The Man Behind Rupert's Roll

Peter Chernin's TV production executives were already in his Twentieth Century Fox office when he arrived for a June 8 meeting. In his affable style, the CEO of Fox Group quickly got down to business. Chernin sought cuts in the $1 billion budget for "Ally McBeal," "Dharma & Greg" and the rest of the record 30 prime-time series the Fox Group produces. "We can't live with these numbers," said the man who wanted the "Titanic" set quickly dismantled after filming, partly so the movie's overspending director couldn't reshoot any more scenes. Just then Rupert Murdoch, whose News Corp. controls Fox, appeared at the office door. "Peter, may I see you outside?" Murdoch asked softly. So close are the two men that the aside could have been about anything. Maybe Murdoch briefed Chernin on how he had spent that day divorcing Anna, his wife of 32 years. Maybe it was to invite Chernin to his wedding 17 days later to Wendi Deng, 32, aboard his yacht in New York Harbor (Chernin came). Or perhaps it was only a routine chat on Chernin's pending trip to Germany, where he's replicating the Murdoch strategy that helped make the Fox network a huge success in the United States. "They confer on a minute-to-minute basis," says a top Murdoch executive.

At the age of 68, Rupert Murdoch has become a lion in winter, and Peter Chernin is his lord-in-waiting. Chernin is also the man Murdoch now expects to run his company--at least until the media titan's children are ready. Murdoch, the controversial visionary who transformed the media business worldwide, insists he's not slowing down. Piece by piece, he continues to build his global empire even as his personal life has come to resemble one of his own prime-time dramas. There's romance, marital discord and ambitious kids--Lachlan, 27; James, 26; Elisabeth, 31--who are constantly depicted as sibling rivals for corporate power. Murdoch's relationship with Deng, who resigned last fall as an executive in Murdoch's Asian satellite-TV business, has also drawn the kind of tangy headlines his tabloid papers have long inflicted on others. Recently, his British and Australian publishing rivals have been serving up mischievous accounts about a "Viagra-chomping Murdoch" and his "smoochy cruise" with Deng around the Mediterranean.

Yet through all the tumult, Murdoch's company has only prospered. Its stock has surged 34 percent this year, and throughout the industry News Corp. is admired for being a self-sufficient global media conglomerate. Its Fox Entertainment unit produces a stream of hit TV shows and movies--including six of the top 10 grossing films of all time--to distribute over News Corp.-owned satellite-TV operations, cable channels and broadcast outlets spread across five continents. "We reach people around the world, around the clock," says Chernin. Almost overnight, News Corp. has also turned into a powerhouse in sports and kids' programming. "They are 10 steps ahead of everyone," says Jessica Reif-Cohen, Merrill Lynch media analyst. And analysts agree that a pivotal factor in News Corp.'s success is Chernin, the company president who seems to possess a rare mastery of both the creative and the corporate sides of the business. "I guess it's from being a lit major from a long line of accountants," jokes the Berkeley-educated Chernin, who resembles a bespectacled Wayne Newton and is surely one of Hollywood's most unassuming top execs. Chernin's emerging star power also represents what many investors say is the missing piece in News Corp.'s Wall Street profile: a solid succession plan.

Murdoch's utter domination of his company, and his buccaneering ways, have long made investors nervous. His autocratic, rollicking management style worked while News Corp. was small; Murdoch used to think nothing of carrying multimillion-dollar certified checks in his pocket to pay for deals (once, while he was buying New York Magazine, he left one on the airport ticket counter). "He was always too busy moving on," says one of his executives, Anthea Disney. Starting with a single Australian newspaper in 1952, Murdoch for years was the irritating outsider who acted on his own, often using racy content--like the daily dose of bare-breasted women in Britain's Sun newspaper--to break into markets. He frequently succeeded by being swift and outmaneuvering entrenched media giants around the world--in 1994, for example, Murdoch stunned CBS by buying up eight of its affiliates for Fox in a single deal. But as News Corp. grew and itself became part of the media establishment--it is now a $13 billion company, while remaining about 30 percent owned by the family--Murdoch's go-it-alone style looked more and more to investors like a liability. The question of what might happen to News Corp. post-Rupert loomed larger. In 1994 the Australian-born tycoon brought in Lachlan, ultimately giving him control of the Australia operations and virtually designating him as his successor. Early this year Murdoch also added the U.S. publishing operations to Lachlan's portfolio. Currently, Lachlan is also in charge of a companywide cost-cutting effort. But the patriarch's broken marriage reignited reports of sibling rivalries. And concerns that his wife at the time, Anna, would seize half the family's wealth made some investors jittery, briefly depressing News Corp.'s stock.

Now Murdoch himself is sending clear signals that Chernin will be in charge for quite some time. In an interview with NEWSWEEK in his New York office, Murdoch acknowledged what many in the industry are whispering: Lachlan won't be ready any time soon. Nor will Elisabeth or James. "They all have to prove themselves first," Murdoch said. "Peter is very much senior to them." Asked about the management lineup if he were suddenly unable to lead News Corp., Murdoch paused. "I don't like contemplating my death. It would certainly be a matter for the board. I would think Peter would probably be the CEO. Maybe my older son [Lachlan] would become chairman. I don't know." Murdoch's mere engagement to Deng invited a frenzy of speculation about a future corporate role for her. But Murdoch hasn't disclosed any such plans to his inner circle. Murdoch insists he is "re-energized" by his new relationship, and says his heirs will have to "carry me out or push me out."

Lachlan himself, in an interview over lunch in News Corp.'s private dining room, plays down the idea of being heir apparent. Calling his parents' divorce "a real shock," he attributes the reports of family discord to his father's rivals. He and his siblings have plenty to do at News Corp., Lachlan says, and "don't have a lot of time to plot how to stab each other in the back." His brother James agrees. "If something terrible happened to my father," he says, "no one would have a problem if Peter were the successor. In my mind, Lachlan, Liz and I are on board with that. We have a structure in place that is really firing... What happens 10 and 15 years from now, who knows?" He and Elisabeth also have major jobs at News, though neither has joined Lachlan on the board. In Britain, Elisabeth helps run News Corp.'s 40 percent-owned BSkyB satellite-TV operation. From New York, James oversees News America Digital Publishing, the unit putting News Corp. onto the Internet and into e-commerce.

Little wonder that the Murdochs are the first to cheer the rise of Chernin into the spotlight. His organizational discipline is welcome at a company that in 1990 nearly collapsed under its global debts. Among industry insiders, Chernin is highly regarded for helping to focus and integrate the sprawling company in innovative ways. He's also helped make its film and TV businesses more profitable, not least by giving the green light to "Titanic," the biggest-grossing film of all time. About four years ago, the former book editor persuaded Murdoch to spend eventually $70 million to bag some of Hollywood's top writers and producers, including David Kelley, the talent behind "Ally McBeal" and "The Practice," and Chris Carter, who developed "The X-Files." The result: Fox is today the top producer of TV shows, and revenues are flooding in. "He's literate, understands stories and has a wicked sense of humor," says "Titanic" director James Cameron. "He gets what movies are all about." Chernin is helping to pull together into a single database the company's huge trove of customers, who range from theater chains that rent Fox films to subscribers to the News Corp.-owned TV Guide. The project, called E-Direct, will be a spawning ground for interactive businesses.

Chernin has also excelled at marketing the company to Wall Street, wowing high-wattage audiences of investors. Two weeks ago, at a Merrill Lynch media conference at London's posh Royal Lancaster Hotel, he told investors that sales from a handful of reruns alone will produce $1.5 billion in profits over the next few years. "Holy s--t!" one audience member yelped. "He's a great presenter," says Lachlan. Having operated in Murdoch's vast shadow, Chernin had been little known on Wall Street until recently. But now, says Gordon Crawford, an investment manager whose fund is News Corp.'s third largest shareholder, "it's important to project the image that News Corp. isn't a one-man show." In Europe, too, Chernin has been helping Murdoch spearhead a high-profile push to expand. "Peter deserves the attention," Murdoch says. "He has shown himself to be an extremely able leader and manager of people."

From early on, Chernin seemed destined to become a Murdoch favorite. Soon after Barry Diller, the former Fox chief, hired Chernin to run the Fox network programming division, Murdoch spotted him at a management retreat in Santa Barbara, Calif. "He asked if I'd give him a ride back to Los Angeles," recalls Chernin. The younger man's sharp management skills and personal touch helped him steadily climb the corporate ranks, heading the network and then the studio. "He's taken a tremendous load off of me to think more about strategy," Murdoch says. Several former colleagues say another factor figured in Chernin's promotion. Unlike some other top News Corp. execs who have come and gone--among them Diller and Preston Padden--he's nonthreatening, willing to execute Murdoch's vision with little questioning.

At the moment, Chernin is focusing on the next glimmer in Murdoch's eye: the European television market. Since last year the two have trudged from Paris to Bonn, negotiating, often without success. Last December, Chernin approved News Corp.'s $40 million deal to take control of TM3, a women's cable channel in Germany with few viewers and $25 million in annual losses. Then in May, Chernin directed TM3 to pay more than $400 million to land soccer's popular European Champions League, stunning the soccer-crazed nation. It was a strategy inspired by Fox's upstart purchase of NFL viewing rights for $1.6 billion in 1993--a move that helped solidify Fox as the "fourth network." The soccer deal "was akin to the Lifetime Channel buying the rights to the NFL," Chernin says.

Now Chernin, facing a mid-August opening of the Champions League season, is in a race to make TM3 into the little channel that could. Last month, during a visit to Munich, he openly wondered if the current TM3 managers measure up. "I don't believe any of them understand the aggressive, go-go News Corp. culture," he said, sounding positively Murdochian. Chernin projects losses of about $100 million for three years running because of the soccer games. But he believes the gamble will be worthwhile.

Another gamble seems to be paying off for Chernin--living life on the edge with Rupert Murdoch. "I may very well have the best job in the world," says Chernin. "I get to control movies seen all over the world. Magazines. Channels. Internet businesses. Television businesses. What could be more fun." For Chernin and News Corp., the big question will be how long the fun can last. And whether Chernin, in making himself into an executive in the image of Rupert Murdoch, will have to confront other Murdochs down the line. For now, both Chernin and Murdoch play down the potential for a succession squabble. The Murdoch children are "20 years younger than Peter, so there's plenty of time for everybody," says Murdoch. Chernin says, "It's no big deal." He always knew that Murdoch intended for his kids to run the show eventually. If at some point everyone's not comfortable with the setup, he says, "life will go on." For now, so will the Murdoch drama.