Rich legacy

New York, Dec. 28: News Corp chairman Rupert Murdoch has been trying to buy or build an American satellite television business for 20 years, a campaign that sometimes appeared to be his life’s work.

Last week, he finally succeeded, buying control of Hughes Electronics and its DirecTV satellite service for $6.6 billion. But his hard-won victory now raises questions for Murdoch, who is 72, and for the company.

Murdoch needs to make DirecTV justify the years and billions spent in its pursuit. With the last piece in place, Murdoch needs to prove that the vast contraption of Hollywood studios, broadcast and cable channels, satellite systems and newspapers that he has assembled will run smoothly and profitably, even after he is no longer behind the wheel.

He has made it no secret that he would like to pass the company’s top job to one of his children who have worked for the company: Lachlan, 32, James, 30, or, as he volunteered in an interview 10 days ago, perhaps Elisabeth, 35. To outsiders, the succession question has the makings of a captivating corporate soap opera. And, in November, the plot took an unforeseen twist when James Murdoch was named the chief executive of British Sky Broadcasting, of which News Corp owns a one-third stake. To many investors and Murdoch watchers, that suggested that James Murdoch might have overtaken his older brother, Lachlan, as the Murdoch heir to watch.

The senior Murdoch prefers not to talk about succession. “The reason I want to avoid it altogether is very simple,” he said.

“The more people write about it and the more people in the company read about it, it just breeds politics. People say, ‘I want to be on the James wagon’ or ‘the Lachlan wagon’, and it is just terribly self-destructive, even of their relationship, if that happens.”

But relaxing in his Los Angeles office — with seven TVs tuned to the company's channels, including Fox and Fox News, and even more photos of his family around him — Murdoch was expansive, savouring the impending acquisition of DirecTV. He is also a proud father. In a two-hour conversation that covered many subjects, including the problems of the Fox network and his satellite plans in Europe and Asia, he could not resist discussing his children’s progress in the business.

As he talked, the Federal Communications Commission was completing its decision that approved his deal for control of DirecTV. The acquisition may be a watershed moment for the American television industry. With 11 million subscribers paying $35 to $90 a month for different levels of service, DirecTV is the second-largest cable or satellite service, after Comcast Cable.

Murdoch has pledged to use News Corp’s vast resources and satellite experience to redouble DirecTV’s threat to cable companies. And the major cable companies are already fighting to keep their customers by adding features like telephone service, video on demand or TiVo-style digital video recorders.

Murdoch sketched a series of expensive early steps in his attack on the cable firms. He promised to strengthen DirecTV’s call centres for better customer service. He said he would virtually eliminate DirecTV’s substantial problem with piracy of its signal by using new set-top technology from News Corp’s NDS subsidiary.

He said he planned to offer interactive programming on the company’s Fox news and sports channels that would let viewers choose among various screens and camera angles. He also said he plans to push set-top boxes with built-in digital recorders like TiVo at little or no extra charge.

Murdoch acknowledged that the recorder move was “not good news for broadcasters by any means” because the devices let viewers skip commercials. “Let’s just say I am being discouraged by the Fox people,” he said, referring to the executives at the company’s Fox broadcast network. But he vowed to push the devices “very hard” nonetheless, to win and keep customers for DirecTV.

All the moves come from a playbook that British Sky Broadcasting used to dominate the British pay television market, sustaining

heavy losses to conquer it before other cable or satellite rivals could establish themselves. Murdoch missed that chance in the United

States, where more than 80 percent of households already subscribe to cable or satellite service. Still, he said he saw room to

expand beyond DirecTV's subscribers. "I am confident we can get to 15 million subscribers," he said. "What do I dream of? Twenty

million." That would pull DirecTV nearly even with Comcast.

Murdoch has long championed his vision of a satellite television service around the globe, in part because it would bolster the power

of his company's film and cable channels. Controlling DirecTV, he said, would add to the company's leverage in negotiating with

cable companies like Comcast, Time Warner and Cox Communications, which also have major investments in channels. "It gives us a

degree of leverage," he said. "There is a certain amount of saying, `We will carry you if you will carry us.'"

But owning DirecTV will not address what may be the News Corp.'s most pressing problem, the slump in ratings at its Fox

broadcasting network. "Our new shows haven't done well enough," Murdoch acknowledged. He said he hoped to address the

problem by introducing more new shows throughout the year, rather than waiting until the competitive fall season.

Still, Murdoch said that Fox could wring still more years of ratings out of its biggest hit, the three-year-old "American Idol" talent

contest. After Fox's teenage edition of "American Idol" this year and the recent "American Idol" holiday special, some critics have

suggested that Fox risks exhausting the show's novelty as ABC did with "Who Wants to Be a Millionaire." But Murdoch promised

self-discipline. "`American Idol,' I think, is the perfect young show," he said. "If we restrain ourselves to just once a year, then it won't

wear out for a long time," he said.

How long Murdoch himself can last is a more delicate question. Even at 72, he says he has no plans to slow down or go anywhere

for several years to come. But that does not entirely ease investors' concerns.

"I worry tremendously about the succession," said Uri D. Landesman, a portfolio manager for Federated Investors, a major investor

in News Corp. "Either he is going to slow down or he is going to meet his maker at some point, and I think it is going to be an

enormous issue."

More than any other major media company, News Corp. reflects the work of one man. Murdoch single-handedly conceived and

built its vast empire from the ruins of his own father's failing Australian newspaper business. He controls a dominant portion of its

voting shares. His instincts led the company to bet on satellite television, to defy the television industry by starting Fox as a fourth

broadcast network and again by betting on the audience for a 24-hour-news network to the political right of CNN. As a result,

analysts and investors say, it is difficult to foresee how it might look without him.

Landesman said he believed that Murdoch would not hand control to an heir whom he deemed unqualified, but added that a father's

criteria might differ from Wall Street's. Investors would be happier, Landesman said, if Murdoch turned over the company to a

strong, young media executive outside the family, perhaps Peter Chernin, the president and chief operating officer of the News Corp.

and Murdoch's second in command.

Murdoch has never hidden his aspirations for his heirs. "I think it is a very, very human motive to see your work carried forward by

one of your own," Murdoch said.

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Still, he said he would never sacrifice the interests of his shareholders to his own ambitions for his children: "If it was to turn out that

they were not good enough, we'd have to face that. That is what you have a majority of independent directors for, although I hope I

would be smart enough to see it myself."

Murdoch remains very close to all six of his children, including the three who have worked at the company - Lachlan, James, and

Elisabeth. Friends and colleagues say the three call their father "Pop" and often close phone calls to their father with expressions of

love or affection. All three remain close to one another as well, two friends of the family said. And the News Corp. is woven into the

family fabric, often dominating conversation when the family gathers.

But each of the three differs notably from Murdoch, an outspoken political conservative who grew up in the sensational world of

Australian newspapers.

The eldest of the three, Elisabeth, has led a decidedly cosmopolitan life. She graduated from the Brearley School in Manhattan and

Vassar and married Elkin Pianim, the son of a Ghanian politician. After the marriage ended, she settled in London. There, she entered

a highly visible relationship with Matthew Freud, founder of a public relations firm sometimes associated with the Labor Party and the

grandson of Sigmund Freud.

Of the three potential successors in the family, Elisabeth may have the best record of success outside her father's company. She and

her first husband bought a television station in California, improved its performance and sold it at a substantial profit. After working

for the News Corp. in television, she started Shine, now a three-year-old London television production company, which has scored

some successes.

She has also done some valuable scouting for the News Corp.'s Fox network on the side. It was Elisabeth, Murdoch said, who

spotted the potential in a British television talent contest that became the basis for "American Idol" on Fox. "I might have been saying,

`what is hot over there?' or something," Murdoch recalled. "We were gossiping, and she said this is."

After learning about its ratings and consulting with an editor at one of his British newspapers, Murdoch said, he called a top executive

at the Fox broadcast network in the United States: "I said, `You have got to buy it.' They said, `Oh, well, we are looking at it,' and I

said, `Don't look, buy.' They said, `We will think about it,' but the next day they bought it." He added with a laugh, "She has her

uses."

"She is a very, very hard-working and intelligent person, and she just loves the business," Murdoch said. But he said she was unlikely

to rejoin the News Corp., at least for the next few years. "She is very settled into the London scene and what she is doing," he said.

"I don't think she wants to, at least for a few years. She wants to be sure she has been successful in her own right. She will probably

sell it for a bloody fortune to someone. And then she will come knocking on the door, and she will be very welcome."

Until this fall, most investors and Murdoch watchers had assumed that the leading candidate to succeed Murdoch was his eldest son,

Lachlan, deputy chief operating officer of the News Corp., in charge of its Australian operations, its television stations in the United

States, and The New York Post, among other things. All three Murdoch heirs were educated mainly in the United States and speak

without an Australian accent, but Lachlan Murdoch sometimes plays up his heritage, sprinkling his speech with Australian expressions

like "no worries, mate."

Colleagues say Lachlan, a Princeton graduate, is, if anything, more consistently conservative than his father, who can be a political

maverick. His colleagues say The Post's staunchly conservative editorials roughly match his views. They describe him as less verbally

polished than his father. As deputy chief operating officer of the News Corp., he joins his father and the company's other top

executives in quarterly conference calls with investors, but he has not yet learned to eliminate the halting "ahs" and "ums" from his

speech.

The senior Murdoch's antagonists, especially in the British and Australian press, often relish his children's failures; in one favorite

example, Lachlan helped arrange a major News Corp. investment in an Australian telephone company that collapsed a few years

ago.

But his father said the fault was just as much his own. "Lachlan is accused in this telephone venture," the elder Murdoch said. "But I

did that. We all did that. The whole board of News Corp. approved that deal."

Murdoch said, "Lachlan is responsible right now for 60 percent of the cash flow of News Corp. and we are doing very well." As

Lachlan rose through the company, James Murdoch was considered the dark horse. Where Lachlan is stout and athletic, James is

more slender and cerebral, although in recent years he has taken up karate. James dropped out of Harvard to start his own,

short-lived hip-hop record label, Rawkus Records, in New York. And, unlike his father or Lachlan, James is steadfastly liberal. He

has supported Bill Clinton and Al Gore, whose daughter he befriended at Harvard. In the interview, the elder Murdoch suggested

that their views have "converged over time" as James has learned more about the burden of taxes on business, but friends of James

who are familiar with his political views strenuously dispute that assertion.

The question mark on James Murdoch's resume is a stint in his 20's when he was in charge of the News Corp.'s Internet investments.

Under his direction, the company invested in a handful of Internet ventures that never took off.

But the senior Murdoch defended James' judgment, too. "He saved me a lot of money," Murdoch said. "He said, `Here is this

company Juno, why don't we take about 5 percent of it?' I said, `That sounds interesting, why don't we buy the whole bloody thing.'

He said, `No, no, no.' He held me back."

While Lachlan was based in New York, James spent the last few years in Hong Kong, where he led Star, the News Corp.'s Asian

subsidiary. Star has accounted for only a small portion of corporate revenue, but during James' tenure it has also turned its first profit.

This fall, however, he became the lightning rod for investors' anxieties about succession because of his appointment as chief executive

of British Sky Broadcasting, in which the News Corp. owns roughly a one-third stake. Other shareholders contended that James, at

30 and with only a few years of experience in television, was unqualified to lead the dominant television service in Britain.

But Murdoch said the scuffle with shareholders who opposed the appointment had not changed his views. "He just had the

misfortune of having my name," Murdoch said. "I understand it might be seen as nepotism or something like that. But the fact was, I

know everybody in this business, and who could do better?" The only one or two candidates who might be more qualified, he said,

already had jobs they were unlikely to leave.

What's more, Murdoch said, British Sky Broadcasting's board had vetted his son with more diligence than usual, not less. The

executive recruiter Spencer Stuart conducted an extensive search, and the board considered three internal candidates and three

outside contenders as well as his son, he said. "They put him through psychometric tests and pretty exhaustive interviews by members

of the committee," Murdoch said, "He aced it."

Among analysts and investors handicapping the succession, James Murdoch's ascension to the top job at one of the company's

biggest businesses has made him the odds-on favorite. But the elder Murdoch discounted those theories. "I think you are jumping to

conclusions," he said, praising Lachlan's performance as well.

Outsiders familiar with the dynamics of other families often assume that the potential competition for the father's job must create

awkwardness among the Murdoch siblings. Murdoch's former wife Anna Murdoch wrote a novel, "Family Business," about a female

media entrepreneur with a certain resemblance to her husband Rupert. In its purple denouement, one of the protagonist's two sons

happily starts his own firm, but the other enters the family business and ultimately drives his mother's lover to a heart attack in an

argument over succession.

Murdoch said that was not the case. "They are very, very close," he said.

As an example of sibling harmony, he pointed to the Newhouse family - a privately owned media dynasty now led by the brothers S.

I. and Donald Newhouse. "Look at the Newhouse brothers," he said. "One is senior to the other, but they basically divide

responsibilities."

He declined to rule out a similar power-sharing arrangement among his heirs. And, for now, Murdoch said such considerations were

premature. "We are going to see," he said. "If I go under a bus or my health fails, that is something that the board is going to want to

talk about. But I look after my health pretty well, and I intend to be the active driver of the company for a long time yet, probably to

the frustration of all my relatives."