Murdoch Senior Mulls BSkyB Exit Over Nepotism Row

23 September 2003

Rupert Murdoch is reportedly considering stepping down as chairman of British satellite giant BSkyB coincident with the appointment of his son James as ceo.

Murdoch senior may relinquish his position to pacify shareholders unsettled at last week’s news that James was frontrunner to replace widely respected incumbent Tony Ball.

That appointment could be confirmed as soon as this week. Non-executive directors in BSkyB – in which News Corporation holds a 35.4% controlling stake – have already been consulted.

However, the prospect of a father-and-son team in charge of Britain’s leading pay-TV operator has not gone down well with investors. Aside from the relative inexperience of the 31-year-old James, his father’s family favouritism raises several corporate governance issues.

To counter the accusations of inexperience, the prospective ceo’s hand may be held by older lieutenants such as Richard Freudenstein, BSkyB’s current chief operating officer. However, a new chairman may be required to allay the governance concerns – a possible replacement being Chase Carey, head of NewsCorp’s stateside TV interests.

Nevertheless, no decision has yet been made. It is thought Murdoch will gauge shareholder reaction to his son’s appointment before taking any further action.

• Separately, BSkyB has outlined plans to launch a free-to-air digital TV channel devoted to entertainment.

Speaking at the Royal Television Society convention, Freudenstein revealed that the broadcaster would take on existing mainstream free-to-air operators such as the BBC, ITV and Channel 4 – but only if digital terrestrial television proves sufficiently popular with the British public and analogue services are switched off.

At present, digital terrestrial is available through the Freeview platform, which over 1.6 million UK homes now access. Should Freeview take-up grow to around 8m households, BSkyB would convert Sky Travel – one of its three channels on the platform – to an entertainment offering in the mould of its pay-TV station Sky One.

“It absolutely makes sense,” declared Freudenstein. “With that level of free-to-air viewing we can afford to invest more in the channel.”

Analysts have long been speculating about such a move, but this is the first time BSkyB has confirmed it in public.

Data sourced from: multiple sources; additional content by WARC staff