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RUBY:

From Schwartz Media I’m Ruby Jones, this is 7am.

This year Rupert Murdoch turned 90, and that milestone has focused discussion on who will take over the world’s largest media empire.

Now Murdoch’s son Lachlan is making major strategic moves in his role as News Corp’s co-chair.

He’s also changing the way the company is structured - signalling that power is finally shifting in the media dynasty.

Today, contributor to The Saturday Paper Paddy Manning on Rupert Murdoch’s succession plan, and what the media empire will look like under Lachlan’s control.

It’s Friday October 8.

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RUBY:

Paddy, Rupert Murdoch recently turned 90. It sounds like he had quite a celebration. What do we know about his birthday party?

PADDY:

Yes so he turned 90 in March, and because of the pandemic they haven't been able to have a party until now.

So they've had something like 150 people to celebrate his 90th at their Georgian mansion Holmwood House that he bought in 2019 with his wife, Jerry Hall of course, just an hours west of London, near Henley on Thames.

And at the party, there was a lengthy tribute video that was put together by Rupert's daughter, Elizabeth, herself a TV producer. So you can imagine it was pretty well turned out video. And I know that the family has put months of work into it.

I was hanging around the National Film and Sound Archive last year, doing some initial research for my biography of Lachlan, and already at that time, they were trying to cull together all the archival footage of Rupert. So we know that, you know, a hell of a lot of work went into producing this video and yeah. Lachlan Elizabeth both spoke as well as you know, the former Australian prime ministers, John Howard and Tony Abbott and the UK Prime Minister Boris Johnson.

And it also had the theme song actually hilariously enough of the hit HBO series Succession.

Archival tape -- Succession:

“This is a family business, but the family is fucked and it's hurting the stock.”

PADDY:

You know, in a sort of nod from the family to this drama about an ageing media mogul and his four children vying for the top job at his company.

Archival tape -- Succession:

“I land the deal, I kill Kendall and I am crowned the King, just like in Hamlet.”

PADDY:

And there was one notable guest missing, though both from the party and the tribute video and that was Rupert Murdoch's youngest son, James.

And that's fascinating considering the significance of Rupert's 90th and what's going on at News Corp.

It's happening at a time when the future of the company and the question of who runs it is sort of up in the air.

RUBY:

Mm. So do we know why James didn't come to his father's 90th birthday? And and what does his absence tell us, Paddy, about the dynamics within the Murdoch family business right now and any succession planning that might be underway?

PADDY:

I think to understand that it's important to understand the family dynamics that have played out within the company over the last 20 or so years between Lachlan, James and Rupert.

So over the last decade, Lachlan and his brother, James have jockeyed for the role of successor to their father, Rupert.

Archival tape -- News reporter:

“The question is are these young men the next generation of Murdochs going to have a steady and strong a hand and voice.”

Archival tape -- News reporter:

“It is also a story of a sibling rivalry between Rupert Murdoch's sons, James and Lachlan, who were constantly competing with each other in a kind of Game of Thrones type succession.”

PADDY:

James, was once a real contender.

Archival tape -- News reporter:

“In interviews, Rupert had always spoke very glowingly that James was his go to guy to understand digital”

PADDY:

After Lachlan quit the company in 2005.

Archival tape -- News reporter:

“Lachlan had been tired of the infighting he felt he had been kind of sandbagged repeatedly by Peter Chernin.”

PADDY:

At the time, it was reported that he sort of felt emasculated. He was outplayed, in fact, by Rupert Murdoch senior executives, and quit the Empire in 2005. And to all intents and purposes, it seemed a permanent decision. He was not coming back to that.

Archival tape -- News reporter:

“In 2005, Rupert concluded his elder son didn't have what it took, was a little soft and hadn't proved himself for went swimming in the deep end.”

PADDY:

And so James became the sort of favoured successor and took on an increasingly senior roles running News International. But then in 2011, when the UK phone hacking scandal really broke wide open

Archival tape -- News reports:

“News international chairman James Murdoch has appeared again before British MPs to answer questions about the phone hacking scandal.”

PADDY:

You know News of the World reporters and possibly also editors, had accessed illegally the voicemail messages of not just, you know, royals and celebrities, but also ordinary people, including the voicemails of a murdered schoolgirl, Milly Dowler.

Archival tape -- News reports:

“But tonight, Milly Dowler's parents have been joined by the families of the Soham girls suffering now not only the grief of loss, but the knowledge of gross intrusion into their privacy and the possible interference with the police investigation."

PADDY:

Now, that revelation was the biggest crisis that News Corporation has ever faced. It split the company, it split the family and it upended the succession and James. Unfortunately for him, fairly or unfairly was the face of that scandal for News Corporation

Archival tape -- News reporter:

“James Murdoch has quit as chairman of the scandal ridden British arm of his father's media empire.”

PADDY:

He was tarnished in a way that made it sort of impossible for him to ever take over the company. The family took a while to realise the extent of the reputational damage that he'd suffered.

And since that time, Lachlan has been back in contention to take over from Rupert when he ultimately passes control.

RUBY:

Right, so the elder of the two sons, Lachlan Murdoch, is in the box seat to take over the company from his father. What’s his role right now, and what kind of influence does he have?

PADDY:

Well, this is the thing is that Lachlan has been OK. He has been the co-chair alongside his father of both Fox Corporation and News Corporation, which was split in the wake of the phone hacking scandal.

But he has also been the CEO of Fox Corporation, which is the bigger of the two companies since 2019. And in the years since he's taken over as CEO, he has really begun to make his mark on both Fox and News. And in one way, it's very natural that Lachlan would succeed his father.

But it's also commonly been observed that Rupert Murdoch would be taken out of News Corp, which he has devoted his entire life to would be taken out in a box. You know that he would work to lead dropped.

Archival tape -- Wall Street Journal:

“You have reportedly told your biggest outside shareholder, I'm going to stay on as CEO until I'm 130.”

Archival tape -- Rupert Murdoch:

“Hahah I’m more realistic than that.”

PADDY:

He is a legendary workaholic, and he has, as I said, devoted his life to that company.

Archival tape -- Wall Street Journal:

“What keeps you at it?”

Archival tape -- Rupert Murdoch:

“I just love it. It's the no, I have busy, very busy days and it keeps me stimulated, keeps me curious. That's the way to stay young.”

PADDY:

And yet what's happening, according to the insiders at News Corp that I speak to is that Lachlan really is now in the process of taking control. And Rupert is stepping back both from day to day operations and also from some of the bigger strategic decisions that are being taken in the last few years, which much more reflect Lachlan's influence.

RUBY:

Well, let's talk about some of those big strategic decisions that have been taken. Then what are they? And tell me about how they reflect the way that Lachlan might be looking to run things?

PADDY:

Well, Fox and News Corp have over the last three years, according to a recent tally by the Financial Times, done a string of acquisitions, something like 20 across both companies, which add up to value of ballpark US $7 billion. And these are deals which are more closely associated, many of them with Lachlan than with Rupert.

Lachlan has also pushed an acquisition of a free streaming service, so recognising that there are structural challenges for traditional cable TV.

Instead of trying to beat the likes of Netflix at their own game. He's invested in a free ad, ad driven video on demand service called Tubi, which is now enjoying spectacular growth. It's coming off a low base, but it is starting to make a meaningful contribution to the profits at Fox Corporation.

And these kind of bolt on acquisitions are slowly changing the earnings outlook of News Corp from a legacy print business to a much more digital oriented, forward looking business.

RUBY:

We'll be back after this.

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RUBY:

Paddy, in the last few weeks News Corp has made a few significant announcements about how the company is structured. Can you tell me about those and what they say about the future of Rupert Murdoch’s empire?

PADDY:

Yes. So just in the last fortnight, we've seen at News Corp an announcement that the Murdoch Family Trust, which is the vehicle through which the Murdoch family owns their stake in both Fox and News Corp. And we've said that they've agreed to cap their shareholding at 44 per cent now. At the moment, they own something like 38 per cent of the voting shares, but they've made this announcement at the same time as they've agreed to drop a poison pill provision, which prevents any hostile bidder acquiring more than 15 per cent of News Corp and has been in place since the two companies were split in 2013.

They've dropped that as a concession to some of the kind of long standing criticisms that institutional investors in the corporate governance community have kind of had of both Fox Corp and News Corp.

There's been a long standing idea that there's a Murdoch discount that kind of hovers applies to News Corp, which is that Rupert Murdoch has always been such a huge risk appetite. He's unpredictable. He's not a box taker when it comes to corporate governance at all. He is kind of buccaneering.

So I think Lachlan is trying to kind of get the house in order at News Corp to kind of get rid of that Murdoch discount once and for all.

RUBY:

And in terms of getting the house in order Paddy, to what end, what's going to happen next at the company? What are you hearing?

PADDY:

Yes. So just last week, we had the first strategy day for Foxtel, where the chief executive and the rest of the executive team, that chief executive being Patrick Delaney.

He did run through their financials over the last three years since they've executed a kind of turnaround and cut costs and introduced their own streaming subscription services here. You know, Kayo for live sports and Binge for entertainment and soon to be followed by Flash for news and these are enjoying spectacular growth. The traditional pay-TV business still accounts for roughly 90 per cent of the revenue at Foxtel, but there is some hope there is actually a future despite the fading business model of pay-TV. There's a future in streaming.

They are very much talking up the upside, and they didn't confirm a float. But almost universally, it's expected that there will be a public offering of shares in Foxtel for the first time early next year.

RUBY:

And what would the significance of that be Paddy? Is that something that they've wanted to do for a while?

PADDY:

It is. It's something that they considered and then shelved five years ago when Netflix was first kind of making inroads in Australia. And what it would signify for News Corp is it's another step along the way of repositioning NewsCorp as a forward looking, digital oriented business.

And investors have rewarded, you know this, that there is a kind of reappraisal going on by Fox Corp and News Corp shares have outperformed in the US and in the Australian share markets, respectively. And a lot of that can be shared home to the decisions that Lachlan has made in the last couple of years.

And so I think that there's, for the first time, a kind of focussed real focus on where Lachlan might be taking the Murdoch empire now.

RUBY:

Mm. And Paddy, just finally, why do you think that is? Why do you think that we are finally seeing Rupert Murdoch beginning to to step aside and make room for Lachlan in this way? Because you said it's something that people never thought they would see happen, that Rupert would need to be taken out of News Corp in a box? So what is it that you think has changed?

PADDY:

I think there's a combination of things. I think since his bad accident, on Lachlan’s yacht a few years ago, Rupert has been stepping back and there is a natural process there, of course, as he turns 90 as well.

There's also increasing confidence in some of the business decisions that Lachlan has made.

And there's also a third dynamic, which is that having stepped off the News Corp board in 2020, James is out of the picture. He has, like all of the Rupert’s six children, has got two billion dollars to play with as a result of the sale of 21st Century Fox to Disney.

And so there is no kind of contest anymore.

Lachlan is in charge and is putting his mark on the business, and so far investors seem to like it.

Fox faces a whole lot of challenges. There's no doubt about that. They are politically controversial, to say the least.

But financially, at the moment, you've got to say the market is giving the thumbs up to the kind of deals that Lachlan has been doing as he takes increasing control both at Fox Corporation and News Corporation.

RUBY:

Paddy, thank you so much for your time.

PADDY:

Thank you, Ruby.

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RUBY:

Also in the news today...
The new NSW Premier Dominic Perrottet has unveiled a revamped roadmap out of the Covid-19 lockdown after the state recorded 587 new cases and eight deaths on Thursday.

Major changes to the roadmap include doubling the number of adults allowed to gather in homes to 10 people and increasing the cap on people able to attend weddings and funerals to 100 people from Monday.

The premier also announced that all children will be returned to school by October 25.

And in Victoria, at least eleven people have died from Covid-19 outside a hospital in the past two months.

While most of these covid-19 cases weren’t known to health authorities before they died, Victorian doctors have raised concerns that more people could die at home warning the at-home program for monitoring thousands of patients with the virus is being overwhelmed.

7am is a daily show from The Monthly and The Saturday Paper. It’s produced by Elle Marsh, Kara Jensen-Mackinnon, Anu Hasbold and Alex Gow.

Our senior producer is Ruby Schwartz and our technical producer is Atticus Bastow.

Brian Campeau mixes the show. Our editor is Osman Faruqi. Erik Jensen is our editor-in-chief.

Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio. Special thanks to Alex Gow for original compositions on the show this week.

And if you enjoyed today’s episode, make sure to follow Schwartz Media’s entertainment podcast, The Culture.. host Osman Faruqi is releasing an episode on season three of Succession next Friday.

I’m Ruby Jones, see ya next week.