In all the speculation about what James Murdoch’s move back to New York and away from News International, several important points have been lost. Murdoch’s role was always going to change; his departure for New York had been revealed last year and timed to happen early this year. Every report that suggested he had “resigned” or been moved or demoted was far, far from the mark.

Rupert Murdoch announced a year ago when he first went to London after the first round of breakthroughs by The Guardian forced action on the phone-hacking claims and destroyed the News of the World, (and Murdoch defence) that it was a “rogue reporter and private eye”. James Murdoch has bought an expensive Manhattan residence and dropping the management role at News International was always going to happen.

Some reports say its the end for Murdoch, others say it’s nothing of the sort, some point out that he’s moving back to head office and into the centre of the company’s business, TV and broadcasting, such as the Lex column in the Financial Times. That latter point is true to a point, but Lex and others failed to check to see what James Murdoch will be responsible for at HQ.

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From the statement: “Now that he has moved to New York, James will continue to assume a variety of essential corporate leadership mandates, with particular focus on important pay-TV businesses and broader international operations.” The statement had earlier said: “He has demonstrated leadership and continues to create great value at Star TV, Sky Deutschland, Sky Italia, and BSkyB.”

So James Murdoch will be involved in “important pay TV businesses and broader international operations”. None of this was specified, which is very unlike News Corp. News Corp management announcements make it clear who the promoted person will report to and especially, what they will be managing. When he was appointed to News International in 2007, News Corp said in the statement:

“James Murdoch has been appointed chairman and chief executive, Europe and Asia, News Corporation. In this new role, Mr Murdoch will take direct responsibility for the strategic and operational development of News Corporation’s television, newspaper and related digital assets in Europe, Asia and the Middle East.”

His latest move is to an ill-defined role in HQ where he is nominally a man without a mission. If he retains control over the international pay TV businesses (he remains chairman of BSkyB), it means his career has both gone backwards and forwards at the same time, retaining a broadcasting role and losing the inconvenient role as head of News International (that must be a plus, though).

Of all the pay TV businesses Murdoch oversaw in his London-based role, the most important was BSkyB. Sky Italia and Sky Deutschland are loss-makers (the German business is a financial black hole at the moment). His role at BSkyB is under pressure with every revelation in London about what went on at News International, The Sun and The News of the World.

Putting BSkyB to one side at the moment (it is run by the very capable Jeremy Darroch), James Murdoch’s management role at News Corp is trying to staunch the losses at Sky Italia and in Germany and overseeing Star, which is where he did well 15 years ago: a case of back to the future? He won’t be able to get his nose into the US cable operations. Roger Ailes, who runs Fox News, accounted for Lachlan Murdoch and the other businesses are well managed and not in need of whatever little James Murdoch can contribute.

And the latest bit of news won’t relieve the pressure on James at BSkyB, or his father or News International with the arrest of  Virginia Wheeler, The Sun’s defence editor. There are also at least 20 News International journalists and others arrested over the phone-hacking scandal.

So much for the confected rage of Sun journalists and Rupert Murdoch’s defence of them two weeks ago (and the intervention of the likes of Geoffrey Robertson, the London-based human rights lawyer who sprang to the defence of The Sun’s journalists, saying they did not have to co-operate with the in-house investigation being conducted by News Corp).

They all went quite quiet after Sue Akers, the deputy assistant commissioner of the Met, told the Leveson inquiry into the press on Monday that The Sun had created ”a network of corrupted officials” with journalists drawing up to £150,000 ($221,000) to pay to people across a wide selection of jobs and influential industries in the UK.That was evidence of a widespread criminal operation by Murdoch’s tabloids (and the one that will push the FBI and the US Justice department towards a full blown investigation to see if they were breaches of the draconian Foreign Corrupt Practices Act).

Less than three days after Akers’ damning evidence, James Murdoch was out of his News International role at HQ. So effectively no change except that it represents a diminution of his management role. Will he get oversight of News Ltd’s 25% stake in Foxtel and 50% stake in Fox Sports Australia (the renamed Premier Media Group). Will he get to succeed his father as chairman of News Ltd because Lachlan can’t do it now that he’s the chairman of the staggering Ten Network?

But there’s another point to be made here. The abandonment of News International by James wouldn’t have been done with out Rupert’s approval, so in the eyes of his father, James has been downgraded as managing director material. More important, on Tuesday that Bloomberg reported that Chase Carey, the chief operating officer of News Corp, has, for the first time, publicly mentioned the possible sale of the newspapers at an investment conference in Florida:

“Chase Carey revealed he had held a number of talks with the company’s executives about selling or separating the publishing unit from the company.

“There certainly is an awareness” that New York-based News Corp. would trade at higher multiples if it didn’t own newspapers, Carey said at the Deutsche Bank (DBK) media conference in Palm Beach, Florida.”

News Corp shares hit a 52-week high this week, after those Carey comments because investors can see the day that the company won’t own the underperforming newspapers. After that is a reduced role for the Murdoch family to eliminate the so-called “Murdoch discount”.

The point here is that he wouldn’t have made that statement without some approval from Murdoch (If he didn’t have that approval, then it’s a much bigger story with Carey moving to assert more power at News Corp, given the closeness of Rupert Murdoch to the newspapers in his empire).

The papers, especially in London, can’t be sold at the moment: the liabilities attached to them, criminal, financial and reputational are too high. And why would anyone wanting to buy if they can wait a year, watch the shit hit the fan, see convictions, possibly fines and other penalties, plus the continuing stream of expensive court settlements, all of which would lower the purchase price?

While London is easily disposed of, what about the papers in Australia and what about The Wall Street Journal, the one paper in the empire that gives the company clout in the US market?

The reporting lines for the various paper groups tells us another thing: News International’s standing has been downgraded: NI head Tom Mockridge now reports to Chase Carey. The Dow Jones Co and Wall Street Journal both report to Rupert Murdoch, as does Kim Williams at News Ltd, who has Rupert Murdoch as his chairman. Carey now effectively controls the future of News International, which will make a future sale much easier.

Selling the News International papers won’t erase the stain on the News name or the Murdochs’ reputation. Convincing evidence that James Murdoch turned a blind eye to the scandal, accepted assurances from the likes of Coulson and Brooks  that there was no “story” in the claims of hacking, or ignored other warnings, would make his role at BSkyB unworkable. It would also throw into question the part ownership of BSkyB by News Corp.

The continued Murdoch control of BSkyB remains the main game for the entire group: its huge revenues, profits and cash flows will reinvigorate the News Corp accounts like no other deal.

UK media law contains a “fit and proper” test that is ill-defined. It could prevent News Corp from making another bid for BSkyB. It could also provide someone with the basis to launch a legal challenge to the current control of BSkyB should criminal charges succeed in the various cases involving the various UK papers owned by Murdoch and News Corp. The reputational damage could be such to News Corp that continued control of the pay TV operator could become untenable.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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