Murdochs face long fight to save their media empire

London: James Murdoch's resignation as the head of the troubled British newspaper division of News Corp raises more questions than it settles: How does this affect his position as the presumptive heir to his father, Rupert's, global media empire? Does it help insulate James Murdoch in any meaningful way from the scandal still spreading through News International's newspaper division?

Most importantly for the News Corp, what does this say about the company's commitment to its newspapers? If James is still the heir apparent but is moving away from oversight of newspapers, will that mean that News Corp is looking to shed its newspapers too, especially the scandal-stained stable of titles in Britain?

To be fair, News Corp as a company isn't suffering badly from its British nightmare. Its stock is trading at a four-year high. However, that hasn't stopped activist shareholders from putting pressure on the Murdochs. The family will want to draw a line under this mess. But how?

The line or succession

James has long been considered the next in line for the Murdoch media empire, at least since his elder brother Lachlan decided in 2005 to focus on businesses outside of News Corp.

Jame Murdoch in this file photo. Reuters

However, last weekend, when Rupert travelled to London to rally the troops at the Sun, the family's flagship tabloid in Britain, he was accompanied by Lachlan rather than James.

For those trying to read whether the scandal had affected the succession plans at News Corp, this was read as a possible changing of the guard.

Lachlan remains a director at News Corp, but he was just named the chairman of Australia's Ten Network. Media management experience outside of News Corp might be seen as a plus, particularly as questions continue about its corporate culture and governance. And a switch to Lachlan might allow the Murdoch family to guarantee succession by bringing in someone with a cleaner rap sheet than James.

Newspapers no more

Rupert Murdoch built his empire on print before expanding into television and movie studios. He is a 20th Century newspaper baron who built a global media empire. Other newspaper families would have been wise to follow his lead on diversification, but at heart he still remains a newspaperman.

James Murdoch is moving to the New York headquarters of the family empire where the company says he will oversee their lucrative pay television business. He has always expressed more passion for the TV business than the newspaper business, so this decision might suit him. Indeed, during testimony before a UK Parliamentary committee last year, he downplayed the commercial importance of newspapers at News International and dismissed the News of the World's importance, saying it accounted for only 1% of its business.

News Corp chief operating office Chase Carey said the company has discussed selling or spinning off its newspaper business. He told a media conference in the US on Tuesday that “there certainly is an awareness” that News Corp would trade much higher if it got out of the newspaper business, according to a report from Bloomberg.

Where does the scandal end?

It's now well over a year after revelations in the New York Times and The Guardian helped destroy the 'one rogue reporter' defence that News Corp had clung to when its staff were accused of illegally accessing the voicemail messages of thousands of people, including not only celebrities and politicians but also ordinary Britons.

However, this scandal is like the rabbit hole in Alice in Wonderland: No one knows how deep it goes. What started as a accusations of phone hacking has now spread to computer hacking, but that is not the end to the explosive allegations.

Earlier this week, Sue Akers, deputy assistant commissioner at Scotland Yard and head of three separate police inquiries into the scandal, said there was “a culture at The Sun of illegal payments”. The payments went to a “network of corrupted officials”, she said, adding that one officials had received £80,000 over a period of several years.

This came just a day after Rupert Murdoch launched the Sun on Sunday to replace the shuttered News of the World, which James Murdoch closed last year in an early and shocking attempt at damage limitation.

It's unlikely that the Murdoch would shutter the Sun; it was the first paper that he purchased in the UK and is still the commercial jewel in British newspaper crown. The Sun on Sunday launched with a stunning 3.2 mn in sales.

It's hard to think of a way that the Murdochs can easily draw a line under such a high profile affair, especially as it continues to unfold. There are more witnesses yet to speak at the Leveson Inquiry and the possibility of future explosive revelations cannot be ruled out. The Financial Times says that it may be up to a year before the full extent of the exposure the company faces from the scandals is known. Until then, the Murdochs will be left trying to simply contain the blaze rather than have a hope of putting out the flames.

Updated Date: Mar 01, 2012 20:22 PM

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