James Murdoch's departure from BSkyB on Tuesday may spell the end to his succession hopes at the parent company, News Corp.
This is not merely the latest distancing of Rupert Murdoch's chosen heir from the mess over which he presided in the United Kingdom. It's death by a thousand cuts.
Murdoch, 39, already resigned as head of News International, parent company of the disgraced News of the World, in February.
The latest resignation comes with an official statement from CEO Rupert Murdoch and COO Chase Carey, insisting that James Murdoch would continue to make "substantial contributions" to News Corp.
But what exactly will that be? Murdoch is now based in New York as deputy COO, a third-tier job overseeing the company's pay-TV businesses and international operations.
News Corp. watchers tell TheWrap that the BSkyB move calls into question James Murdoch’s role in the family media empire over the longer term. He may hold on to power, but months of media scrutiny and Parliament testimony have taken their toll.
For some time, James Murdoch has been the heir apparent to the News Corp. media empire. With Rupert Murdoch in his 80s, the succession plan has long been to hand the reins to a family member. Wall Street hasn’t necessarily liked it. And neither did Peter Chernin, the former president and COO, who left the company in 2009 after decades in the trenches when it became clear that he would never hold the top job.
But the scandal in the United Kingdom has been slowly eating away at James Murdoch’s stature both within the company and outside it. In one photo opp after another, he has become the public face of the scandal that has uncovered deep rot in at least one part of the News Corp. kingdom.
BSkyB has always been a critical element in the News of the World phone hacking scandal. When the scandal broke last summer, Rupert Murdoch pulled the family firm’s bid for government approval to attain full ownership of the satellite company.
Moreover, James Murdoch's leadership at the company was seen as a resume-building stint as News Corp. continues to devote more of its attention to its cable assets and turns the page on his father's beloved newspapers.
By all accounts James Murdoch has done an admirable job in that capacity. He has helped turn BSkyB from a money-losing company into the largest pay-TV broadcaster in the United Kingdom and Ireland, boasting more than 10 million subscribers.
But that success did not override the further damage that could have occurred by keeping him tied to News Corp.'s United Kingdom properties.
It was only last July when the BSkyB board of directors unanimously endorsed the junior Murdoch's leadership.
Things have changed: Rupert Murdoch has recently made no secret that Chase Carey is now seen as the man most likely to take over the reins of the company once he steps down.
"Chase is my partner and if anything happened to me I'm sure he'll get it immediately — if I went under a bus," Rupert Murdoch said during a call with analysts last summer.
Despite the moves on Tuesday, a News Corp. executive said James Murdoch will continue to be fully involved in the company.
If he keeps his head down, analysts say that he could eventually regain his favored status.
"I don't think this move presages James leaving the company," Matthew Harrigan, an analyst at Wunderlich Securities, said. "Barring something unforeseen, James isn't going anywhere, but I do think Chase will be the CEO."