James Murdoch’s resignation as chairman of British Sky Broadcasting Group could “serve as a bargaining chip” for his father, News Corp. chairman and CEO Rupert Murdoch, who hasn’t abandoned his hope of acquiring the 60% of BSkyB that News Corp. doesn’t already own, according to
a Bloomberg report.
To achieve his goal, Murdoch must convince British regulators that News Corp. is a “fit and proper” owner of the pay TV company in the wake of the phone-hacking scandal at News Corp.’s British newspapers, the article said.
A
Los Angeles Times
article
noted that Parliament is “expected to be critical of” James Murdoch’s handling of the ethics scandal at the tabloids. James and Rupert Murdoch are expected to appear before Parliament again and to testify before a judicial inquiry into British newsgathering practices, the
LA Times
report said.
The Bloomberg report predicted that News Corp. would wait until its phone-hacking scandal is resolved — at least a year — before resuming its pursuit of BSkyB. Citing anonymous sources, the report said Rupert Murdoch “has never given up on the dream of owning BSkyB, which he sees as a potent money machine.” David Joyce of Miller Tabak & Co. in New York told Bloomberg that owning BSkyB outright would generate as much as $800 million a year for News Corp.
The Bloomberg article said James Murdoch volunteered to resign from the chairman’s post at BSkyB “and wasn’t pushed.” His successor as BSkyB, Nicholas Ferguson, is the first person outside the Murdoch family to chair the company since it was formed in 1988,
a
Financial Times
report
noted.
Citing a friend of James Murdoch’s, the
FT
article said Murdoch considered the BSkyB chairmanship as “his line in the sand” and as recently as mid-March had not made a final decision to step down.
“He saw stepping down at Sky as tantamount to defeat,” the friend said. “It is somewhere he saw himself as having done a pretty good job and proved himself to be independent of his father.”
Media analyst Claire Enders told the
FT
that during James Murdoch’s tenure at BSkyB, the company doubled its revenues and quadrupled operating profits. The day he stepped down had to have been “one of the saddest days of James Murdoch’s life,” Enders said.
A separate
FT
report
said James Murdoch had hoped to expand BSkyB and “cement his status as heir presumptive to his father.”
News reports have pointed out that James Murdoch’s role has been diminished since the phone-hacking scandal broke. He has also relinquished his position as executive chairman of News International, News Corp.’s British newspaper unit, and has stepped down from the boards of GlaxoSmithKline and Sotheby’s.
James Murdoch continues as a non-executive director on BSkyB’s board “because he has contributed to the company’s success over the past eight years” and because the phone hacking at the newspapers “has nothing to do with the satellite broadcasting company,” the Bloomberg article said. Tim Bake, a professor of political science at the University of Sussex, told Bloomberg that his continued role on the board will likely be criticized:
“A lot of the criticism of News Corp. in Britain has centered around James Murdoch himself, and in some ways it will make sense to have him step down…. The fact that he’s still on the board, I think, will cause a few raised eyebrows because it looks like it’s a cosmetic move.”
But, the
FT
noted:
By remaining on the BSkyB and News Corp. boards, [James] Mursoch has reminded observers that he still has territory to fight for. People close to him say he still hopes to become News Corp.’s chief operating officer, should Rupert Murdoch split his chairman and CEO roles and promote Chase Carey from COO to CEO.
The
FT
also said that James Murdoch’s resignation from the BSkyB chairmanship “raises questions about the rationale behind his current position on the board of News Corp.” (Sources: Bloomberg, April 4, 2012;
Los Angeles Times,
April 4, 2012;
Financial Times,
April 3, 2012.)
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