News Analysis: Murdoch is online for expansion

The News Corps chief - with help from new `deputy' - is exploring cyberspace at last
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WHAT'S THIS? A touchy-feely Rupert Murdoch, obviously reinvigorated by the embrace of his new wife, and not just interested, but seemingly enchanted with the Internet?

Company insiders say the attitudinal changes aren't directly related, but note that they stem from Mr Murdoch's renewed confidence about News Corp's direction and its long-term staying power - with or without him at the helm. The new mood has corresponded with a 35 per cent rise in News Corp's share price so far this year.

Both factors are being put down to the emergence of Peter Chernin, officially president and chief operating officer of News Corp and chief executive of Fox Entertainment, the US TV and movie studio arm. Unofficially, Mr Chernin is Mr Murdoch's deputy and, according to some, an increasingly close personal confidant.

Mr Chernin sprang to prominence this week when Newsweek revealed he was viewed by Mr Murdoch as the successor, should the Australian-cum- American tycoon suddenly die. That demonstrated to investors, say analysts, that Mr Murdoch has accepted what many in the industry have been quietly urging: withdraw the children from consideration in any near-to-medium term succession.

Of course Mr Murdoch has stated clearly in the past that the children, notably 27-year-old Lachlan, head of the Australian arm News Ltd and board member of News Corp, and 31-year-old Elisabeth, managing director of Sky Networks, needed to prove themselves to secure the top job. "Peter is very much senior to them," Mr Murdoch told the magazine. Asked about the management line-up if he were suddenly unable to run News Corp, Mr Murdoch, 68, added: "I don't like contemplating my death. It would certainly be a matter for the board. I would think Peter would probably be the CEO. Maybe my older son [Lachlan] would become chairman. I don't know."

Mr Chernin may only have recently entered the spotlight that goes with being first in line for the News Corp succession, yet his rise could not be considered meteoric.

He was named president and chief operating officer of News Corp in October 1996, after previously heading Fox Filmed Entertainment from 1992 and, prior to that, running Fox's broadcasting business where he directed the network's programming, advertising and marketing departments. After joining the network in 1989, Mr Chernin was instrumental to Fox, airing such hits as The Simpsons and Beverly Hills 90210.

But it was upon becoming chief executive of the Fox film studio that Mr Chernin rocketed to the pinnacle of Mr Murdoch's affections. As studio boss, he oversaw Titanic, the most profitable film ever made, and struck gold with The Full Monty, Speed and Independence Day. That surety of touch generated profits that extended to hundreds of millions of dollars, helping to off-set the weaker performance in several News Corp divisions, including the plunging profit record of BSkyB as it embarked on digital broadcasting. In 1998Fox become the number-one studio, with a record $2.69bn (pounds 1.68bn) in box office receipts.

If that weren't enough to earn Mr Murdoch's gratitude, the former book editor and associated publicity director of St Martin's Press also transformed the money-making prospects of Fox TV. After years of being dismissively dubbed the "fourth network", Fox has become the number-two ranked US broadcaster for the key demographic sector of 18-49-year-olds. Moreover, Twentieth Century Television, Fox's network production arm, with hits such as Ally McBeal and The X-Files, became the leading supplier of programming to all television networks. The formula for Fox's triumphal progress will be eerily familiar to Britons who watched BSkyB rise, phoenix-like, from the ashes of near insolvency since the mid-Nineties. Like Sky, Fox gambled on sports, purchasing NFL viewing rights for $1.6bn in 1993. It has since acquired further sports rights and stands to make upwards of $1.5bn on syndicating re-runs over the next three years.

Mr Chernin has helped spearhead News Corp's expansion into Europe. In December he approved the pounds 25m acquisition of TM3, a German cable channel with annual losses of around pounds 15m. In May, he directed TM3 to pay pounds 250m to land German rights for the Champions League, instantly attracting attention to the channel.

With Fox minting record cash flows and News International continuing its profitable hegemony among British newspapers, Mr Murdoch has, at long last, begun to try to remedy News Corp's weakness in the Internet world. Having earlier decried the lack of profits to emerge from cyberspace, Mr Murdoch has had to admit that the company is one-to-two years behind the curve in on-line development.

The admission could probably also be made by a number of European corporate bosses, including Vivendi's Jean Marie Messier, who has recently attempted to up his company's Internet opportunities. Indeed, like Mr Murdoch last week, Mr Messier agreed to a business venture with Japan's Softbank to encourage US Internet firms to invest in Europe.

Now some of Europe's media players are aware of the Internet opportunities unfolding, it's rather unlikely that Mr Murdoch can ever dominate cyberspace to the degree he has pay-TV. For the moment, however, the development of News Corp's Internet investment fund partners, looks set to be an object of affection - once, that is, Mr Murdoch returns from honeymoon.