(Bloomberg) -- Rupert Murdoch’s decision to step down as chairman of Fox Corp. and News Corp. leaves his son, Lachlan Murdoch, with a daunting task — steering the family’s cable TV and newspaper companies around two troubled industries.
Murdoch’s media empire, which he built over seven decades, has long been seen as a giant, with enormous influence over news, entertainment and politics. But since selling most of its film and TV business to Walt Disney Co. for $71.3 billion in 2019, Fox has become a relative minnow in a sea of whales, with a heavy focus on news and sports. It’s still heavily dependent on the declining businesses of cable TV and print.
Murdoch, 92, said on Thursday he’s leaving the boards of Fox and News Corp., capping a career that started with a small Australian newspaper business. He becomes chairman emeritus of each.
“He goes down with those leaders of the industry, like Sumner Redstone,” said Mario Gabelli, a longtime investor in media companies. “You’ve got to applaud the pluses, along with the obvious potholes that took place over the years.”
Only the timing of the transition was a surprise. Lachlan, 52, takes over as chairman of News Corp. and continues as both chairman and chief executive officer of Fox. Among his siblings, Lachlan, who became CEO of Fox in 2018, was already seen as the winner of a family battle over who would take over their father’s business.
The younger Murdoch has made some shrewd business decisions. Fox’s purchase of the streaming service Tubi for $440 million in 2020 looks like a winner. The ad-supported product now claims the same share of total TV viewing as Warner Bros. Discovery Inc.’s Max service, according to Nielsen data.
But Fox’s traditional channels, the broadcast network and cable news outlet, continue to lose viewers with the rest of the pay-TV industry and lack a clear strategy for the new streaming order. The company has never revealed the number of subscribers to Fox Nation, a $6-a-month streaming service focused on conservative viewers.
Internally, Fox executives say they’ll be able to collect fees in the future from streaming services they may partner with. But with consumers canceling their cable-TV subscriptions, Wall Street analysts forecast little growth for the company over the next few years, projecting revenue will climb from $14.9 billion in fiscal 2023 to $15.7 billion in four years.
News Corp.’s newspapers, meanwhile, are trying to attract more digital subscribers and online advertisers as print readership dwindles.
One of Murdoch’s top lieutenants, News Corp. CEO Robert Thomson, is leading an industry charge to protect newspapers from the threat posed by artificial intelligence and ensure that publishers share in the revenue their articles generate for technology companies.
In the UK, Murdoch sat at the top of a tabloid empire after buying up a number of influential titles over decades. While Murdoch claimed his papers had editorial independence, many in the UK political sphere saw them as tools to bully the government.
He was forced to shut his nearly 170-year-old paper, the News of the World, in 2011 after its journalists were caught hacking the phone of a murdered schoolgirl. Murdoch was hauled before a UK parliamentary committee, calling it the “most humble day” of his life. The incident kicked off a years-long media-ethics inquiry looking into rampant phone and computer hacking and bribery in the industry and convinced Murdoch to split off his newspapers into a separate unit.
Still, he rebounded. Last year, he created TalkTV, hiring controversial British journalist Piers Morgan as its star in an attempt to introduce Fox News-style journalism to British television. It’s not yet clear whether Lachlan has the same enthusiasm for the UK business as his father, who spent many years in London.
News Corp. is also expected to see little revenue growth in the coming years. Wall Street analysts forecast low, single-digit gains at best. Sales last year totaled $9.88 billion.
Early this year, the Murdochs gave up on an effort to combine the two companies after News Corp. investors complained a merger might undervalue their businesses.
Murdoch’s decision to step aside is unlikely to take Fox and News Corp. in new directions right away. That’s partly because the elder Murdoch isn’t going away.
In a letter to employees, he promised to be “an active member of our community,” watching Fox’s broadcasts “with a critical eye” and “reaching out to you with thoughts, ideas and advice.”
“When I visit your countries and companies, you can expect to see me in the office late on a Friday afternoon,” Murdoch wrote.
There’s also the matter of the stock, which stays put for now. The Murdoch family, led by its patriarch, holds about 40% of the voting power in both Fox and News Corp., according to filings. When Rupert Murdoch dies, his votes in a trust that holds the shares will go to his four oldest children.
Murdoch last reconfigured his Fox empire five years ago. Comcast Corp. acquired its stake in the European satellite TV service Sky and, shortly after, Disney bought the bulk of Fox’s entertainment assets. Murdoch said at the time he feared Fox wasn’t big enough to compete in a new world of global streaming TV giants like Netflix Inc.
Those deals now look prescient — with media giants like Paramount Global, Warner Bros. and even Disney struggling to profit in streaming while their traditional TV businesses decline.
“He could see around corners,” said Bank of America analyst Jessica Reif Ehrlich. “He also knew when to sell.”
For news junkies, the most intriguing question may be how Murdoch’s retirement plays out at Fox News and in Republican politics. The 2024 presidential race is heating up and Fox News’ relationship with Donald Trump, the Republican frontrunner, has been strained lately.
Trump recently spurned the network’s attempt to have him join a debate televised on Fox. Instead, the former president gave an interview to former Fox News host Tucker Carlson who was pushed out in the wake of the company’s $787.5 million settlement of a defamation suit brought by Dominion Voting Systems. Fox continues to wrangle legally with Smartmatic Corp. in a similar case.
The biggest challenge facing the company could come internally, when Rupert passes from the scene. It remains unclear if Lachlan will have the support of the other siblings to stay in the CEO role.
James Murdoch, Rupert’s other son, stepped down from the board of News Corp. in 2020, saying at the time he disagreed with editorial direction of the news outlets and some strategic decisions. The 50-year-old has contributed to Democratic political candidates and said the company’s newspapers in Australia were deniers of climate change.
Lachlan, who has described himself as a libertarian, shares many of his father’s views. Last year in Sydney, the younger Murdoch criticized government mandates and business closures during the pandemic. He said other media were suppressing coverage of Hunter Biden, the US president’s embattled son.
“The battle for the freedom of speech and, ultimately, the freedom of thought, has never been more intense,” Rupert wrote in his letter to employees. “My father firmly believed in freedom, and Lachlan is absolutely committed to the cause.”
--With assistance from Scott Moritz.
(Updates with UK context from eleventh paragraph)
©2023 Bloomberg L.P.