Insiders noted that the news feed on the company’s intra-net service was full of media reports about the coming overhaul.
The first phase of the brothers’ ascent came in March 2014 when Lachlan was named non-exec chairman of 21st Century Fox and News Corp. while James was named co-COO of Fox working under Carey.
Sources say James and Lachlan have been increasingly visible presences at the company, digging into the details of budgeting and long-term planning with company division heads. Fox Networks Group CEO Peter Rice has reported to James Murdoch ever since the latter’s elevation to co-COO, which has put him in the thick of the conglom’s biggest businesses, its cable and broadcast network group.
James Murdoch has also been strengthening his relationships with the Wall Street community and has appeared on the last several quarterly earnings calls, fielding analyst questions alongside Carey.
“James has become a much better known commodity to the Street,” said Tuna Amobi, an analyst with S&P Capital IQ.
In a December call with investors, James Murdoch bristled at succession questions, remarking that Fox has been more transparent than rivals such as Viacom, which is facing its own succession drama as Sumner Redstone ages, in signaling how its future leadership will manifest.
Meanwhile, Carey last year signed a new two-year contract that gave him an out at the end of this year. That was also taken as a signal the Murdoch’s longtime lieutenant was ready to transition out of the role he moved into in 2009.
As such, the movement for James and Lachlan comes as no surprise, but it marks the beginning of a new era for the media biz that Rupert Murdoch has helped shape over the past 50 years.
“This will be the biggest generational shift of any media company,” said Rich Greenfield, media analyst with BTIG Research, who praised the planning as “an orderly transition.”
“Anybody who has not been expecting the Murdoch family or the sons to take over has not been paying attention. They’ve been actively positioning this,” Greenfield said. “The sons are ready to step into more prominent roles.”
Observers questioned the degree to which Rupert Murdoch would be able to take even a half-step back and allow his sons to call the shots. Multiple company sources said that the elder Murdoch intends to stay hands-on in driving the company strategy. A source noted that Rupert Murdoch has been more engaged of late in the finer details of the Fox film and TV studio business than he had in years prior.
“The question is although Rupert is stepping down, what extent will he really separate himself from the company,” said Marla Backer, an analyst with Research Associates. “He’s obviously someone who has tremendous vision, and he’s certainly someone to be reckoned with in the media world, so I do hope he stays involved.”
One question is how the Murdoch clan will keep Fox News Channel chief Roger Ailes happy. The television executive reportedly has clashed with Lachlan Murdoch in the past.
“That is a potentially tense situation,” said Amobi. “It’s fraught with potential minefields because of the personalities involved.”
Ailes told Variety that he will continue to liaise with Rupert Murdoch through the transition: “My job is to report to Rupert, and I expect that to continue.”
News of the succession plan didn’t do much to Fox’s stock price in trading Thursday. As word of the succession plan spread, shares dipped about 25 cents, or less than 1%, in early trading. The stock closed down 3 cents to $32.82.
(Pictured: Lachlan Murdoch, Rupert Murdoch and James Murdoch)