Murdoch Courtroom Fight to Be a Verdict on Lachlan’s Leadership

(Bloomberg) — The succession battle playing out in a Nevada courtroom this month between Rupert Murdoch’s four oldest children could ultimately decide who controls Fox News and the Wall Street Journal, two of the most influential US news outlets.

Murdoch, 93, is seeking to change an irrevocable family trust to favor his eldest son Lachlan as his successor, prompting three other children, Prudence, Elisabeth and James, to fight back in probate court in Reno. If Murdoch gets his way, Lachlan will control Fox Corp. and News Corp. after his death, rather than dividing power among the four, as the trust had prescribed. 

To some extent, the legal fight is also a report card on Lachlan’s business prowess. Rupert has argued that the legal change will be good for all of his six children, the beneficiaries of the trust, according to people familiar with the case who asked to not be identified. He has said Lachlan’s political leanings make him a better steward of the media outlets, which are popular with conservatives. 

Some Murdoch family insiders complain that Fox shares have underperformed the market under Lachlan’s direction, and that Fox News hasn’t come up with a plan to outlive its aging but loyal viewership.

In the past five years under Lachlan, Fox shares have trailed the broad market. But their 18% gain over that period is better than many traditional TV industry peers, including Walt Disney Co., Warner Bros. Discovery Inc. and Paramount Global, according to Alan Gould, an analyst with Loop Capital Markets. 

“Given his hand was a traditional media company that he started with, we think he has done a good job,” Gould said.

At Rupert’s request, the trial and related documents are sealed and journalists are barred from the courtroom. A status conference is scheduled for Tuesday afternoon and five days of hearings begin on Sept. 16, with District Court Probate Commissioner Edmund Gorman presiding, according to the Washoe County court website.

Lachlan was clearly designated to replace his father when Rupert formally retired from the two companies’ boards last year. The 53-year-old was appointed chairman of News Corp. last year and is chairman and chief executive officer of Fox.

News Corp., which has evolved from predominantly a newspaper publisher to more of a provider of business-to-business information and real estate listings, has slightly outperformed the market, with an 88% return over five years, Gould said. The company has been run for more than a decade by Robert Thomson, a former reporter. 

The past five years have been a critical stretch for the Murdoch empire. In 2019, Rupert sold most of Fox’s entertainment assets to Disney in a $71 billion deal. The sale focused Fox primarily on news and sports programming.

Lachlan has made an effort to rebuild the company’s general entertainment offerings, with investments in animation and reality TV studios. His most notable deal was the $440 million purchase of Tubi, a free ad-supported streaming service that now has 81 million users.

“I really struggle with what Fox’s long-term strategy actually is,” said Timothy Nollen, an analyst with Macquarie Capital. “Disney and Peacock and all these other services are losing money, but I think they are ultimately the future of the industry and Fox, without those options, is going to have a tougher time.”

None of Lachlan’s siblings works for the businesses. James, 51, stepped down as CEO of Fox after the Disney sale. He resigned from the News Corp. board in 2020, citing disagreements over editorial content and strategic decisions and now runs Lupa Systems, his own investment firm. He’s been critical of the Murdoch news outlets’ coverage of climate change and was among 88 business leaders who endorsed Vice President Kamala Harris this month in her run for the White House.

Elisabeth, 56, founded Shine Group, a TV production company sold to Fox for $415 million in 2011. She now runs Sister, another TV studio. Prudence, 66, has been the least involved in the family business.

Some investors argue the issue isn’t so much Lachlan’s management, but the super-voting stock that gives the family control over the companies. On Monday, Starboard Value LP, a News Corp. investor, said it sponsored a shareholder resolution to eliminate the dual class of shares at News Corp.

“One of the root causes for the conflict is disagreement over the future strategic direction of News Corp. and Fox Corp.,” Starboard Managing Member Jeffrey Smith wrote in his letter. “This uncertainty represents a risk to shareholders.”

News Corp. said in response that the company’s dual class of shares “promotes stability,” and the company has thrived under its current board and management.

Lachlan’s tenure has seen its fair share of controversy. The company paid $787.5 million last year to settle claims by Dominion Voting Systems that Fox News guests and hosts made defamatory allegations about fraud in the 2020 presidential election.

Fox News remains the No. 1 cable news network by a comfortable margin. The company’s cable-TV networks, led by Fox News, generated over $2.69 billion in profit last fiscal year, more than 80% of the company’s total.

“Fox News, over the last four years, has reasserted its dominance on the right,” said Paddy Manning, author of a biography of Lachlan. “The future of that network is incredibly important, politically as well as culturally, and so that’s what the Murdoch siblings are fighting about.”

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