Michael Wolff’s book on Rupert Murdoch (The Man Who Owns The News), makes it clear that the Sun King was always in charge of News Corp, but the hard heads in the market always knew that Peter Chernin lurked in the background to keep Rupe on the straight and narrow.
Chernin was always there, except around contract renegotiation time when rumours leaving, going into politics etc, and Rupe would up the ante, double the dosh and Pete would stay, earning well over $US20 million a year.
He of course was backed by Rupe when, along with the aggressive Roger Ailes, when the two of them ganged up on poor Lachlan and forced him out of News.
Now that’s no more; the latest outbreak of Chernin to leave stories have a solid basis in fact, as we found this morning with the announcement that he was was leaving the company after 12 years of service in which he helped put structure, processes and backbone into Murdoch’s ambitions. He isn’t renewing his latest contract, signed with News back in 2004.
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”It is understandable that at this stage in his life he would want to do something new after serving News Corporation and our shareholders so well for so long,” Mr Murdoch said in a statement. ”Peter and I will work closely over the next four months to ensure effective transition.”
Mr Murdoch will pick up many of his duties, which for many investors around the globe, will send a shiver down their profit and loss statements if they hold a lot of News Corp shares. Rupert has great ideas, but is not a disciplined buyer, as we saw with the Wall Street Journal buy.
Mr Chernin has been influential since 1989 when he started running Fox Broadcasting. He was at the centre of News when it almost failed that year as banks refused to refinance the company and Murdoch. Chernin was made president and chief operating officer of News in 1996 and the company and Murdoch soared, up till the Wall Street Journal buy and the credit crunch in 2007 when debt became a swear word, and then the recession hit the company.
News says Chernin will step down in June. He will have a film and television production deal with the company’s Fox unit.
The Fox unit will report directly to Chairman Murdoch. That in itself is significant because the Fox TV and film business is the black hole for Murdoch and News at the moment, especially its Free To Air TV business in the us where plunging ad revenues saw earnings fall $US227 million to $US18 million in the three months to December.
The Fox film business is under pressure as the spate of poor releases hurts box office and more importantly, the gathering slump in DVD sales hurts the bottom line and the studio’s cash flows.
Fox, like NBC universal and other studios, have cut back on film production and developments and are busy rewriting existing contracts to take account of the DVD slump. it could be the growing importance of Blu Ray, or more probably the slump in consumer spending, that’s hurting the studio’s sales.
Cable TV is still solid, although ad revenues are falling and the giant Comcast group, the country’s biggest Cable operator, reported a sharp drop in December quarter subscribers. It also lost quite a few video only subscribers as the housing bust and rising jobless toll forces families to cutback.
Direct TV, which John Malone greenmailed out of Murdoch is the best performing US media businesses, with rising revenues, subscribers and profits under some pressure, but not falling like a stone.
Malone grabbed Direct TV from Murdoch in exchange for around 19% of News’ voting shares he nabbed while Murdoch and Chernin were distracted by News Corp’s flight from Australian domicile to US residency in 2004-05
So now we will have a spate of Lachlan to return stories; James to get promotion yarns (more logical than Lachie going back); and variants of those storylines.
You can be sure nothing wild or outlandish will appear in any News Ltd paper in Australia.
News Corp shares fell 24 cents to $410.08 just before midday on the Chernin news.