The Reluctant Son: Lachlan Murdoch
and News Corp

By Paola Totaro, The Monthly AU

23 April 12

 

Rupert Murdoch keeps dangling the keys to the Roller that is News Corp in front of his eldest son, but Lachlan just won't take them.

even years ago in New York, the heir apparent to one of the world's most powerful media conglomerates walked out on the family business. Lachlan Keith Murdoch, eldest son of Rupert, and already the deputy chief operating officer of News Corporation, was fed up with his father's meddling and his patronising lieutenants. He'd had enough of being dismissed both in America, by Fox News creator Roger Ailes, and in Australia, by the swashbuckling head of News Limited, John Hartigan. "Harto never really rated Lachlan," says a source close to both. "And the feeling was mutual."

Last year, however, the long-serving Hartigan finally received a tap on the shoulder from Rupert Murdoch. The former Foxtel chief executive, Kim Williams, a man liked and trusted by Lachlan, was installed in his place. Curiously, Murdoch senior pronounced himself chair of News' operations in Australia, while remaining in New York.

"A holding pattern move," insiders said.

"Keeping the seat warm for Lachlan," Mark Day wrote in the Australian.

Most News Corp watchers both inside and outside the camp interpreted the shuffling as signs that the patriarch wished to woo his eldest son back into the fold. The changes appeared all the more significant at a time when the News of the World phone-hacking scandal had seriously tarnished the reputation of Lachlan's younger brother, James - possibly indelibly. Until that point James, promoted to Lachlan's former post of deputy operations chief one year ago, had seemed destined to succeed his father. And though their sister Elizabeth was considered by many to be the most capable of the three children, her father had never shown any inclination to hand his empire over to a daughter. Which left Lachlan.

Chase Carey, News Corp's chief operating officer, and the man who would assume control if his octogenarian boss "went under a bus", as Rupert himself hypothesised last August, stated three weeks ago: "Rupert has said he'd be thrilled to have Lachlan back."

The real question wasn't what Rupert wanted, though, as Carey well knew. It was what Lachlan wanted. Carey didn't presume to know, other than to address the rumour that Lachlan was returning to the fold by saying: "Right now, there aren't any plans to announce it."

The very next morning, on 10 February, Lachlan Murdoch was pronounced chair not of News Limited, but of Channel Ten. Even without Australia's cross-media ownership rules, currently under review, the move appeared to pour cold water on the notion that he was stepping into his father's footsteps anytime soon.

But it's unlikely the rumours will stay away for long. Michael Wolff, author of The Man Who Owns the News - and the only biographer with quality access to Rupert, his family and top executives - wonders if Lachlan, who remains a non-executive director of News Corp, is simply procrastinating. "I find that long period in the wilderness for Lachlan confusing," he says from New York. "Why has he not clarified his position in terms of family and News Corporation? The fact that he has not done so shines some light on the fundamental ambivalence at the heart of where he finds himself … there is almost something Prince Charles-ish about him."

"My sense is that Lachlan is very, very happy, very content doing what he is doing, that he is not in any rush to go back to News Corp," his friend, fellow media mogul and business partner, James Packer, tells me in a rare interview.

"He is still a young man in his prime, he's just 40 years old and life is long … He has got his own big business [Illyria] in Australia, he's got his TV, Channel Ten, he's got radio and he's a non-executive director at News Corp.

"The notion that he spends all day plotting 'What next? What next?' just doesn't … look, I'm sure he is doing all the things as we all do in life but he's been doing really good stuff here … my gut says he will keep doing what he's doing. Some time maybe, he might go back [to News Corp] in some form, I just don't know."

Simon Mordant, a philanthropist and financial adviser to some of Australia's biggest corporations, has known Rupert and Lachlan Murdoch for close to two decades. "I have asked him directly whether this is something he would consider and I got a clear impression it was not on his agenda [despite] the noise made in the media," he tells me at the height of speculation early last month that Lachlan would take over as chair of News Corp's Australian roots, News Limited.

"I myself left my family to prove I could do something and I see all those traits in Lachlan. He has a lot of unfinished business, he is a driven, ambitious as well as sensible person. You would never say never but I would be very surprised if he returned to the business in an active role while his father was still active in the business."

It's enough to test the patience of any father. Mid last year, shortly before the News of the World scandal ensnared James Murdoch, Rupert Murdoch reportedly tried to find a buyer for Lachlan's share of Channel Ten, ostensibly to try to facilitate a buy-out by Lachlan himself of News Corps' Australian assets.

The move "really pissed Lachlan off", says Michael Wolff. "It's the thing they [the Murdoch family] would like to see happen but my feeling is that [Lachlan would see it] as just coming back to work for the company. I think that was just indicative of the whole situation: he sets something up then Rupert tries to manage from behind. Apparently he was bloody furious.

"The family is always yelling. It's a constant backdrop, acting out, confronting, not speaking and snubbing each other. But they are also all deeply involved with each other. They are each other's central reference point but all is conducted at a pitch of emotion and intrigue, hurt and misunderstanding."

The ultimate problem, Wolff says, is Rupert always knows best. "The kids know this, that you have to trust Rupert. But nobody trusts Rupert, not because he is trying to trick them but rather, he is like any father … he wants them close, to please them, [but] a lot of these things are in conflict … often he says what they want to hear but it goes against the reality of the situation."

Though born in London and schooled in New York, Lachlan Murdoch is often described as the most Australian of the siblings. There were three children from Murdoch's 32-year marriage to journalist Anna Torv. Bound by migratory experience and the reflected opprobrium, from some quarters, of being Rupert's children, they still close ranks under fire, despite being fiercely competitive. A story, perhaps apocryphal, from a senior News executive holds that, as young boys, James and Lachlan would use the beams in the family ski lodge in Aspen for chin-up competitions. The game would only stop when one boy, usually James, ended up with bloodied hands. The kids attended private schools in the elite New York milieu of big, big money: Lachlan went to Dalton and Trinity in Manhattan followed by the Phillips Academy in Massachusetts before going to Princeton University.

It was a "wholly upper-class establishment - liberal Eastern establishment, to be sure - American upbringing," observes Michael Wolff.

During his gap year, Lachlan spent three months in Sydney entrusted to one of the Holt Street printers for the traditional baptism in familial newspaper ink. After graduating four years later with an arts degree in philosophy, he was dispatched to run Brisbane's Courier-Mail at 23, the same age his father was when he took over the Adelaide News in 1953.

Around the same time, he made friends with Jamie Packer, who, four years older (they share a birthday on 8 September) was likewise taking on duties from his media-rich father. In 1995 Lachlan was appointed director of News Limited in Australia. A frequent newsroom presence in those years, Lachlan was generally well liked and forged ready friendships.

David Penberthy, appointed editor of the Daily Telegraph at just 35 when Lachlan was chairman, in 2005, says he was not an interventionist proprietor. "But he wasn't backward in coming forward with his thoughts on what the paper was doing well and what it needed to improve. He pulled me up on a few occasions when I did something stupid or lazy. He wouldn't shout or be abusive, he was just quiet and direct.

"I remember one time after a social event where he had bumped into the then premiers of NSW and Victoria, Bob Carr and Steve Bracks, and both of them expressed a high level of happiness with the Tele [Daily Telegraph] and the Herald Sun. Lachlan later asked us what the hell we were doing wrong. It was a fair question."

Murdoch's six years spent running the Australian newspapers earned him respect as well as fulfilment, although they weren't without tumult. During the Murdoch-funded Super League walk-out at the end of 1994, Murdoch oversaw much of the recruiting of breakaway rugby clubs and players, sparking a $560 million run on the company chequebook. The young Murdoch wasn't always so affable then. At times, he displayed his father's brutal side, striking back against opponents with ferocious precision: "Anyone who criticised News was by default criticising Lachlan and his family," recalls one veteran of the time. "Critics were treated with undisguised hostility." In one overt display of family power, Murdoch's Daily Telegraph famously blanked from its pages a 40,000-strong street demonstration in support of South Sydney Rugby League Club.

In March 1999, Lachlan married model Sarah O'Hare in a specially constructed riverside chapel on the family's sheep station, Cavan, near Yass. As he settled into married life in a harbourside home in Sydney (later sold to Russell Crowe), he was made responsible for News Corp's print operations worldwide. The following year, at the age of 28, he was appointed deputy chief of operations for the global business, virtually cementing his place in the succession plan.

Simon Mordant, who represented Singapore Airlines in its $500 million bid to buy News Limited's stake in Ansett Airlines in 2000, remembers being struck by the young executive's knack for doing business. "Lachlan was intimately involved in representing News in those negotiations. I met him many times through [that period]. He was a very young guy and I was very impressed … He obviously had grown up in an environment where he sat around the table with dad and listened and absorbed."

But trouble was brewing. A few weeks before the wedding, Lachlan had embarked on a joint venture with James Packer, injecting more than $700 million into the telecommunications company One.Tel. The investment collapsed barely two years later with debts of $600 million, $400 million of which belonged to News Limited alone. Later in 2001, Lachlan quietly moved from Sydney to New York, ostensibly for a breather, while James Packer was forced to endure a public shaming. Friends say this illustrated the different fathering styles of Rupert Murdoch and Kerry Packer: the latter had always subjected James to the type of tough love Rupert would never have forced on any of his children.

James Packer refers only obliquely to that time in our interview, observing that Lachlan was never given enough credit for the sizeable, successful acquisitions he had made for News, including realestate.com in 2000: "Before he left News Corp [he did] one of the best deals that News has ever known - they put in 100 million bucks and it's worth a billion or something like that [$1.7 billion] … It's become a very valuable asset and I think you will see a lot more of that happening."

So did Lachlan feel he wasn't given enough credit?

"I don't think Lachlan thinks like that … I think we have all been [too] battered and bruised to really care what people think."

In his early years in New York, in the wake of the One.Tel debacle, Lachlan lived in an apartment close to his father's enormous Water Tower triplex in SoHo and, by all accounts, worked closely with him.

Lachlan and Sarah were a glamour couple, sporting his and hers tribal tattoos on their arms, but they chose not to make the ripples in New York's social scene that now follow them in Sydney. They favoured restaurants that, according to one New York paper, "fed their homesickness" by serving Aussie wines and produce. They collected contemporary art and there were friendships with international arts glitterati, but they gravitated towards expat Australians including Nicole Kidman and Baz Luhrmann.

"I met Lachlan just after I finished [the movie] Romeo and Juliet," Luhrmann tells me. "I liked him right away. He was sensitive, smart, and had a quiet, wry sense of humour. I was also struck by his decency and respect for others. It wasn't long after that we went on a grand adventure; he invited me to sail with him in the Sydney-Hobart yacht race. It was … great to see Lachlan in an environment where he was most passionate and fulfilled."

At work, however, there were ructions. Michael Wolff's account of that period reveals that Rupert's key American executives, Fox News boss Roger Ailes and then News Corp chief Peter Chernin, began undermining Lachlan soon after his arrival in the United States. Ailes, who Wolff suggests might be the only mortal capable of frightening Rupert, spoke almost immediately with "open disparagement" of the young deputy operations chief, variously describing him as "callow, unsubstantial" and, pointedly, "un-Murdoch like".

Murdoch senior was caught between his most trusted bosses and his blood. It was a fraught time at home, too, as his third wife, Wendi Deng, was pressuring him to reconstruct the inheritance trusts thrashed out post-divorce for the older children. During the last week of July 2005, tensions came to a head. Lachlan, then 33 and a rookie dad himself, to Kalan, was in Sydney on business when he phoned his father for one of their regular chats. Lachlan was by then responsible for 35 television stations as well as the publishing house HarperCollins and the feisty New York Post.

According to Steve Fishman's account in New York magazine, reportedly reconstructed with Lachlan's help, Rupert mentioned Roger Ailes had expressed some concerns. Lachlan and Ailes had been tussling over launching a new police series. Lachlan deemed it ill-timed and too expensive. Ailes had approached Rupert to have a "whinge" and when it became clear he backed Ailes, something snapped in his son - as if the decision were an aide-mémoire unleashing myriad other incidents of white-anting.

On 26 July, the pair had lunch to discuss Lachlan's growing unease. Rupert floated a couple of options, including a change to the reporting chain and the way senior executives made decisions. The younger man insisted tinkering wouldn't work; he felt his father did not sufficiently respect him, least of all as a worthy successor. "I have to do my own thing," Lachlan told him.

Within weeks, Lachlan packed up his life in New York and moved his young family - Sarah was pregnant with Aidan, the second of their three children - to Sydney.

It seemed the fears of the matriarchs of the family, Lachlan's mother, Anna, and grandmother, Dame Elizabeth Murdoch, had come to pass. David Leser, the only journalist granted an interview by Anna Murdoch after the divorce, says she had long worried that the succession battle could be detrimental to her children and their relationships to each other.

"When I asked her about who was best suited to take over from Rupert she actually said 'none of them'," Leser tells me. "She went on to say that she feared a lot of heartbreak and hardship with the succession, that there had been so much pressure that none of them needed to have at their age. I think her concerns are proving true."

Some close to the family still speak with disbelief and admiration about the eldest son's decision to quit in 2005. Says Baz Luhrmann: "He surprised me by leaving News and coming back to Australia with Sarah [but it was] a place he loved and where he could be his own man. I think for him that is the most important thing. It can't be easy to be part of a family of such global prominence, and I have always been impressed by how he has defined himself as a person, and created a life for his wife and family."

Simon Mordant says that Lachlan continues to have a strong and close relationship with his father, dropping everything to support him during the News of the World parliamentary inquiry in England. "But I have the clear view that he has a vision and an ambition and direction that he wants to continue to grow the [Illyria] business. He has younger children, he is very earthed in Australia … he is extremely happy here, engaged in the community."

As chairman of the Museum of Contemporary Art in Sydney (and a donor of $15 million to the gallery's recent redevelopment), Mordant has invited the younger Murdoch on to the board, saying the young heir's value is "far broader" than his personal interest and investment in modern art. "He has a deep sense and understanding of marketing, sponsorships and connections in corporate Australia and the broader media landscape."

Working closely with Siobhan McKenna, an old friend and former McKinsey & Company whiz kid, Murdoch has spent the past six years methodically investigating and investing in a crop of media interests in Australia that have, in their own right, returned him to being one of the most influential media men in the country. He presently holds 9% of Channel Ten, 50% of DMG Radio Australia, which owns the Nova and 5AA radio stations, and nearly 9% of Paul Ramsay's Prime Media Group.

As a non-executive director at News with Kim Williams in John Hartigan's place at the helm, he will presumably have a greater voice, at least informally, in the company's affairs. Significantly, his "time in the wilderness", as Michael Wolff refers to it, has allowed him to master areas of the media business that eluded him at News Corp: the work that goes on at business unit level, raising capital, satisfying shareholders and studying weekly profit and loss reports.

Wolff believes Lachlan has been "demonstrably, a pretty good media executive".

A senior Australian TV executive observes, "My sense is that, post One.Tel and those things, he wants to achieve a level of business respectability independent of his father." The executive says Lachlan's focus on righting Channel Ten's course is very much a part of that. "He knows that his father has always looked at Channel Ten … before Foxtel, Rupert was always dancing around Channel Ten." Still, independence is relative. News Corp supplies Channel Ten with shows like the Simpsons, while Ten mega-hit MasterChef is produced by News Corp-owned Shine TV, headed by Lachlan's sister Elisabeth Murdoch.

Says the TV boss: "I think Lachlan made a mistake doing it [making his play for Channel Ten] on Packer's coat-tails." (James Packer bought an 18% stake in the Ten Network in 2010, later selling half to his friend.)

A long-time business associate in the US offers a rather more brutal perspective: "A tough businessman is one who calls a spade a spade without regard to the feelings of others. A weak businessperson is one who pretends to be sweet and friendly and gets other people to do the nasty stuff. My personal view is that the moment has passed for both James and Lachlan."

The trouble with Australian media - when viewed from the enormous and diverse pool that enlivens the British landscape - is that it appears tiny and in-bred. Debate around issues of diversity, cross-media ownership laws and power in the hands of just a few individuals has vexed governments of both political persuasions for decades.

And yet, one can be forgiven for longing for the days when the titans of Australian media were easy to identify and their influence in the nation's political discourse obvious. Back then, the Packers, the Murdochs and the Fairfax family were in constant, ferocious competition. In recent years, however, the explosion of the internet, the decline of the press and the push to exploit new digital platforms have created an unexpected web of media relationships and market bedfellows.

James Packer and Lachlan Murdoch are not the only ones cosying up. Packer's Consolidated Media Holdings has a share of Kerry Stokes' Channel Seven and both men have a stake in Foxtel, as does News Limited. Meanwhile, Gina Rinehart, the iron-ore heiress and Australasia's richest woman, has a 10% stake in Channel Ten to go with Packer and Lachlan Murdoch's Illyria hand-in-hand investment.

Often, the direct business connections attest to social relations - whereas Australia's media players not long ago were at each other's throats, now they park their yachts side-by-side and head off on joint family holidays. Indeed, now that Rinehart is making a serious play at Fairfax, the country's biggest independent media company, the whole media landscape is starting to resemble a cake to be shared among mates.

Says a veteran media man in Australia: "The only ones not playing the game are Fairfax, and they are in decline. The truth is that this is a terrible story in terms of concentration … of course, none of it is illegal but they are all so closely aligned and intertwined."

According to Eric Beecher, former Fairfax editor and media proprietor, all the big media owners, regardless of medium, are under a level of business-model pressure they have never encountered before: "These are companies used to massive profit margins and enormous financial and other power. That is what they have been used to all their lives and it's been swept away. They find themselves like victims of the Queensland floods … it is enormous and, as a result, they are much more likely to do deals and forge alliances with competitors in a way that they never needed to do when the gates were still locked and they were the gatekeepers.

"Everyone is scrambling and no one knows where it will end up. Everyone's profits, in TV, in papers, in radio are either being squeezed or decimated. Everyone is looking around for solutions that include the kinds of relationships they would never have contemplated in the past."

The power wielded by this club of media players exists partly because, in Australia, free-to-air television broadcasters have managed to maintain and enshrine a lucrative oligopoly. Pay TV simply has not penetrated in Australia the way that it has in Europe and the US.

The federal government, which is in the throes of several, mostly self-serving, media inquiries, appears to be getting in on the cosiness, too. In January, the Australian reported that the minister for communications, Stephen Conroy (who declined to be interviewed), played regular rounds of golf with James Packer at Melbourne's exclusive Capital Golf Club. In 2010 the minister copped flak for going skiing with Kerry Stokes in Colorado, just before announcing a $250 million gift to the ailing, free-to-air networks in the form of a licence fee rebate.

Senator Conroy has strenuously defended his right to meet with major players. But while even critics agree he has a deep and detailed understanding of the portfolio, they fear his personal beliefs about the profound impact of the internet will lead to a premature relaxation of cross-media rules.

"From a share of voice perspective, in a journalistic sense, the internet is way down the pecking order. In e-commerce it's huge, obviously, but when it comes to share of political voice, share of social commentary, [it] is not big," says a veteran media executive. "There are some voices of dissent - Crikey, Business Spectator. But it's early days for them … you have all these other powerful commentators and personalities, like Alan Jones, who is close to Packer, like Andrew Bolt [who was given his TV show by Lachlan]. There are layers and layers of friendships and no diversification of voice."

The identity of Rupert Murdoch's successor is a riddle that only time and Lachlan can answer. In the UK, the News of the World scandal has cost his father dearly, including the profitable Sunday tabloid he bought in 1969, his bid for full control of BSkyB, the British Pay TV broadcaster, and quite possibly the fall-back dream of seeing his second son take over the empire.

Wall Street, however, seems to have taken a kinder view: over six- and 12-month periods, News Corporation stock has out-performed rivals such as Walt Disney and Time Warner. Media analysts believe generous share buy-backs along with robust growth in other parts of the business have limited fallout from the scandal. But they also point out that the markets welcomed Murdoch's reassurance, soon after the scandal, that his non-familial deputy, Chase Carey, would keep things running should anything happen to him.

Nobody seems quite to know what lies behind the ornate, curling moustache of the low-key president, chief operating officer and deputy chairman of News Corp. But the one thing Carey has long stressed is that he is "on good terms with all three potential successors: James, Lachlan and their sister Elisabeth" - a clear and astute acquiescence to the patriarch's dear wish that it be one of them.