What Next for the Murdoch Dynasty?

What Next for the Murdoch Dynasty? - at www.moneyweek.com - the best of the international financial media

Lachlan Murdoch's announcement last Friday that he was quitting his post as deputy chief operating officer at News Corp leaves his younger brother, James, as the heir-apparent to the Murdoch empire. Unlike his sister, Elisabeth, who was the first of the trio to go it alone when she quit BSkyB in 2000 to launch her own production firm, Shine, Lachlan appears to have resigned without a "cast-iron exit strategy", says Owen Gibson in The Guardian. He cited "family reasons" for leaving, saying he wishes to return to Australia with his wife, Sarah O'Hare and eight-month-old son, Kalan. But the rumour mill immediately ground into action, with some saying that he doesn't like being pitted against James, who has impressed as chief executive of BSkyB, and others speculating that he was fed up of being in a non-job', third in the pecking order behind his father and News Corp's well-respected president and chief operating officer, Peter Chernin. According to the LA Times, Lachlan probably won't be replaced, "because the divisions he oversees are run by strong executives".

A surprise departure

Whatever his reasons for stepping down, Lachlan's departure is surprising he was always seen as the natural choice as successor. His father, Rupert, once described his eldest son as "first among equals" in the contest to succeed him, and those close to the family say he is most like his father in personality. Like Murdoch Snr, print was his first love. As a schoolboy, he took summer jobs working at newspapers and went straight from Princeton to work for News Corp in Australia. His tenure in charge of the print side was a successful one, especially the way he turned around the ailing New York Post. But his record is not unblemished. In 1999, the Australian telecoms firm, One.Tel a joint venture with Kerry Packer's son, James collapsed. The debacle, in which 1,400 people lost their jobs, and Packer and Murdoch Snr between them took a $760m hit, led to accusations that Lachlan was no more than a "rich brat".

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The Australian connection

Although London-born, Lachlan is often described as being the most "Australian" of Murdoch's children, says The Guardian. With a large lizard tattooed on his forearm and a "penchant for extreme sports", such as rock climbing and skin diving, he used to be regularly described as one of the world's most eligible bachelors, until he married. He is even better known in Australia than in Britain, however, and he is thought to want his son to grow up an Australian.

What about James?

For a long time, James looked like the least-likely contender to take over at News Corp. Viewed as the black sheep of the family, he pierced an eyebrow and dropped out of Harvard to launch a hip-hop record label, Rawkus Entertainment, with a friend. In 1996, News Corp bought the firm some say Murdoch Snr bailed him out and James was handed a job. In 2003, in an act of nepotism that ruffled many feathers, the relatively inexperienced 30-year-old was appointed chief executive of the British satellite broadcaster BSkyB, making him the youngest-ever chief executive of a FTSE 100 company. Within nine months, the share price had tumbled by nearly a third, but James has gone on to earn the grudging respect of his peers, and in the past 12 months has presided over continued growth in subscriber numbers.

Could the baton pass to his daughters?

Those who know Rupert Murdoch well say that his treatment of his children reveals a "rare streak of sentimentality", says Tim Luckhurst in The Independent on Sunday. How, sneer his critics, can a true capitalist (and Republican) justify appointing senior executives according to their DNA? But Rupert Murdoch has had a long-held dream of passing his empire on to his own flesh and blood he said as much in a reading at St Bride's Church in Fleet Street last month and the sadness expressed at his son's decision to stand down is likely to be due in part to the increased precariousness of his wished-for dynastic succession.

But if his children appear to be losing their appetite for his throne, Murdoch "has only himself to blame". He has been "uncharacteristically indecisive about his retirement plans" and "that same vacillation has infected" his assessment of his sons' relative merits. Devoted though James and Lachlan both are to their father, there is also the distinct possibility that, like their sister, Elisabeth, they have inherited their father's "ferocious independence" and would rather build their own empires than take on his. Murdoch has other children, but his eldest daughter, Prudence, 46, from his first marriage to Patricia Booker, has never sought a career in the media and has stayed out of the limelight, while his children by new wife Wendi Deng, Chloe and Grace, are still only two and three. But maybe there's still time. Cynics suggest these girls may be "the most malleable" of Murdoch's offspring. And in 20 years' time, Murdoch will still be only 94