Lachlan Murdoch: Standing Alone

Standing Alone

Lachlan Murdoch, the London born, New York raised son of arguably the most powerful media man in the world, calls Australia his spiritual home. And Australia has been the launching pad for his new solo venture, Illyria.

It was all-quiet on the business front for Lachlan Murdoch after he left the News Limited empire back in July 2005. Speculation abounds as to why he removed himself from an empire he was destined to take over. Was it really that he wanted his children to grow up in Australia? Or were there some deeper-seated issues: disagreements with his father over business practice, for example a kind of ‘emasculation’ as New York magazine commentator Steve Fishman called it. This is evident in his father’s decision to overrule a direct edict made by Lachlan to television executives. Fishman wrote of Lachlan, “He stewed … He loved his father but he felt undercut, maybe humiliated. Lachlan began to brood not just about Crime Line (Crime Line was a police reality series that Lachlan opposed but Rupert gave the go-ahead to Fox News Chief Executive Robert Ailes to produce), but also about his identity, in the company and out. Where was the respect due a successor, a deputy COO, a son?”

The time was right for Lachlan to take his own stand. Brother James has made BSkyB his own, defying critics and turning the company’s fortunes around. And although Lachlan was seen as the heir apparent, it was James who was making waves in the business world. “It’s just difficult to sort of uncouple your life and your identity from the company. I have to do my own thing. I have to be my own man,” writes Fishman of Lachlan’s words to his father. Despite the $9 million payout he received when he left News Ltd, standing on his own two feet was made difficult by a clause that prevented Lachlan from starting any media related entity for two years. Now time has passed, the business he set up in the months pre- and post his departure are starting to show signs of life.

The awakening giant

Illyria has several historical references: It is the area now known as Albania, previously ruled by a pre-Christian confederation of tribes. It was also the name used by Shakespeare as his setting for Twelfth Night. Interestingly it is also the name of a demon who resurrects herself in Joss Whedon’s television series Angel.

Illyria is the name given by Lachlan to his new business venture; a name he incorporated just three days after he left the comfort of his career inheritance to take some time with his family, wife and supermodel Sarah O’Hare and their two sons, Aiden and Kalan. Illyria reportedly has nothing to do with Shakespeare or Angel, but is an island he once sailed around. Lachlan is sole Director.

Not much was heard about the company until late in 2006. In fact in the past 12 months Lachlan has become quite active. In May he paid $4.3 million for office space in Surrey Hills in Sydney. The office is half way between his News Limited office, where he is still on the board, and Aussie Stadium, (presumably so he can get to a few rugby games).

The big speculation was that Lachlan would make a play for James Packer’s magazine arm, Australian Consolidated Press (ACP). Given James is looking at other ventures, most notably gaming and Internet, the time could be right for Lachlan to re-enter the media space, particularly with the relaxation of media laws.

Indeed, the media scene in Australia is currently in a state of frenzy. Macquarie Media Group took a 14.9% stake in Southern Cross Broadcasting, a move designed to make Macquarie the country’s largest radio group. Network Seven’s magazine arm bought the remaining 50% of Australia’s largest custom and corporate publisher Fairfax’s Text Pacific for an undisclosed amount. And Rupert Murdoch has been doing some posturing of his own. A lightning raid on Fairfax Media on October 20, 2006 saw him purchase a 7.5 per cent stake for $387 million, or a $5.20 share. With the fall in share price to $4.77 in late November, Murdoch senior was sitting on a $30 million loss. Discussions of another three per cent buyout were occurring at time of print.

Lachlan hasn’t been so gung-ho as his father. His acquisitions have started slowly and with much smaller companies. He bought a stake in Internet DVD company Quickflix and took an equity stake in a Los Angeles based on-line ad agency Spot Runner, which allows small business to place and create ads in local markets. The deal was done in partnership with CBS and ad heavyweights Interpublic Group for a combined US$40 million investment. Quickflix, however, was LachlanÕs own undertaking. He bought a 9.6 per cent stake in the burgeoning on-line company, whose major shareholder is Stephen Langsford. Langsford modelled his company on US giant Netflix, a US$2 billion company that allows subscribers to rent films online before mailing them out.

Langsford has bigger plans, looking to create a community of borrowers that competes with social networking sites such as RSVP and myspace.com. The idea also attracted Internet and digital music company Destra Corporation, which also bought a 10 per cent stake.

Like his friend James Packer, Lachlan is interested in Internet businesses. Quickflix and Spot Runner are both growth businesses. The investments offer calculated risks that Lachlan believes will reap benefits. Quickflix share price had already risen 40 per cent to 17 cents at time of print.

Out of the shadow

Arguably, Lachlan's rise is to do with birthright, not ability. Lachlan will decry this - when your father is one of the world’s most powerful men you learn about the tricks of the trade and how to apply them to your own ventures. This is what he is now hoping to do. In spite of his fortune and supermodel wife (who herself seems as down to earth and approachable as Lachlan) he is seen as someone who can fit any cultural or political situation. If there is one thing he has learned from his father, it is to appeal to the broader zeitgeist, to connect with popular opinion - perhaps this is something he learnt studying philosophy. Of course market populism also requires profit. This is not lost on Lachlan.

The profit theory may well have been driven home during the One.Tel debacle, which lost News Corp its $600 million investment. Lachlan allegedly lost his memory, and his seeming lack of foresight (why was there no due diligence done?) cost his reputation dearly.

It was a tough lesson but one he had to learn. One would suspect he has learnt many lessons. Upon his departure from News Limited he made the statement: “I would especially like to thank my father for all he has taught me in business and life. It is now time for me to apply those lessons in business and life.” What exactly do these lessons entail? On the one hand he knows he needs to keep his eye on the financial affairs of the businesses he has interests in - another One.Tel could possibly ruin his reputation for good. Due diligence in regards to the company he is investing in is also crucial. And then there are the lessons his father would have imparted: the importance of popular press, to be a catalyst for change, commitment to business growth, and reputation.

Lachlan may not have the reputation his father does: the quintessential media mogul. He is seen as a gentler kind of entrepreneur. It is hard to tell whether his desire to succeed matches that of his brother or his father, (although we tend to forget that James was also implicated in the One.Tel scandal). However, Lachlan is ready to make his move, and whatever he does, whatever he now pours his money into, whatever board he sits on, the mistakes of the past and the skills he inherited (not just the money) should hold him in good stead. One day he might just match his father’s legacy.

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