Murdoch Succession Plan Means New Bosses for Ailes

As Rupert Murdoch's sons, James and Lachlan, prepare to assume top leadership roles at 21st Century Fox next month, they already have one big assignment cut out for them: building a rapport with Roger Ailes, the chairman and chief executive of Fox News.

A TV news impresario with deep roots in Republican politics, Mr. Ailes has built the channel into a cable-news juggernaut and a major profit center for Fox. The 75-year-old executive's contract is up next summer, just months before the presidential election, people familiar with the matter say.

Mr. Ailes has enjoyed considerable autonomy while reporting to the elder Mr. Murdoch. Under the leadership structure that goes into effect July 1, Mr. Ailes will report to his sons. James, 42, will become chief executive while Lachlan, 43, will join his father as executive co-chairman.

The relationship got off to an awkward start last week after word of the succession broke on CNBC. Mr. Ailes said publicly he would continue to report directly to Rupert Murdoch. Then on Tuesday, a company spokesman said that in fact Mr. Ailes would report to the Murdoch brothers, although he would continue his "unique and long-standing relationship with Rupert."

The decision to have Mr. Ailes report to the younger Murdochs was seen by some familiar with the inner workings of 21st Century Fox as a potential issue over time. Mr. Ailes protects his corner of the Fox empire with zeal.

Mr. Ailes and the Murdochs all declined to be interviewed for this article. A Fox News spokeswoman declined to comment on how Mr. Ailes viewed the Murdoch succession. A call to Mr. Ailes's lawyer, Peter Johnson, wasn't returned.

21st Century Fox and News Corp, owner of The Wall Street Journal, were part of the same company until 2013, when the elder Mr. Murdoch split up his media holdings.

Mr. Ailes built a name for himself as a cable news executive while running CNBC in the early 1990s. He also had produced Rush Limbaugh's TV talk show. Mr. Murdoch tapped Mr. Ailes to launch Fox News and the two developed a close relationship and a shared interest in politics.

A former senior Fox executive said it would be highly unlikely that Mr. Ailes would leave Fox News. "It's his baby and his persona," the former executive said.

Replacing Mr. Ailes at the helm would be difficult. Under his leadership, Fox News grew to dominate cable news and rack up profits. It accounted for approximately 20% of 21st Century Fox's profits of $4.5 billion in 2014.

Not only does the channel routinely beat rivals CNN and MSNBC in the ratings by a wide margin, it also typically beats most entertainment and sports channels on the dial, especially in prime time. The channel has struck a chord with conservative viewers who feel other outlets pander to the left, though its critics charge that its opinion shows have contributed to a polarization of the political process.

"He's cornered the market on conservatism," said Temple University School of Media professor Chris Harper.

Fox News will have revenues of $2.2 billion this year and cash flow of $1.4 billion, according to industry consulting firm SNL Kagan.

Its sister financial channel Fox Business Network is less successful and has struggled to make headway against Comcast Corp.'s CNBC.

Of the two brothers, it is Lachlan Murdoch that has a deeper history with Mr. Ailes as the two bumped up against each other during Mr. Murdoch's first stint as the company's deputy chief operating officer over a decade ago, according to people familiar with the matter.

Despite disagreements over programming of the Fox-owned TV stations, Mr. Ailes has respect for the elder son, who is seen as sharing some of his father's approach to business and deals, people familiar with Mr. Ailes's thinking said.

Mr. Ailes has weathered storms before. When Mr. Murdoch's former son-in-law Matthew Freud was publicly critical of Mr. Ailes in 2010, Chief Operating Officer Chase Carey offered strong words of support, saying the company was "100% behind Roger Ailes."

Keach Hagey

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