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Worries grow that Peter Chernin won't stay on as Rupert Murdoch's No. 2

For months, the News Corp. president and his boss have been locked in talks over a new contract. Insiders and Wall Street wonder what's keeping them.

February 13, 2009|Meg James and Dawn C. Chmielewski

Rupert Murdoch has returned from Australia, where he celebrated his mother's 100th birthday. Now the mogul faces another important date.

The contract for Murdoch's chief lieutenant, News Corp. President Peter Chernin, expires June 30, and the two executives have been locked in negotiations for months. They haven't struck a deal, and concern is mounting inside the company, and on Wall Street, that Chernin will not renew.

Fueling the speculation is Murdoch's arrival this week in Los Angeles for an extensive review of the West Coast operations of News Corp., which include the Fox network, movie studio and cable channels. Murdoch spent much of the last year in New York immersed in his purchase of Dow Jones & Co. and putting his imprimatur on the Wall Street Journal.

Some Fox executives worry that Chernin, who has been key to the company's smooth operations, might leave News Corp. at a difficult time. The stock closed Thursday at $7.24 -- off 65% from its 52-week high. Last week News Corp. reported a $6.4-billion loss for the quarter ended Dec. 31, much of it owing to asset write-downs.

Chernin has been tight-lipped about his plans. Some analysts view the situation -- and the domino effect in management his departure could trigger -- with alarm.

"While Chernin has not signaled his intent, we fear the longer time goes by, the less likely he is to renew his contract," Pali Research analyst Richard Greenfield wrote in a recent report. "Chernin's departure would raise significant investor concern and could lead to other management changes at News Corp."

Chernin and Murdoch declined to comment.

The succession question has been a long-standing issue at News Corp. The 77-year-old Murdoch is fond of saying that his mum's longevity -- Dame Elisabeth celebrated her birthday Sunday with 600 friends -- bodes well for his own prospects of remaining at the helm for many more years.

Some on Wall Street question whether Murdoch's children are ready to manage a company that took in $33 billion in revenue last fiscal year.

A week ago, during a conference call with analysts to discuss earnings, Chernin played a less prominent role than he had in the past. Murdoch dominated the call, fielding questions about the entertainment properties that have long been Chernin's specialty.

Then there was the prickly question about his contract.

During November's earnings call, when Murdoch and Chernin were asked to characterize the negotiations, Chernin called them "constructive." Murdoch jumped in: "I would characterize them as constructive and friendly."

But last week, the same question prompted a measured response. "Peter and I are continuing our conversations, and they're private and that is all there is to it," Murdoch said. "Nothing more for me to say and we won't take any further questions on that. It is a confidential matter."

Chernin remained silent.

People close to Chernin said it would be a leap to tie Murdoch's visit to Chernin's tenure.

Murdoch's tour through Los Angeles is part of a strategic review of the company's businesses that takes place every three years, according to people familiar with the situation who did not want to be identified discussing the sensitive subject. They said that the chief executive is typically involved in long-range planning.

Chernin, 57, has been known to take negotiations down to the wire. His last contract renewal, in July 2004, was announced three days before the agreement took effect.

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meg.james@latimes.com

dawn.chmielewski@latimes.com

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