WORLD EXCLUSIVE MT interview - James Murdoch

Is he his father's son or his own man? The boss of BSkyB seems a bit of both, actually. The cries of nepotism have died down but now he faces a competition commission enquiry into his firm's £940m stake in ITV - plus Ofcom, Virgin and BSkyB expansion to take care of…

by Matthew Gwyther and Andrew Saunders
Last Updated: 31 Aug 2010

After a three-year siege outside the Sky walls, MT is finally in. It's a bright, sunny morning at New Horizon Court 1 over in Osterley on Brentford's Golden Mile and we're mooching around in the foyer waiting for our meeting with James Murdoch, the BSkyB boss. He is unquestionably the man of the moment and a white-hot interview subject. His multi-fronted battles with the telecommunications industry, the regulator Ofcom and the EU, and, most visibly, his running brawl with Richard Branson's Virgin organisation have left us all wondering what kind of stuff this guy is made of and who he might engage in a dust-up next.

We're ushered up to the executive floor and past the office of the very absorbed CFO Jeremy Darroch, who looks up from sifting through his morning's e-mails and then looks down again. Plenty on his mind. He's the guy who rustled up £940 million in three days flat for the raid on ITV shares back in December - a haymaker punch that came from nowhere, thwarting Virgin Media in its TV empire-building ambitions. The counter-punch - Virgin's refusal to pay Sky's increased fee for such popular shows as The Simpsons, Lost and 24 and the subsequent pulling of Sky channels from the Virgin cable operation - will probably hit Sky for £50 million in lost fees and advertising revenue annually. Virgin sued, so this high-stakes bare-knuckle fight is now being played out in the High Court.

Sky PR man Robert - tough and laconic - makes us coffee. Then suddenly James whizzes past, deeply focused on an e-mail printout, and disappears out onto the sun-deck. ‘Gone for a cigarette, probably,' shrugs Robert. Then James re-enters, still rapt, and is off down the corridor. Murdoch has taken a lot of persuading to do this interview. His people want him to do it and are confident he'll do well. There's a sense his talent is under-appreciated and under-exposed. Royal Mail chairman Allan Leighton - among whose collection of hats is one labelled ‘non-exec director, BSkyB' - told us: ‘James is very focused and very smart and very personable. He doesn't have the ego you get with some people - good leaders don't need to show how good they are, you just get it. That's how it is with James.'

But the man himself clearly hates the interview idea, especially the private bits. We've been warned by all and sundry that he will not do personal, and most certainly does not do family. So, no personal. Or else things might get personal. News Corp may be one of the world's most personal large companies - it has the essence of its founder running in every cell and sinew - but James prefers things kept to business. No re­miniscences about Christmas in Aspen with ‘Pop' when the family played charades, some in Latin (according to Andrew Neil). He doesn't like the myths, such as the erroneous claim that during his ‘wayward' youth, he dyed his hair blond and had his eyebrow pierced. Not true. This is, of course, a crying shame, because a large chunk of the business world is fascinated to know what this young man of 34, scion of the world's most famous media family, is actually like.

The kid once portrayed as the black sheep of the Murdoch clan: dozing off in press conferences as a 12-year-old intern in Sydney; dropping out of Harvard - where he drew a cartoon strip for the Harvard Lampoon entitled Albrecht The Hun - to launch a hip-hop record label called Rawkus; studying in Rome and contemplating a career as an archaeologist or an academic. But he joined the family firm 10 years ago, and here he is, in a dark, single-breasted suit with a plain white shirt and trendy black pointed shoes. His eyesight is quite poor and the powerful lenses of his titanium specs make his brown eyes seem huge. In his hand he carries a small black notebook, which makes him look slightly like a lay preacher. He's tall and slim and looks in very good nick, which at 34 he certainly ought to. Despite the fags.

The first thing that strikes you is the politeness expressed in that New England, Henry Jamesian accent. ‘Well, thank you, guys, for coming in. Hope it wasn't inconvenient.' Inconvenient? Are you kidding? He presents his card in the formal Far Eastern style, held between both thumbs and forefingers and delivered with the smallest of bows - a reminder of his highly successful time spent in Hong Kong as CEO of News Corp's Star TV.

We begin at his beginning at BSkyB. Amid howls of outrage from the meritocratic chattering classes, it became apparent in 2003 that Sky's chairman, Rupert Murdoch, wanted his son, James, then aged only 31, placed in Sky's CEO seat (Rupert then owned 35% of Sky). This would make James, of whom few on the London media scene had ever heard, the youngest ever boss of a FTSE-100 company. Those who accused Murdoch of nepotism failed to understand the organisation - which he sees as dynastic - and forgot he rarely puts sentiment before business. That's the way the 76-year-old operates and you take it or leave it, buy shares or stay away. However, to keep the corporate governance fans quiet, the headhunter Spencer Stuart was engaged in an unusually tricky search and all candidates were obliged to submit to psychometric testing. We had the spectacle of Norman St John Stevas, the senior non-exec director at Sky, explaining how this was all above-board, had nothing to do with James' lineage and how they would get the best candidate.

Few believed him then, but opinion has shifted now. James Murdoch has transformed the organisation. It has advanced from a one-product pay-TV broadcaster with a static subs base into a triple-play, multi-platform communications operator offering paid-for television, home telephony and broadband internet in the pro­cess. So it's moved from a £7 billion pond to a £20 billion lido. An acknowledged techno- enthusiast, young Murdoch has moved Sky forward at a brisk pace into telephony, Sky+, high-definition TV and even carbon neutrality, with the Green movement expressing its approval of his actions in the area of sustainability. There have been set-backs. He had to come to a compromise with the European Commission over the precious rights - Sky's ‘battering ram' - to the FA Premier League, but he has overseen steady growth in revenue and subscription numbers, returning £1.3 billion to shareholders in the last two years. So he seems to have won the approval of many of his earlier detractors and the City. Does he feel vindicated?

‘No, I don't think vindication is necessary. I asked to be judged on the results. That's what any manager should be judged on. I moved on. We've come an enormous distance in three years but there's more to do. We've got a rate of growth that is good. We don't worry about vindicating old stuff, we worry about moving forward.' But surely he must find it a piquant irony that having been so royally slagged off, there are many now expressing an anxiety he may be off to News Corp in the US, leaving Sky shareholders in the lurch. The News Corp equivalent of Kremlin-watchers say he's now a shoo-in for the top job when his father finally decides he's had enough - or, more likely, when powers greater than mere mortals make that decision for him. ‘You have to laugh. It's pretty silly,' he replies. ‘That's always the case in the broader Commentariat. People move on quickly from "Oh you're useless!" to "Oh, you're gonna go now?" We get used to that at Sky. They complain that "all your customers live in council houses", then in the same breath remark that "all the future growth is coming from low-income groups because all the wealthy people who can afford it have it already". There's so much inconsistency in the Commentariat that you almost have to ignore it.'

One realises quickly that Murdoch relishes the image of his Sky still being the edgy outsider, well removed from the cosy confines of the establishment. ‘I like it out here. You read about Sky being in a bunch of mud huts out in Osterley - that's what they think in Soho - but we like having all our operations in one place. It's better to be a bit separate and it allows us to forge a challenger culture which we nourish… At our worst, we slow down and start to think we're established. That's when we are vulnerable.'

This has been the shtick since Sky's beginning in the late 1980s. Sky, the terrier-like outsider, attacking the complacent UK television and media establishment with their licences to print money - at ITV - and their licence to tax the population - at the BBC. One should not forget, either, that Rupert Murdoch bet the farm on Sky when he placed his Astra satellite into space on an Ariane rocket on 11 December 1988. First, Murdoch Snr had to defeat the rival satellite start-up, BSB - which pretty well imploded amid complacent management and half-baked technology. Then he had to take on ITV and the BBC, which he has done with huge success, paving the way for the fragmentation of UK media in the process. In the area of live televised sport, Sky has as good as vanquished its opponents. A few weeks before our interview, the last episode of that lumbering old BBC warhorse, Grandstand, had been broadcast. It had been reduced to the ignominy of trying to attract a Saturday afternoon audience with the slim pickings of World Darts from Thurrock or the odd bit of English ladies gymnastics - mere crumbs left under the Sky table.

Part of the outsider image is trying to play down the size of Sky's influence in the market. TV and communications is an odd world, because it has always been so politically sensitive, especially in the UK. It's not like making socks or smoothies, it's about influencing people's minds. Just ask the ghost of Lord Reith - about whom James in a speech last year said: ‘He had a pretty firm view of the need to keep the lower classes in their place.' And when you get too big and too successful, Ofcom starts getting itchy and then scratchy. If there is one thing that gets even further up the Murdoch nose than Branson, it's the regulator. In the same speech, Murdoch said: ‘From the very start, UK broadcasting regulation was skewed. Not to protect people against real harm but to ensure that broadcasting was a sort of moral and educative crusade... It was and is authoritarian.'

So being the challenger to an established culture goes to the heart of what it means to be a Murdoch - remaining an outsider in your own mind even if you are really a media colossus getting into 8.4 million UK homes and bringing in more than £4 billion in revenue.

This is precisely Virgin's argument - that Sky is a big bully on the block unfairly protecting its patch. As a result, we have the spectacle of a pair of 600-pound gorillas body-slamming each other in court. It's not WWE wrestling, either, where everyone has a laugh in the dressing room afterwards. It has all got very nasty and personal. ‘Given Virgin's MO [modus operandi], it was inevitable,' says James Murdoch. ‘This is what they do. They create a big bad Goliath in people's minds. They try to wring a regulatory concession out around their area then fight like hell to protect it. They do it in trains, in aircraft landing slots - anywhere. That's the way they work. They broke out of the blocks with highly personal attacks about the company and what we do, about our customer service, even about my family. A lot of really nasty stuff.'

 

Talking of nasty stuff, how did he react to John Kay's verdict that in leaving the BBC for ITV, Michael Grade was ‘dismounting the elephant in the room to climb on the dead horse'. Even if there's still life in the old nag's bones, aren't they hopelessly arthritic? ‘The ITV deal is very straightforward. We're a long-term investor in the UK media sector. There are a set of players in the market. Pieces move around. Things happen. We took the view that ITV has real turnround potential and a world-class brand, huge connection with viewers, a great programme-making company. It was a business without leadership or any articulated strategy in an ad downturn with structural as well as cyclical components in it. It's not the time for this business to be kicked around. It needs time and some leadership. We can help provide that. We're barred from anything over a 20% stake, so we took it.'

It's hard to keep a straight face hearing someone as savvy as Murdoch describing ITV as a ‘great programme-making company', but did he intend to be an active investor? ‘Well, look, we have 17.9%. It's a minority stake. There are sensitive issues around competition and we have no interest in mucking around with things that Michael and the team have every incentive to get on with themselves. We're happy as a passive investor to sit and watch that happen.'

Readers will search in vain for any News Corp investment that could ever be described as ‘passive'. As with ‘personal', the Murdochs just do not do passive - it's not their style. As Emily Bell has written in the Guardian, News Corp organisations are run ‘with a fer­ocity, ingenuity and individual sense of purpose that have left the rest of the media by turn breathless, scared and outraged'. All of which originates in Rupert, the ‘larrikin' from South Yarra, Melbourne, whose son James was born in the UK in 1972. And although he was schooled in the States, he still carries a British passport.

James' mother was Rupert's second wife, Anna Torv, whose background is a mixture of Scottish and Estonian. James has two older siblings from this marriage. Elisabeth, wife to PR Matthew ‘Of The Shadows' Freud, worked at Sky for a while but things failed to work out and she now runs her own independent TV production company, Shine.

Lachlan worked on the New York Post until a very public bust-up two years ago, after which he resigned as deputy COO of News Corp and returned to Australia with his wife, who is without fail described as an ‘ex-Wonderbra model'. As the eldest son, Lachlan had been described by his father as the one most likely to succeed him - the ‘first among equals'. The public displays of family woe at the parting of the ways were highly unusual: Rupert was ‘particularly saddened by [his] son's decision'; Lachlan responded by thanking his father for ‘all he has taught me in business and in life', but added: ‘It is now time for me to apply those lessons to the next phase of my career.'

James also has three half-sisters - Pru, who is in her forties and has never worked in the business, plus two toddlers, Grace and Chloe, the offspring from his father's third marriage, to Wendi Deng. All of which leaves James centre-stage and blinking in the succession spotlight, not unlike Michael to Rupert's Don Vito Corleone - not that the Murdochs operate in any way like Mario Puzo's mafiosi.

So, we're nearing the end of the interview and it's time to go for broke on the personal front. Even if he walks out now, we've got plenty of stuff in the bag. When it comes to running a business and managing, who are his biggest influences? Where and how did he learn how to do it? What lessons did Rupert teach him about keeping a show on the road? ‘I think he has been a strong influence. Anyone's father is. I've grown up around News Corp - it's a flat, open, very fast-moving organisation.'

Which football team does he support? ‘I'm not sure if I should say. When I first came to London I used to watch Chelsea because I lived near there.' He much prefers baseball and sits on the board of the New York Yankees. He's now in west London with his wife Kathryn and their two small kids, round the corner from Branson - which must make walking his dog interesting.

OK, OK. A really easy one: What's his favourite Simpsons character? There's a lengthy pause and the merest, minute hint of a smile. ‘That would have to be Bleeding Gums.' (For non-Simpsons aficionados, Bleeding Gums Murphy was an alto sax player and mentor to Lisa Simpson. Gums learned at the feet of ‘Blind Willie' Witherspoon, who wanted to give his protégé his sax, only to be finally told that it wasn't a saxophone but an umbrella. Willie had been playing an umbrella for some 40 years.) MT readers are welcome to read into this what they will.

Finance director Darroch describes James' management style: ‘He's collective and wants to hear everyone's opinion, but he is ultimately his own man and very decisive. He is as far removed as it's possible to be from the classic corporate exec - the type who worries about the size of his office. He's just not interested in that stuff.'

James is, of course, fabulously wealthy on paper as one of the beneficiaries of the Trust established by his father to inherit his chunk of News Corp stock. In February this year, each of Murdoch's six children received an unexpected $100 million-worth of non-voting shares each, in an act described as ‘normal financial planning'. By contrast, James' Sky wages last year came to a relatively paltry £2.75 million.

Those who know him say that James is actually a bit shy. This is interesting, in that it may be yet another sliver off the old block. Witness what Harold Evans, the former Sunday Times editor, wrote when he met Murdoch Snr in 1969 at a dinner party in London: ‘Murdoch was counterpointed by the slim, crystalline beauty of his second wife Anna, a former reporter on his Sydney tabloid. She was talkative, vivacious and open, whereas he was apparently crippled by shyness. He shuffled, smiled and left sentences in mid-air. He seemed too diffident to be a tycoon and too inarticulate to be a journalist. This was as appealing as it was surprising. It was hard to put him at his ease.'

In an interview she gave when her children were young, Anna said Rupert was not always patient with his children. ‘He's not a wrestly daddy. He'd rumple his tie,' she remarked. He could seem remote, even when he was at home. James sometimes asked her: ‘Is daddy going deaf?' ‘No,' she'd say, ‘he's just not listening.'

James Murdoch is neither diffident nor in­articulate, nor suffering especially from having an insufficiently wrestly daddy, so far as one can see. Who knows? He appears quite at ease in his own skin, status, wealth and power - his own person, so far as that is possible in his unusual position. His youth, keen interest in and mastery of the technology surrounding communications is key to his success in the future.

‘He's a chip off the old block,' says an anonymous close acquaintance. ‘I've known Rupert for a while and actually James is better. He's very smart, he's got all his father's cunning but he's got his mother's charm as well. People see that he's young and bright and brash, but they miss the fact that he also has all the qualities that make a great leader.' We can't wait to see what he does next.

 

Four challenges facing Murdoch

1 Maintaining focus while fighting battles on many fronts against competitors and regulators

2 Increasing BSkyB's subscribers to 10 million by the end of 2010

3 Producing more compelling content for his TV channels

4 Proving he is, indeed, his own man

 

Murdoch in a minute

1972 Born 13 December in UK. Educated at Horace Mann school, New York City, and Harvard University. Left before finishing degree in 1995

1995 Founded Rawkus records, a hip-hop music label, bought by News Corporation three years later

1997 Joins News Corp and is put in charge of internet operations

2000 Appointed chairman and CEO of Asian satellite service, Star Television, Hong Kong

2003 Appointed CEO of BSkyB

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