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Not long ago, news that Rupert Murdoch was ill would have sent News Corp.'s stock into a dive. Perhaps more than any other media mogul, Murdoch is synonomous with his globe-girdling powerhouse. Starting with a single family-owned newspaper in Australia in 1952, Murdoch has been a one-man dynamo, creating a $16 billion colossus as much by dint of his drive as his vision.
But when News Corp. announced on Apr. 16 that its chairman was suffering from prostate cancer, the stock barely moved, falling less than half a percent before rallying a day later with the rest of Wall Street.
What's going on? For years, investors were concerned that the 68-year Murdoch, a notorious workaholic, wasn't putting in place the kind of succession plan a company his size needs. Now, the Street seems to be mollified. The reason: Peter Chernin, the cherubic-faced former Fox Network head who has largely been Murdoch's alter ego for the last four years.
As president and chief operating officer, Chernin, 48, isn't well known outside the clubby world of Hollywood dealmakers and Wall Street money managers. But as one investor with a chunk of News Corp. stock puts it: "If Rupert got hit by a bus tomorrow, we'd be very secure with the knowledge that Peter would still be standing."
These are potentially perilous times for News Corp. and other media companies trying to move onto the Internet. Within weeks, Murdoch's company is expected to unveil an overhauled structure. It has already spun off its film and TV operations into a separately traded company, Fox Entertainment. This summer, News Corp. is widely expected to spin off its nearly ubiquitous satellite holdings, which have been stitched together into a company ready to for an IPO.
Later this year, the entertainment, sports, and news empire will include medical information in its offerings, with the launching of Sky WebMD. It will deliver health news and information through News Corp. satellite, TV, and print holdings.
HEAVY LIFTING.
Murdoch, his company says, isn't likely to slow down when he begins a radiation treatment for a cancer that News Corp. says was caught early. But a lot more of the heavy lifting is going to fall to Chernin. He has been negotiating alongside Murdoch for TV holdings in Europe. Last year, he was a key player in the deal that combined News Corp.'s TV Guide holdings with those of Gemstar's VCR plus, giving News Corp. a leg up in the huge interactive-TV listings business.
More recently, Chernin has been riding herd over executives at the Fox TV Network, which has only recently started to recover from a ratings swoon with such popular new shows as Malcolm in the Middle. Then there is the movie studio, one of Chernin's first loves, that under head Bill Mechanic is likely to have a strong summer with films Titan A.E. and X-Men.
Company insiders know that Chernin is largely a transitional figure -- but that changeover could last a decade or more. Three of Murdoch's children -- 32-year-old Elisabeth, 28-year-old Lachlan, and 26-year-old James -- have been working in the family business for five years. Lachlan, who ran the Australian operations and more recently has been in charge of a companywide cost-cutting initiative, is widely seen as the heir apparent. He's the only one of the three now sitting on the board, although Elisabeth watches over Europe's satellite operations, and James has become the key architect of the company's new-media initiative.
Murdoch and Chernin struck up a friendship some years ago when Chernin drove Murdoch back to Los Angeles from a company retreat in Santa Barbara, Calif. At the time, Chernin was the head of the programming unit for the Fox Network, finding and launching such groundbreaking Fox shows as Married with Children and The Simpsons. Murdoch has since said that he was struck with the younger man's business sense. More recently, he has given Chernin increasing amounts of authority so that Murdoch himself can focus on strategy.
MERGER?
News Corp. will likely remain a Murdoch family operation for the foreseeable future. The question is how big the family intends to make it. Murdoch and Chernin took an interest -- now dismissed -- in buying General Motors' Hughes satellite operation to give it a U.S. wireless presence. And for much of the last six months, News Corp. has been haggling with Seagram Corp. Chairman Edgar Bronfman Jr. over what would have been a $30 billion merger.
Chernin, among others inside News Corp., has been preaching that it needs a strong music company, and Bronfman controls the world's largest. Murdoch pulled out of that deal, say insiders, because Bronfman demanded equity that would give him several seats on the board and a say in how the combined company would be run.
It seems Rupert Murdoch isn't ready to give up much control. He said not so long ago that he'll probably work until his death, as did his father. So Murdoch's trust in someone other than his own flesh and blood to run his empire says a great deal about Peter Chernin.
Grover Grover is Los Angeles bureau chief for Business Week. Follow his Power Lunch columns, only on BW Online EDITED BY DOUGLAS HARBRECHT
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