article

07.21.11

News Corp. After Rupert

The hacking scandal has provided a preview of News Corp.’s Murdoch-less future. Chris Thompson on a company that will prove less interesting—and more profitable.

There were reminders throughout his performance on Tuesday: the one-word answers, the cantankerous table slapping, the confused air, the moment when he seemed to nod off.

Someday even Rupert Murdoch is going to die.

And when he does, News Corp. will join a long line of companies that have struggled to find their identity in the wake of their founding personalities. When Steve Jobs first left in 1985, Apple floundered until he came back. Walt Disney’s death threw the company into a slump that lasted decades.

Rupert Murdoch’s extraordinary personality has defined his company: the combativeness, the sensationalism, the sheer joy in taking extraordinary risks. When he departs the scene, News Corp. may well become just another media conglomerate. And that might be the best thing to happen to the company in years.

Murdoch has long prepared for one of his children to succeed him and continue his unique style. His daughter Elisabeth was a rising star until 2000, when she had a very public spat with her boss at the satellite broadcasting outlet BSkyB and left News Corp. altogether. Rupert’s eldest son, Lachlan, was considered the heir apparent until 2005, when he, too, abruptly resigned and fled to Australia.

Since then the younger son, James, has stepped forward to understudy. And up until a month ago, he had some very capable help, in the form of Rupert Murdoch’s closest confidants: Wall Street Journal publisher Les Hinton and News International head Rebekah Brooks, both of whom shared Murdoch’s taste for scoops and combat. Now both have resigned in disgrace.

There’s talk of Elisabeth coming back, and Lachlan still sits on the board. But Brooks and Hinton had the real fire in the belly when it came to Rupert’s tabloid passions. When Rupert goes, the power concentrated in him will devolve to a politburo of his children and his widow, with all the attendant squabbles and petty rivalries. Never again will a Murdoch be able to single-handedly drive News Corp.

Even now pressures are mounting to make News Corp. more than Rupert Murdoch’s personal plaything. On Wednesday, Calpers, the California public pension fund that owns almost seven million shares in News Corp., called on the company to reform its governance structure. The company’s independent directors, alarmed that the hacking affair might touch them, have hired their own attorneys. Bloomberg has reported that these same directors have floated the idea of promoting the sober, restrained COO Chase Carey to CEO, stabilizing a company reeling from scandal.

Pressures are mounting to make News Corp. more than Rupert Murdoch’s personal plaything.

So what would a Rupert-less News Corp. look like? According to David Joyce, a media analyst at Miller Tabak & Co., most people will barely notice the difference. Murdoch’s way of doing business is simply hard-wired into the company’s DNA. “The culture is already there,” he says, “and it’s ingrained.”

But Thomas Eagan, an analyst at Collins Stewart, thinks that a News Corp. without Rupert Murdoch would be almost unrecognizable. News Corp.’s stock trades roughly 40 percent less than media giants like Disney or Viacom, mainly because investors are spooked by Murdoch’s impulsive need to risk the company on ambitious acquisition plans.

In addition, once Murdoch buys a property, he almost never lets it go, no matter how much money it loses. Take MySpace: Murdoch bought the website for $580 million and held on to it despite overwhelming losses.

According to Eagan, it was Carey, the prototype of the dispassionate manager in News Corp.’s future, who finally unloaded the albatross, albeit for a humbling $35 million.

“We think that overall, the company will become more shareholder friendly,” Eagan says. “I think it will be more focused on results. Rupert Murdoch has been known to buy assets and never sell them. Well, guess what, we’re seeing them sell assets now. I think they’re going to be more results oriented.”

Finally, there won’t be a Rupert Murdoch—or a Rebekah Brooks or a Les Hinton—to play press baron in the sandbox of British politics. Print newspapers are an insignificant part of the News Corp. portfolio; the most valuable assets are Murdoch’s film, television, cable, and satellite broadcast properties. But print newspapers play a crucial role in influencing elections in the United Kingdom, and Murdoch loved visiting 10 Downing Street, even if he had to enter through the back door. As the last few weeks have shown, this has cost his company a fortune. In fact, according to Eagan, it has cost his company more, in terms of what News Corp. was once worth, than the entire value of every single newspaper he owns.

“Ever since this scandal broke, the company has lost $7 billion in market cap,” Eagan says. “Well, the combined market cap of all the newspapers is $5 billion at best.”

A News Corp. run by bloodless technocrats will never make this mistake. They’ll look at the bottom line, count their bonuses, and never shy away from dropping money losers like the New York Post. There will be plenty of egos at the top, but there will be more than one of them. News Corp. will be less interesting but more profitable.

On the other hand, as David Joyce points out, Rupert Murdoch’s mother is still alive at age 102. And Rupert, well, “he’s only 80.”