Britain: Murdoch dynasty in doubt

By CHRISTOPHER TORCHIA | July 18, 2011 | 12:59 PM EDT

FILE - A Thursday, Jan. 29, 2009 photo from files showing media industry entrepreneur Elizabeth Murdoch taking part in a breakfast meeting about 'Digital Britain' at Downing Street in London. Some analysts believe Rupert Murdoch is positioning 42-year-old daughter Elisabeth as a successor in the event that 38-year-old James, chief executive of his father's European and Asian operations, is forced to step aside or faces arrest. (AP Photo/Alastair Grant, Pool, File)

LONDON (AP) — James Murdoch scaled the rungs of the global media empire that his father built. Now scandal taints the heir apparent, threatening to derail the expected succession and shaking the assumption that the Murdoch dynasty would preserve its tight grip over the multibillion-dollar business.

Founder Rupert Murdoch, 80, has long expressed a wish to hand his publicly traded News Corp. to his offspring, and he retains the voting power to make key decisions. But shareholders and board members are said to be troubled by revelations of wrongdoing on Murdoch's watch, and feel the U.S.-based company needs fresh leadership.

A pivotal moment for the family comes Tuesday when the media mogul and his son testify before British lawmakers investigating the hacking and alleged police bribery at a now-shuttered tabloid, News of the World.

"The future is looking increasingly gray" for James Murdoch, said Ivor Gaber, professor of political journalism at City University London. "There are now investors, particularly in the United States, who are suggesting that the time has come to end the Murdochs' dynastic hold on News Corp."

Some analysts believe Murdoch is positioning 42-year-old daughter Elisabeth as a successor in the event that 38-year-old James, chief executive of his father's European and Asian operations, is forced to step aside or faces arrest.

"At the end of the day, that's what made it a success. It's 'Brand Murdoch,'" said Richard Hillgrove, a London-based public relations consultant and former commentator for Murdoch-owned newspapers in New Zealand. "He's going to do anything in his power to make sure it stays that way."

Hillgrove described Elisabeth Murdoch, who is expected to join the board of News Corp. in October, as the "likely contender" for leadership of the company and noted that she appears "untainted and pretty clean" in comparison to the pressure bearing down on her brother, James.

There have been unconfirmed reports in the British media of family tension and dissatisfaction on the part of Elisabeth with how the company has been run; some observers speculate people close to the family have leaked information to elevate her stature.

However, a suit in the United States has questioned News Corp.'s move in February to buy Shine Group., the television production company founded in Britain by Elisabeth, in a $670 million deal viewed by some shareholders as overpriced and fueled by nepotism. And while the company is successful, Elisabeth lacks experience at the highest levels of international management.

Another Murdoch son, 39-year-old Lachlan, is on the board of News Corp., but he quit a high-level position in the company in 2005 and does not have a management role. He is saddled in part by the legacy of a failed investment in an Australian telecoms company a decade ago.

Chase Carey, the American deputy chairman and president of News Corp., could step in to head the group as an option from outside the family. He previously worked with Fox television, a company holding.

Murdoch crafted a behemoth over the decades, acquiring newspaper, television, publishing and entertainment interests in Asia, Europe, the United States and Latin America. New York-based News Corp., which employs more than 50,000 people, said it had total assets as of March of $60 billion, and total annual revenues of $33 billion, though the scandal has pushed down share prices.

The accusations of phone hacking and police bribery by journalists at the News of the World reached into the elder Murdoch's inner circle with the arrest Sunday of Rebekah Brooks, former head of his British newspaper unit.

James Murdoch did not directly oversee News of the World, where the phone hacking of celebrities and others allegedly occurred, but he approved payments to some of the paper's most prominent hacking victims, including 700,000 pounds ($1.1 million) to Professional Footballers' Association chief Gordon Taylor.

He said he "did not have a complete picture" when he approved the payouts. Still, commentators view his position as fragile because of questions about whether the criminal investigation will go higher up the chain of command at News Corp. Additionally, the company could be liable under the U.S. Foreign Corrupt Practices Act, which bars American companies from bribing foreign officials for business.

Journalists at the News of the World hacked the voice mail of mobile telephones in an attempt to get information for stories that would help sell newspapers, and allegedly paid police for information that could also be used in the production of news reports.

Louise Cooper, an analyst in the London office of the brokerage BGC Partners, described years of speculation about who would take control after Rupert Murdoch as a perpetual process of "one's up, another one's down" that focuses on the tycoon's children. In the end, she said, it is the patriarch's decision.

"He still has absolute control over that company," Cooper said. She said that barring further revelations about the involvement of James Murdoch in the scandal, "it's difficult to write him off completely."

Rupert Murdoch controls News Corp. through a family trust that holds 40 percent of the company's Class B voting shares. The succession question has centered on James, Elisabeth and Lachlan, children by Murdoch's second marriage to Anna Tory.

Elisabeth is married to prominent British public relations executive Matthew Freud. She resigned as managing director of British Sky Broadcasting, a lucrative satellite broadcaster in which News Corp. is the biggest shareholder, in 2000 to go her own way. This month, Murdoch dropped a bid to take full control of BSkyB in response to the uproar over phone hacking.

Lachlan Murdoch, once seen as the heir apparent, had been elevated to deputy chief operating officer of News Corp. by the time he quit in 2005 to go back to Australia.

That left James as the expected heir. He has been chairman and CEO of the company's European and Asian operations since 2007, and later became deputy chief operating officer of News Corp.

Rupert Murdoch has another daughter, Prudence, from his first marriage to Patricia Booker; she is married to Alasdair MacLeod, who stepped down last year after 20 years as a News Corp. executive, most recently as managing director of the Australian newspapers.

Murdoch also has two daughters, 9-year-old Grace and 7-year-old Chloe, with his wife, Wendi Deng.


Robert Barr and Martin Benedyk contributed.