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DANIEL:

From Schwartz Media, I’m Daniel James. This is 7am.

Rupert Murdoch’s attempts to secure his son Lachlan’s control of the family empire have hit a major legal roadblock. A scathing ruling from a Nevada commissioner against the patriarch's attempts to reshape his family trust has thrown his succession plan for his eldest son into disarray.

The ruling and a seemingly divided family have cast doubt over the future of the Murdoch media empire, with the implications of the Nevada court’s decision yet to play out.

Today, director of the Centre for Advancing Journalism at the University of Melbourne, Andrew Dodd on the ruling, the fallout and the next chapter in the Murdoch trust saga.

It’s Friday, December 13.

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DANIEL:

Andrew, thanks for joining us.

ANDREW:

Thank you, Daniel.

DANIEL:

Obviously, we all know that the drama series Succession was inspired by the Murdoch family. But I've heard that this saga of the Murdoch family's trust was itself actually inspired by an episode of Succession. Is that right?

ANDREW:

Well, apparently. That's what's been revealed by The New York Times. They reckon that Elisabeth saw the episode where Logan Roy dies. That prompted her to get in touch with her lawyer, Mark Devereaux. And Mark Devereaux wrote what's called the succession memo, which triggered all of this.

Audio Excerpt - News Host (MSNBC):

“That episode - then again, according to these filings and details, we're only learning because of the court clash - led one of Murdoch's children, the daughter Elisabeth, to write a succession memo to help avoid a real life repeat of that fictional and imagined situation.”

ANDREW:

So that then led to Lachlan seeking to revoke the irrevocable trust.

DANIEL:

Can you tell me about the trust itself, when it was established and what it was initially set out to do?

ANDREW:

Yes, it was initiated by Rupert's second wife Anne and she did it to protect her kids. Apparently she agreed to take a smaller share as a settlement if it was guaranteed that the children, meaning her children, but also Prudence from the first marriage, would all be protected equally under the terms of the will. And what then subsequently happened to the trust was that as it was being developed, Wendi Deng's children came along. They were given an equal share of the assets of the company but were not given voting rights. So the trust has locked that in, and it's done in such a way, irrevocably, so that it can only be changed if all of the beneficiaries agree to the change and the changes are for the benefit of all the beneficiaries. So that's what's been in question.

DANIEL:

And it's become more of a question as the gulf and world perspective between the four siblings has seemed to have become wider. Can you just give us a brief overview of Lachlan's position compared to Prudence, Elisabeth and James'?

ANDREW:

Yeah, sure. So there's been a lot of inning and outing from the company. So Lachlan has come and gone, James has been in the company and left. Elisabeth went her own way, formed her own business and created quite a successful media company and Prudence has been somewhat aloof, but they've all had an association with the company over their lifetimes. And what we now know about them is that Lachlan seems to be the favoured son because his politics are more aligned with Rupert’s. And James, although initially showing that he was quite right wing, seems to have become less so, perhaps due to the marriage to his partner who is a climate activist. And he has moved away from the company and expressed his dismay at its reportage of bushfires in Australia and other climate related matters. He endorsed Kamala Harris in the last election. He's spoken out openly against Fox's coverage of The Big Lie and Donald Trump. And we know from that that he's eager to see some change in the company and that's why he's known internally as the troublesome beneficiary, because he's got those views. So the question really is, does he have the support of Elisabeth and Prudence and can the three of them gang up against Lachlan if it comes to that?

DANIEL:

And so this attempt to change the trust is to really give Rupert control of the businesses from beyond the grave through his eldest son Lachlan?

ANDREW:

Yeah, that's one way of reading it. And he's quite explicit. He says that the company really only survives financially if it retains its right wing politics, and that's because it thinks it's found that corner of the market and that corner of the market is lucrative for Fox, for example. And that's what keeps the company afloat. And there's a certain amount of truth to that. I mean, Fox is by far the most profitable part of the empire. It made 1.5 billion USD last financial year alone, and it is propping up a lot of the loss making newspapers. So you can see the argument. But the counterargument to that is, well, they haven't tried another approach and who's to say they can't bring that audience with them as they move a little closer to the centre and produce journalism that's a little less damaging for society in general.

DANIEL:

So the fight over the trust went to a closed court in Nevada and the court ruled against the attempt to change the trust. So what did the judge say when he made the ruling?

ANDREW:

Well, he was scathing. Edmund Gorman, who is the trust commissioner, said that what Lachlan and Rupert had put together was a carefully crafted charade done in bad faith. They criticised the lawyer who represented those members of the family as acting somewhat dishonestly. So he's left no doubt as to his position on this. He says that it doesn't benefit effectively all of the members of the trust and therefore can't change under the current rules. The trouble is, though, that it is just a recommendation and it now needs to be ratified by a district court judge and then could be subject to litigation beyond that.

DANIEL:

Right. So there's a potential that Lachlan and Rupert could appeal eventually?

ANDREW:

Yeah, well they've said they will. They've got too much at stake, of course they'll appeal this. But I think the important thing is that the ruling, the initial ruling by Gorman, is so strong that it's going to make what looked like a weak case before even weaker. It would be a rogue district judge, I would think, who would disavow this ruling by its own commissioner. So it seems to me that they're on even more shaky ground than they were beforehand.

DANIEL:

Rupert hasn't been afraid to make radical business decisions to change the future of his companies before. Apart from appealing this decision. Is there anything else that Rupert could do to sway the balance in Lachlan's favour?

ANDREW:

Well, yeah. He can do all sorts of things while he's alive, of course. He can try and engineer some sort of settlement within the family that changes this. I'm sure there are other legal avenues open to him that he can explore to do that. But really now I think the question is, can the family maintain some cohesion through this? I mean, this has been a very bruising battle for them. Elisabeth and Prudence are saying now that the emphasis should be on trying to restore or repair family relations. And I think it'll come down to whether or not, in fact, the three siblings have been scheming against Lachlan, and whether Lachlan can convince them that there's another path. And this is, of course, where it all begins to look very much like Succession.

DANIEL:

After the break, the fallout and what it means for the Murdoch empire.

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DANIEL:

So Andrew, Rupert Murdoch's attempt to challenge his family trust was ruled against him resoundingly. So this will now go to the district court as you just mentioned. And as you also mentioned, he doesn't have a very strong case. So what are the implications of this decision now for the business empire?

ANDREW:

So if we default to the position that this is lost and we can then, I think, start exploring what News Corp could look like after Rupert's death. And let's imagine the four of them get together and the three siblings dethrone Lachlan. Then there are all bets off. So News Corp becomes a very different entity. But then it's got to weigh up all sorts of things. It has to weigh up what the market does in response to that and they will be no doubt spooking the market if they do that. So I imagine they've got a bit of a game plan developing. And if not, they will soon be developing it, where they try to bring their audiences, their shareholders and their advertisers and subscribers with them through gradual change. That, I think, is effectively the only way they can retain a company with the market capitalisation that it currently has and in such a way as to gradually bring about change. It needs to be done very carefully and very strategically.

DANIEL:

So when you take stock of Rupert Murdoch's media empire, how has it been performing overall in recent years from a business perspective?

ANDREW:

Well, it is, in fact, two companies. So Fox is separate from News Corp and Fox is a whole lot of media assets, not just Fox itself, but other sports channels and other allied media businesses. And then there is News Corp, which is the more traditional aspect of the company, mostly its newspapers around the world. And generally it can be said that newspapers lose money and Fox makes money. As well as that, there are all sorts of other allied businesses in sports, subscription and book publishing. For example, Harper Collins is a News Corp company. Overall, the company makes an enormous amount of money, but it can do so knowing that it's propping up businesses that aren't making money. So when people think about post-Rupert and News Corp, they're often thinking about what are the futures of the loss making aspects of the business. And by that they mean newspapers. The thing about Rupert, for all his faults, is that he is a fan of newspapers and he's kept many, many people in work because he insists on keeping them running.

DANIEL:

So with that in mind, what would this decision, if it holds, mean for his Australian publications and other business interests?

ANDREW:

No idea. You may as well look at the entrails of a goat to work that out, Daniel. Nobody knows that. And I wonder whether at News Corp they even know that themselves. Particularly as this entire ruling in Nevada has thrown everything up in the air again. So I wouldn't even begin to speculate about that. If they wanted to bring in an accountant slide rule to it, then they'd have to be looking very seriously at quite a few publications in Australia that aren't making a lot of money.

DANIEL:

So there's a potential that there's a few chapters left in the Murdoch family drama just yet. When will we see the final season of that drama unfold?

ANDREW:

Well, of course I wish Rupert a long and happy life. And if he's anything like his mum, there are a few more years yet in that life. But I think that's when the next chapter really starts, unless we see some sort of that kind of manoeuvring going on while he's still able to control things. I mean, he has half the voting stock in the trust now, and he and Lachlan together control it. So they will no doubt be looking at other ways to influence change. And they could do things like hive off parts of the company, they could divest it and put it in other sort of places. And they still have the control to do that. But I suspect now they're going to try and work behind the scenes to come up with some other approach.

DANIEL:

And finally, Andrew, will the death of Rupert Murdoch also mark the end of Lachlan at News Corp?

ANDREW:

Well, that's certainly the thesis that Paddy Manning has put out in his book. And he's not alone in that. That's come from others as well. But that, of course, does rely on the other three ganging up on their brother. So in that sense, yes, it could happen. And whatever happens though, there will be a reduction in his power, a massive reduction in that power. But, you know, for me, I think that's when the next really interesting chapter of this company begins. And that is what it looks like post Rupert and whether or not we do see a gradual shift towards a company that is more socially responsible, produces more balanced journalism, and frankly, does less harm in the world than it currently does.

DANIEL:

Andrew, thank you so much for your time.

ANDREW:

Thank you, Daniel.

DANIEL:

And if you want to learn more about the life and legacy of Rupert Murdoch, media’s most powerful man, you can listen to “Rupert: The last mogul” – a special series from Schwartz media. Search for it wherever you get your podcasts.

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DANIEL:

Also in the news today...

Australia’s unemployment rate has fallen to 3 point 9 percent, down from 4 point 1 in October.

The latest figures from the Australian Bureau of Statistics have been attributed to a growth in population as the employment kept pace with population growth.

And,

Platforms including Facebook, Google and TikTok could be forced to fund Australian Journalism, under a federal government plan to impose a new tax on the tech companies.

The proposed tax would be applied to the platforms’ Australian revenue, but could be reduced to zero if they enter into pay agreements with news outlets.

7am is a daily show from Schwartz Media and The Saturday Paper.

It’s made by Atticus Bastow, Cheyne Anderson, Chris Dengate, Erik Jensen, Ruby Jones, Sarah McVeigh, Travis Evans, Zoltan Fecso and myself, Daniel James.

7am will be back on Monday. See you then.

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