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Last Updated: Tuesday, 11 November, 2003, 08:47 GMT
Why Sky stuck with Murdoch's son

By Nick Higham

Last month shareholders in Carlton stunned the City when they successfully blocked the company's founder and chairman, Michael Green, from becoming chairman of the new ITV plc.

This month some of those same shareholders are protesting volubly at the appointment of James Murdoch as chief executive of BSkyB, which his father Rupert chairs and which is 35 per cent Murdoch-owned.

James Murdoch
James Murdoch: The City will settle for his appointment
Yet James will keep his new job, unlike Michael Green.

The revolt is fizzling out - BSkyB's disgruntled shareholders will turn their anger at Friday's annual meeting on the non-executive directors who allowed Rupert to give his lad the job.

A moment's reflection will tell you why. Carlton and Granada are in trouble. They are struggling in the aftermath of their ill-judged investment in ITV Digital, for which the shareholders partly blame Green. ITV plc's future is uncertain.

But BSkyB is a highly successful company. After years of investment in developing digital, it has started to make money: an operating profit of 370 million on revenues of 3.2 billion last year. By 2006, we are told, the company could be producing 1 billion a year of "free cash flow".

You would be mad, as a shareholder, to want to upset all that, and you would be very keen to reap the rewards in the shape of future dividend payments.


The shareholders are worried that Rupert might want to cream off a disproportionate share of the profits. But they also know that he is the architect of Sky's success and that it has always been run as part of his empire: previous chief executives were also his appointees.

So they have opted for prudence rather than confrontation. If the old man wants his lad to run the show, then so be it: the alternative would mean foisting someone he didn't want on an unwilling Rupert, and risk the chairman-chief executive relationship rapidly unravelling, to the company's detriment.

Instead they are insisting on non-executive directors who will be guaranteed to speak up for the non-Murdoch shareholders in any future division of the spoils.

As for James, he faces several challenges. One is to keep the company's top management, several of whom - like the finance director Martin Stewart and the chief operating officer Richard Freudenstein - were rivals for his job.

Another will be to sort out Sky One, whose audience share has plummeted.

And a third, and most pressing, will be to sort out what happens if the European Commission rejects Sky's new deal with the Premier League. This could work out well for Sky, but it will need careful handling by James of rivals, regulators, the League and the media.

But if he gets into trouble, he can always ring Dad for a little friendly advice.


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