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Call Wendi

July 20, 2011

Did any Murdoch come out well from the recent grilling (albeit typically light grilling) from MPs in the DCMS Select Committee? The only one who enhanced their reputation was Rupert’s wife Wendi. She literally leapt to her husband’s defence as a pie-chucking protester approached and began to hit him with his paper plate, simultaneously shouting “I’ve got him.”

Except in their sangfroid in the face of this attack – which will doubtless be the subject of another inquiry – the male Murdochs did less good for their image.

The criminal wrongdoings in News International have led to the failure of the BSkyB bid and have wiped billions off the value of News Corp. Leaving aside the long list of legal consequences for the company, the key question now is whether News Corp investors think their future is best served by the continuing tenure of the Murdochs.

The company is routinely referred to as The Murdoch Empire and Rupert is very much the Emperor. The problem with emperors is that their subjects naturally tend to venerate them and to tell them only what you think they want to hear. Did this happen with whoever, at whatever level, knew about the poison that lurked not far from the surface at the News of the World? Rupert Murdoch said ‘maybe’. The true answer must be definitely. The other even less charitable partial explanation is that at whatever level up the chain it went, those responsible weren’t shocked; they thought it fell within the boundaries of the red-meat, macho culture that pervades all red-top tabloids, and in particular those within News.

In a wider context, that’s always been the problem with News Corp for investors, you don’t just buy into a company, you buy into a culture; the Murdoch culture. In return you get a share price that over the long term has been discounted to its major media peers but occasionally gets a wild upward ride as one of Murdoch’s massive risks paid off. That’s always been the upside of News Corp, the part that’s easy to admire. No one bets the farm quite like Rupert: Wapping, Sky, and most memorably Fox Television.

Presumably, long time News holders do also buy into Murdoch’s values, and that makes them swallow the discount. Those values are those of the old style Media Baron – he definitely isn’t in it just for the money. He believes media ownership, particularly newspapers, should bring power and influence – he should be a King maker and he should be able to encourage his, broadly, right wing agenda. He is exactly in the line of Beaverbrook, Northcliffe and Hearst.

In a more fragmented media world, where newspapers are falling through the gap between highly regulated broadcasters and completely unregulated Internet media and blogging, this looks a very old fashioned model.

In his Select Committee testimony, Rupert Murdoch looked an old, slightly out of touch man, a remnant of an era that is passing. That is how News Corp investors will see him now and impatience with a share voting and corporate governance structure that reflects the old regime will be tolerated no longer.

The $64 billion question then becomes whether the long expected succession of James, or any other Murdoch, will survive?

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