Problems mount for Rupert Murdoch

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For News Corp. (NWS) Chief Executive Rupert Murdoch, all of the news lately has been bad.

His long time right-hand man Peter Chernin reportedly is leaving his role as company president, and his daughter Elisabeth turned down a spot on News Corp's board because it would have required her to sever ties with a television production company she has spent seven years building.

Investors are growing tired of Murdoch. His $5 billion purchase of Dow Jones & Co. was not about creating shareholder value. It was about gaining political influence. The offer to the Bancroft family, which largely stopped caring about Dow Jones generations ago, was so off the charts that they would have been insane to turn him down. Since then, News Corp has been working feverishly to cut costs through layoffs.

The company is also slashing costs at the New York Post, which also reportedly loses money. Post Editor Col Allen canceled gossip columnist Liz Smith's column. Last year, Murdoch made a $580 million offer for Newsday in a move that would have helped cut costs at the Post. Cablevision Systems Corp. (CVC) acquired the Long Island paper.

Shares of New York-based News Corp are down 32 percent this year, under-performing rivals including Time Warner Inc. (TWX) and Viacom Inc. (VIA). The reason for investor unease is simple: Murdoch is still in love with the moribund newspaper business. Add to that his strained relationship with his children and the fact that though there are shareholders, News Corp remains a family business.

Elisabeth Murdoch's brother Lachlan quit the company in 2005. She quit in frustration with 2000. Murdoch has a daughter with his first wife who is not involved with News Corp. He also has young children with his current wife Wendi. James Murdoch, 36, is his only child left at the company.

"Whether she is on the board or not, Liz is clearly beginning to play a larger role at News Corp," Fortune says. "But that does not, insiders say, diminish the odds that James is the most likely Murdoch to one day succeed Rupert as CEO."

If News Corp's Fox TV network is in need of a reality show idea, it need look no further than its controlling family.
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