London: When James Murdoch was named chief executive officer of British Sky Broadcasting Plc. in 2003, the job was seen as an audition to succeed his father, Rupert Murdoch, as boss of parent company News Corp.
The younger Murdoch, 34, is now locked in battles with billionaire Richard Branson’s Virgin Media Inc. and UK regulators that may determine how that script ends.
As the rivals tussle over the price Virgin Media pays to carry BSkyB channels, BSkyB’s purchase of a £940-million ($1.8 billion) stake in broadcaster ITV Plc. has triggered an inquiry into Murdoch’s dominance of the UK media. Virgin is also offering a package of cable TV, fixed-line telephone, broadband and mobile services that may lure customers away from BSkyB.
“One slip-up here could be really fatal” for James Murdoch, says Henk Potts, an equity strategist at Barclays Wealth Management, which oversees £96 billion, including BSkyB shares. “Virgin Media, for the first time, gives BSkyB a competitor that could potentially prove to be a real thorn in their side.” Any mistake may erode investor confidence that James Murdoch would be the right choice to succeed his father, who turns 76 next week, Potts says.
A change in management may be years away. The elder Murdoch has consistently dismissed talk of retirement.
Rupert Murdoch has transformed an Australian newspaper publisher into a global company that includes newspapers such as Britain’s Sun and Times, Twentieth Century Fox films and Fox Television in the US, and the Internet networking site MySpace. Rupert Murdoch also serves as chairman of BSkyB, the UK’s No. 1 pay-TV system, in which News Corp. owns a 39% stake.
England-based BSkyB says it will have 10 million digital subscribers by 2010, up from 8.4 million at the end of 2006.
Profit for the quarter ended December 2006 fell 3% to £130 million, partly on higher costs to promote broadband, BSkyB said on 31 January. “We have achieved a number of important milestones in building our business for the future,” James Murdoch said in a statement at the time. He declined to be interviewed for this story.
Some investors aren’t convinced. Sky’s shares have declined 16% to 559.5 pence under James Murdoch’s leadership, compared with a 49% gain in News Corp. shares over the same period.
Robert Fraser, a BSkyB spokesman, wouldn’t comment on succession plans. New York-based News Corp. spokesman Andrew Butcher also declined to comment.
BSkyB executives have been quick to respond to technological changes over the past decade, says Anthony De Larrinaga, media analyst in London at SG Securities, which has a “buy” rating on the shares.
“Sky has always been able to deliver a workable, user-friendly proposition” such as the Sky Plus gadget, he says.
It may take three years to determine the winner in James Murdoch’s battle with Branson, given the length of pay-TV contracts, broadband subscriptions and content deals, says Carr of Teather & Greenwood. “It’s quite high stakes,” she says.