Facing down Dad
In an exclusive interview with Robert Peston, James Murdoch, the new head of BSkyB, promises that he will not be a puppet of his father Rupert, the firm's chairman
What's wrong with this statement? "The relationship between the chief executive and the chairman of the company as it pertains to the strategy of the company, the performance of the company, everything that happens in the company, is in the professional category."
Well, nothing at all, if made by most FTSE100 chief executives: it would be the sort of "worthy-but-dull" declaration that's barely worth recording. But the speaker is James Murdoch, the new chief executive of British Sky Broadcasting, and the chairman in question is his father, Rupert Murdoch, the legendary media mogul.
I'm interviewing the younger Murdoch in his unglamorous corner office, with a view over the congested and ugly A4, in the satellite broadcaster's sprawling west London campus.
And he's producing some agonising linguistic constructions not to use the "dad" word (or "pop", as he supposedly calls him in private) in an attempt to prove that blood ties to his father - whose News Corporation owns 35.4 per cent of BSkyB - will not distort his responsibility to serve all shareholders.
It's a must, because his appointment last week to the helm of the UK's largest media group - with a market value of £12.87bn - led some BSkyB investors to shriek "nepotism" and worse.
So what would he do if "the chairman" tried to push him to adopt a strategy for BSkyB with which he disagreed? Wouldn't his natural love and respect for his father put him under enormous pressure to go against his better judgment?
He fixes me with a stare and says: "The key thing to understand, that is very important for me to get across, is that in taking this role there is absolutely no question in my mind who I work for: it's the board of the company and all of the shareholders of the company.
"And in executing those duties, I and the management team will do everything we can to maximise value for all those shareholders. And to the extent there are disagreements on strategy, we will make it plain. If we disagree about something, we will disagree and we will hash it out."
So how does he manage this tension between the demands of family and the imperative of putting the company first? "I should tell you that my relationship with my father is on the one hand a professional relationship and on the other hand a personal relationship."
I ask what's in the "personal" category. "I'm not going to tell you . . . fishing or something."
Anyway, a BSkyB non-exec tells me that Murdoch Junior said "no" to the chairman in his very first 24 hours in his new post. This was over his decision - which he is carrying out - to resign from all the positions he holds in his father's News Corp empire.
"Rupert didn't want him to do it," says the director, "but James was adamant." When I ask the son about this, he is palpably embarrassed and refuses to be drawn.
He implies, however, that he has tested his father's patience in the past, over his decision in 1995 to quit his course in film and history at Harvard a year before graduation (to set up a record label called Rawkus). "Any father has concerns about that sort of thing," he says.
If there is inner turmoil between the professional and the personal, it's well hidden. He's all charm and impeccable manners - which is impressive for someone who is only 30. In fact, he looks even younger. With his soft Henry Jamesish accent, dapper, preppy suit and little round glasses, he's Harry Potter with an Ivy League education.
There are other subjects he eschews. One is his family life (he's married to a marketing executive, Kathryn Hufschmid, and has a six-month-old daughter).
Equally off limits is the way the board appointed him to the CEO post and whether his lineage gave him an unfair advantage over other internal and external candidates.
"How it went and the way the company approached the process are questions for the nominations committee," he says, passing the buck to BSkyB's harrassed non-executives (Lord St John of Fawsley, the former Tory minister, Allan Leighton, the chairman of Royal Mail, and Gail Rebuck, the publisher).
But what prompted him to throw his hat in the ring? He says he learned that the job might be available when he read press reports at the end of the summer that Tony Ball, the incumbent CEO, might be quitting. "I talked with Tony [Ball] and I said 'okay, is this going to happen? Would you enter this process?' and it sort of started."
As for his qualifications to run one of the UK's 20 biggest quoted companies, he concedes that Star Group, the Asian News Corp offshoot he has been running since 2000, is considerably smaller than BSkyB. And although it's in satellite and cable television, its revenues are weighted towards advertising and fees from other cable businesses, while BSkyB's success has been built on selling subscriptions.
However, Star is a complex business - it operates in 53 countries - and in three years he has turned it around from substantial losses, estimated at $100m a year, to operating profits of about $50m now (this includes dividends from businesses it does not control and is an approximation, since News Corp does not publish the precise number).
What are his plans for BSkyB? He is pleased that the board is moving to reconstruct the balance sheet and is taking legal steps that would allow it to start paying a dividend again after a five-year break - which will warm the cockles of independent shareholders.
His strategy is to expand BSkyB's core business, rather than embarking on adventures overseas. "There is a lot of growth left in the UK and Ireland markets. We're excited about these markets. The focus of the company is totally on that, and at this point there are no plans for anything else," he says.
But he refuses to discuss "the longer term issue of volume versus high Arpu [average revenue per user]" - which may sound like gobbledegook but is in fact the central dilemma facing BSkyB.
What it means is that he has not yet decided whether to adopt Tony Ball's approach of increasing the number of subscribers paying the relatively high annual fee of around £400 a year from 7m to 8m by 2005 - or whether to make a push into selling cheaper services to a potentially bigger market.
This uncertainty may unsettle shareholders, since some of them have put to me a conspiracy theory that runs like this.
Murdoch Junior would depress profits and the share price by going for low-margin growth and he would then issue shares to acquire a News Corp television business such as Star or its Italian interests. Hey presto: News and Rupert Murdoch would see their stake in BSkyB increase to above 50 per cent and would have control.
Nothing could be further from his mind, he says. "There are lots of conspiracy theories out there. We're focussed on growing value for shareholders, we are focussed on keeping operational momentum . . . and there aren't any plans for all that other stuff."
That's reassuring. So what will he earn? "I haven't been told," he says (which is the first time I've ever come across a CEO who took a job without driving a hard bargain on pay). "I hope the remuneration committee will be giving me a call soon."
When I erroneously suggest to him that he earned $3m last year, his disarming response is: "Holy cow, I wish it was". But even more strikingly, he doesn't appear to know what he took home, since the numbers he gave me (a base salary of $700,000 and a bonus of $500,000 or "something like that") are wrong. News Corp's annual report says his remuneration in salary and bonus was $2.1m.
Finally, there is the question he probably hates more than any other, which is whether the supposed competition with his older brother Lachlan weighs on him.
In this context, I mention the alleged remark by his mother Elizabeth that the sibling contest to succeed Rupert Murdoch at the helm is a recipe for a "lot of heartbreak and hardship".
He insists he never agonises about the future inheritance. "Look, I've a job, I do the job . . . To play into all that other sort of junk is not worthwhile. Everyone loves doing it, but it's not something that concerns me."
He fixes me with a stare and says: "The key thing to understand, that is very important for me to get across, is that in taking this role there is absolutely no question in my mind who I work for: it's the board of the company and all of the shareholders of the company.
"And in executing those duties, I and the management team will do everything we can to maximise value for all those shareholders. And to the extent there are disagreements on strategy, we will make it plain. If we disagree about something, we will disagree and we will hash it out."
So how does he manage this tension between the demands of family and the imperative of putting the company first? "I should tell you that my relationship with my father is on the one hand a professional relationship and on the other hand a personal relationship."
I ask what's in the "personal" category. "I'm not going to tell you . . . fishing or something."
Anyway, a BSkyB non-exec tells me that Murdoch Junior said "no" to the chairman in his very first 24 hours in his new post. This was over his decision - which he is carrying out - to resign from all the positions he holds in his father's News Corp empire.
"Rupert didn't want him to do it," says the director, "but James was adamant." When I ask the son about this, he is palpably embarrassed and refuses to be drawn.
He implies, however, that he has tested his father's patience in the past, over his decision in 1995 to quit his course in film and history at Harvard a year before graduation (to set up a record label called Rawkus). "Any father has concerns about that sort of thing," he says.
If there is inner turmoil between the professional and the personal, it's well hidden. He's all charm and impeccable manners - which is impressive for someone who is only 30. In fact, he looks even younger. With his soft Henry Jamesish accent, dapper, preppy suit and little round glasses, he's Harry Potter with an Ivy League education.
There are other subjects he eschews. One is his family life (he's married to a marketing executive, Kathryn Hufschmid, and has a six-month-old daughter).
Equally off limits is the way the board appointed him to the CEO post and whether his lineage gave him an unfair advantage over other internal and external candidates.
"How it went and the way the company approached the process are questions for the nominations committee," he says, passing the buck to BSkyB's harrassed non-executives (Lord St John of Fawsley, the former Tory minister, Allan Leighton, the chairman of Royal Mail, and Gail Rebuck, the publisher).
But what prompted him to throw his hat in the ring? He says he learned that the job might be available when he read press reports at the end of the summer that Tony Ball, the incumbent CEO, might be quitting. "I talked with Tony [Ball] and I said 'okay, is this going to happen? Would you enter this process?' and it sort of started."
As for his qualifications to run one of the UK's 20 biggest quoted companies, he concedes that Star Group, the Asian News Corp offshoot he has been running since 2000, is considerably smaller than BSkyB. And although it's in satellite and cable television, its revenues are weighted towards advertising and fees from other cable businesses, while BSkyB's success has been built on selling subscriptions.
However, Star is a complex business - it operates in 53 countries - and in three years he has turned it around from substantial losses, estimated at $100m a year, to operating profits of about $50m now (this includes dividends from businesses it does not control and is an approximation, since News Corp does not publish the precise number).
What are his plans for BSkyB? He is pleased that the board is moving to reconstruct the balance sheet and is taking legal steps that would allow it to start paying a dividend again after a five-year break - which will warm the cockles of independent shareholders.
His strategy is to expand BSkyB's core business, rather than embarking on adventures overseas. "There is a lot of growth left in the UK and Ireland markets. We're excited about these markets. The focus of the company is totally on that, and at this point there are no plans for anything else," he says.
But he refuses to discuss "the longer term issue of volume versus high Arpu [average revenue per user]" - which may sound like gobbledegook but is in fact the central dilemma facing BSkyB.
What it means is that he has not yet decided whether to adopt Tony Ball's approach of increasing the number of subscribers paying the relatively high annual fee of around £400 a year from 7m to 8m by 2005 - or whether to make a push into selling cheaper services to a potentially bigger market.
This uncertainty may unsettle shareholders, since some of them have put to me a conspiracy theory that runs like this.
Murdoch Junior would depress profits and the share price by going for low-margin growth and he would then issue shares to acquire a News Corp television business such as Star or its Italian interests. Hey presto: News and Rupert Murdoch would see their stake in BSkyB increase to above 50 per cent and would have control.
Nothing could be further from his mind, he says. "There are lots of conspiracy theories out there. We're focussed on growing value for shareholders, we are focussed on keeping operational momentum . . . and there aren't any plans for all that other stuff."
That's reassuring. So what will he earn? "I haven't been told," he says (which is the first time I've ever come across a CEO who took a job without driving a hard bargain on pay). "I hope the remuneration committee will be giving me a call soon."
When I erroneously suggest to him that he earned $3m last year, his disarming response is: "Holy cow, I wish it was". But even more strikingly, he doesn't appear to know what he took home, since the numbers he gave me (a base salary of $700,000 and a bonus of $500,000 or "something like that") are wrong. News Corp's annual report says his remuneration in salary and bonus was $2.1m.
Finally, there is the question he probably hates more than any other, which is whether the supposed competition with his older brother Lachlan weighs on him.
In this context, I mention the alleged remark by his mother Elizabeth that the sibling contest to succeed Rupert Murdoch at the helm is a recipe for a "lot of heartbreak and hardship".
He insists he never agonises about the future inheritance. "Look, I've a job, I do the job . . . To play into all that other sort of junk is not worthwhile. Everyone loves doing it, but it's not something that concerns me."
http://www.telegraph.co.uk/finance/2868442/Facing-down-Dad.html
