With Disney Deal Looming, Murdoch’s Empire Is Fractured

With Disney Deal Looming, Murdoch’s Empire Is Fractured

Lachlan understood the threat posed by the technology giants, but he saw less need to rush into Disney’s arms. Most of 21st Century Fox’s businesses were doing quite well.

“There is a lot of talk about the growing importance of scale in the media industry,” Lachlan said on an earnings conference call with investors in early November. “Let me be very clear. Fox has the required scale.”

He had also just gotten his family settled in Los Angeles as part of the 2015 management arrangement. The primary property Disney was leaving behind — Fox News — was based in New York.

Although Lachlan has not yet made a decision, Rupert has made it clear that he wants his elder son to run what they are calling New Fox, which will house Fox News and the other businesses left behind by Disney, including the Fox broadcast network and a chain of TV stations.

“I hope my son Lachlan will agree to be chief executive,” Rupert said during an interview with Sky News in December.


Rupert Murdoch, left, with his son Lachlan. In 2015, Rupert named Lachlan executive co-chairman of 21st Century Fox, giving them equal standing.

Drew Angerer/Getty Images

That signals a return to his original succession plan, which went awry in 2005 when Lachlan abruptly left the family business after sparring with Mr. Ailes. He decamped to Australia, where he founded and ran a successful investment company. He returned to his father’s side in 2014.

“This may be his way of being immortal,” the London-based analyst Claire Enders, who has followed the Murdochs for more than three decades, said of Rupert, “because he clearly sees that Lachlan is the right person and shares his views and will support him for the next 10 years.”

What James will do is more of a mystery.

People close to him say he may try to strike out on his own. Unlike his brother, James has never worked outside the family businesses, other than the hip-hop record label he founded after dropping out of Harvard. His father bought it, bringing James into the corporate fold.

A senior job at Disney is also a possibility, but there were “no guarantees of any sort,” Rupert said in the Sky News interview.

“He will be integral to helping us integrate these companies over the next number of months,” Mr. Iger said on a call with investors after the deal was announced. “Over that time, he and I will continue to discuss whether there is a role for him here or not.”


The headquarters of the British broadcaster Sky in London. 21st Century Fox has bid to become the sole owner of Sky.

Daniel Leal-Olivas/Agence France-Presse — Getty Images

Beyond the family dynamics, the deal may allow James to finally vanquish memories of his role in the phone-hacking scandal at family-owned tabloids in Britain. He was never found to have had direct knowledge of the hacking by members of the paper’s staff, but a parliamentary committee accused him of “willful ignorance” after he acknowledged that he had failed to read emails that referred to settlement payments made to hacking victims.

Moreover, James is likely to emerge with a stake in Disney worth at least $1 billion.

“That’s a good return for putting up with your father for 20 years,” Ms. Enders said.

As for Rupert Murdoch, he may now turn his attention to buying local television stations to buttress New Fox and compete with Sinclair Broadcast Group, which agreed in May to buy Tribune Media for $3.9 billion. If the proposed deal with Tribune Media goes through, Sinclair will reach some 70 percent of households in the United States.

It has been suggested that Rupert could look at buying stations in political swing states, where there is a lot of money to be made in political advertising during election years, to say nothing of potential influence.

Some have also mused that Mr. Murdoch may try to combine New Fox with News Corporation, the owner of The Wall Street Journal and The New York Post. In his interview with Sky News, he brushed aside the immediate possibility. “There’s logic to it, but we’re not planning it at this stage,” he said.

In any case, Mario Gabelli, a longtime media investor whose Gamco holds roughly $350 million in 21st Century Fox shares, predicted that Rupert would relish having a voice at Disney, even if the deal did not come with a board seat.

“He now becomes Disney’s largest single shareholder,” Mr. Gabelli said, “with an ax to grind.”

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