So where does Rupert Murdoch go from here?

The media magnate's son Lachlan was the heir apparent. But last week he quit, and now his ageing father must work out a new future for the News Corp empire. Tim Luckhurst reports

It was the the former editor of the Murdoch-owned Sunday Times, Andrew Neil, who best expressed this apparently sentimental weakness in Murdoch's famously ruthless personality. "In the end," said Neil, "picking the people to run a company on the basis of their genetic make-up is not the best way to survive." Murdoch seemed determined to do it anyway. Three decades ago, he achieved the traditional aristocratic goal of breeding "an heir and a spare". Much of his time since has been spent setting Lachlan, now 33, and James, 32, challenges to determine which of them can best replace his father.

On Friday, Lachlan appeared to bow out of the contest. Resigning as deputy chief operating officer of News Corp, Rupert's first son revealed that he intends to spend more time with his wife, ex-Wonderbra model Sarah O'Hare, and their eight-month-old son. Lachlan will retain his seat on the News Corp board. Rupert's response revealed no anger. He was "particularly saddened by [his] son's decision". Lachlan responded by thanking his father for "all he has taught me in business and in life". He added: "It is now time for me to apply those lessons to the next phase of my career."

Rupert has only himself to blame. He has been uncharacteristically indecisive about his retirement plans. Two and a half years ago, he revealed that his sons were the only executives at News Corporation that he would trust to tell him he was past it. "I don't know what the time frame will be," he said, "but if they knock on the door and say, 'Dad, you're losing it' - which they would not shrink from - I'll go." That seemed to confirm that Lachlan and James would have the ultimate say over the timing of their own succession. But then their father recanted. Apparently rejuvenated by his third marriage to Wendi Deng and daily workouts in the News Corp gym, Rupert told shareholders at his company's 2003 AGM that his retirement plans had been put on hold "forever". He would have to be "carried out".

The same vacillation has infected Rupert Murdoch's assessment of Lachlan and James's relative merits. In a 1997 interview, he said: "Currently, it is the consensus that Lachlan will take over." But that was before the collapse in May 2001 of the Australian telecoms company One.Tel, in which Lachlan had masterminded News Corp's A$575m (£206m) investment. Closure left 1,400 people jobless and Lachlan was attacked for what some derided as an arrogant, "rich brat" response.

Rupert appeared to forgive him, but he gave his younger son the chance to prove he could do better. In November 2003, James Murdoch was appointed chief executive of the British satellite broadcaster BSkyB. There was initial shareholder disquiet. James was catapulted into a job that made him the youngest ever chief executive of a FTSE 100 company, with little of the experience normally required. At first, the concern seemed legitimate. Subscriber growth had tumbled, the share price plummeted and James did not allay fears when he revealed that his daily schedule included a telephone call to his father. At BSkyB's 2003 AGM, the new CEO faced an inauspicious task: crushing a shareholder revolt.

He survived, and Rupert's second son has proved much more effective than critics of the hereditary principle expected. In the past 12 months, he has presided over continued growth in Sky's subscriber numbers, which remain on target to hit eight million by the end of 2005. Prior to Friday's announcement of Lachlan's resignation, James's success had prompted claims that he had replaced his older sibling in his father's succession plans. Earlier this year, when Rupert Murdoch told a conference of American newspaper editors to embrace the internet or suffer dire consequences, James hinted that his father's conversion to new technology might be based on his advice.

So - James was in the ascendancy anyway and Lachlan's decision is little more than a recognition of reality? That is one reasonable conclusion, but executives who have worked with Rupert Murdoch suspect that he will not take quite so sanguine a view of Lachlan's decision. He has now seen two of his children indicate a preference for their own projects over his. His daughter Elisabeth was the first to spread her wings. After being groomed as a highly effective executive within her father's empire, she quit to try her hand at making money on her own. She has proved an adept entrepreneur and now runs her own successful television production company, Shine.

There can be no guarantee that James will not, one day, be tempted to try the independent route himself. He has done it before. He dropped out of university to launch a hip-hop record label, Rawkus Entertainment, with a student friend. It failed and his father paid James's debts. But that was not his only break for freedom. As a student, he contributed a rather impressive cartoon, "Albrecht the Hun", to the satirical magazine Lampoon.

Last month, Rupert Murdoch gave a reading at St Bride's Church in Fleet Street, in which he extolled the value of family and left the congregation in little doubt that he yearns to bequeath control of the empire he has built to someone of his flesh and blood. Former News Corp insiders say this attitude has long been apparent from his failure to groom other executive talent for top jobs.

As analysts ponder the future of Rupert Murdoch's businesses following Lachlan's resignation, a nagging question persists. What if all his adult children have inherited Rupert's ferocious independence and share his desire to prove themselves against the world? Will any of them be satisfied with inheriting a business empire rather than creating one for themselves? Cynics suggest that the most malleable offspring may prove to be Grace and Chloe, his two toddler daughters by Wendi Deng.

In 20 years' time they should be ready to take control, under the careful supervision of their mother. Rupert Murdoch will only be 94.

Rupert Murdoch, 74

Son of legendary Australian media mogul Keith Murdoch, he grew up to bestride the world, a uniquely powerful figure in print, film and television. A US citizen, his influence in Britain, where he owns The Sun, the News of the World, The Times and the Sunday Times, goes back 36 years. Married and divorced Patricia Booker, mother of his first child, Prudence. Married and divorced Anna Torv, mother of Lachlan, James and Elisabeth. Married his third wife, Wendi Deng, in 1999, with whom he has two children, Grace, four, and Chloe, two.

Wendi Deng, 37

Married Murdoch in 1999 after he split from his second wifeearlier that year. They met while Deng was working for Murdoch's Star TV in Hong Kong. Mother of his two youngest children. A company called Cruden Investments holds a 30 per cent stake in News Corp, and this will be passed on to Rupert Murdoch's children when he dies. Rupert Murdoch will also inherit a further 10 per cent stake in Cruden from his mother on her death and that will eventually be passed on to his daughter Grace, after being held by Ms Deng as a trustee until Grace is 30.

Elisabeth Murdoch, 36

Murdoch's younger daughter (Prudence, his daughter by his first wife, is not involved in the business). Elisabeth worked in the family fold for 10 years, as a researcher at Nine Network in Australia, then as an executive at Fox Television. Joined Sky in 1996 before becoming the first member of the family to strike out on her own, quitting in 2000 to set up a production business, Shine, and have a baby. After first marriage ended, married PR supremo Matthew Freud in 2001.

Lachlan Murdoch, 33

Murdoch's elder son. In 1995 was appointed deputy chief executive of News Limited, in 1996 executive director of News Corp, and senior executive vice-president from 1999 to 2000, when he became the deputy chief operating officer. Also famous for his tattoos, rock-climbing wall, and for surviving the 1998 Sydney-Hobart yacht race in which six competitors died. Reportedly ends every phone conversation with his father with the words, "Love you, Pop". Married to Sarah, former model and spokeswoman for Wonderbra. Father of eight-month-old Kalan.

James Murdoch, 32

Murdoch's younger son, educated at Harvard but left a year before completingcourse. Set up a record business and began career in the music arm of News Corp. Married Kathryn Hufschmid, a former PR executive and model, five years ago. At 27, with no experience in television or Asia, made chairman and chief executive of Star TV. Last year voted joint 34th most powerful person in the USA (with Lachlan) by Vanity Fair's Establishment List. Appointed Chief Executive of BSkyB 2004.

Comments