The Murdochs: a family saga

Now into his seventies, Rupert Murdoch is enjoying the greatest success of an extraordinary career.

On a balmy evening on Thursday 19 July, a select group of London's great and good gathered at No 11 Downing Street for Gordon Brown's annual summer party. This year there was something special to celebrate: the Chancellor and his wife, Sarah, had just announced that they were expecting a baby. Circulating among the canapes and Pimm's, the ministers and celebrities, one group especially stood out: the stars of the News International firmament, among them Les Hinton, the News International executive chairman, Peter Stothard, the editor of the Times, Rebekah Wade, the editor of the News of the World, and the formidably influential Irwin Stelzer, known as Rupert Murdoch's representative on earth.

Their presence in numbers was evidence of an increasingly strong link between the man in No11 and the world's most important media mogul. Some say Murdoch is already thinking ahead to the time when Brown will be Prime Minister, and that it will happen with Murdoch's backing. The prospect is already causing concern among those close to Tony Blair. They would be even more worried if they had seen the Murdoch coterie pay its respects to the Chancellor and his family on that bright summer's night last month.

Rupert Murdoch's own family is becoming as famous for its glitzy soap opera shenanigans as the global media empire over which it presides - and the marriage of his daughter Elisabeth to Matthew Freud in London on 17 August promises to be a vintage episode to rival Dallas or Dynasty. Consider the cast list and then tell me you would not love to be a fly on the wall.

The bride's handsome, blonde-but-brittle mother, Anna, will be flying in for the big day, fresh from her interview with Australia Women's Weekly, in which she alleged that her 31-year marriage to Rupert had collapsed because of his adultery with Wendi Deng, a vice-president of his Hong Kong-based Star TV whom he subsequently married. Anna also complained that her ex-husband had "behaved badly" by kicking her off his News Corporation board after the divorce (did she really think she was there on merit?) and mused aloud that "the Rupert Murdoch I loved died a long time ago" (she did not offer a date for this demise). To add spice to the storyline, 33-year-old Wendi will also be at the wedding, heavily pregnant with the 70-year-old media mogul's baby - his fifth, her first. At the wedding of Murdoch's eldest son, Lachlan, she had to wait in the hotel suite: Lachlan insisted that, because Rupert had not yet married her, he had to come alone.

If that were not juicy plot enough, Rupert's prospective son-in-law has also had a few harsh things to say about him in the run-up to the wedding. Freud, a maestro in the rather seedy world of celebrity PR, told the July edition of Vanity Fair that the media magnate was old-fashioned and something of a misogynist.

Freud also admitted that Rupert had placed "something of a black mark" against the younger man's name. He is not wrong there: the one thing that united Rupert and Anna through an increasingly bitter estrangement was their shared belief that their daughter (who has two children by her marriage to the son of a former Ghanaian political dissident) should not marry Freud, who left her after she became pregnant by him. (The couple then got engaged in June, eight months after the birth of their baby daughter.) But Elisabeth has a mind of her own, and regards Freud as her "soulmate". Her parents have given up trying to change her mind; none the less they will be gritting their teeth as they watch the wedding ceremony. Yet it will be all smiles the day after, when there will be a second, bigger party in London, and Lachlan, the favoured heir apparent to the Murdoch empire, will celebrate his 30th birthday.

Rupert moved a News Corp board meeting to London so that senior executives and the Murdoch clan members in the business could attend both events (the company may be a PLC, but Rupert runs it like a family shop). The Murdochs are classic tabloid fare: it will be interesting to see if the non-News Corp British press treats them as such or whether the informal proprietors' agreement - their own personal lives are no-go areas for each other - still holds.

Lachlan's landmark birthday will trigger renewed speculation about the Murdoch succession, a matter potentially complicated by the imminent arrival of a Murdoch child. In her Australian interview, Anna went out of her way to stress that neither Rupert's new wife nor any Deng children could ever inherit the Murdoch mantle. But she also lamented the heavy pressure that the succession was placing on her own children.

Anna is right, the pressure is substantial - but then so is the prize. News Corp is currently valued at $40bn (£27.5bn), even in today's depressed market for media stocks; it is among the top five media conglomerates in the world and the only one with genuinely global reach. More important, the bad news for Murdoch-haters is that Rupert is on a roll: after a period when it looked as if he had lost his touch, the man is back - with a vengeance.

The Nineties did not end well for Murdoch. His attempt to repeat the success of BSkyB in the United States by creating a pan-American satellite broadcast system had collapsed. Even the BSkyB cash cow in this country had dried up as the cost of rolling out the new digital boxes took its toll on the bottom line. His grand scheme to group all his satellite interests into Sky Global and take the company public had floundered before flotation. He fumed as upstart internet companies such as Yahoo! and AOL boasted market capitalisations much higher than News Corp, which had taken him a lifetime to build; he then squandered millions by blowing hot and cold on internet ventures of his own.

As Murdoch approached his 70th birthday last March, it did not look like it would be a happy one. Murdoch-watchers on both sides of the Atlantic were concluding that he had lost the plot: the business analysts told investors to dump the stock, and News Corp shares plummeted. He also contracted cancer of the prostate.

That was then. He has since executed a breathtaking, Houdini-style escape. He is back to his usual rude health, more of a perpetual-motion machine than ever, as he jets from one continent to another to clinch new deals, accompanied by a young wife who clearly adores him. In the wake of the dotcom bomb, sentiment has moved back to media companies such as News Corp, with valuable assets and proper revenue. BSkyB's expensive give-away of digital boxes has bought it control of the broadcast digital space: its only rival, ITV Digital, is already an also-ran.

Last month brought fresh Murdoch successes in the US: he won regulatory approval for the $5.35bn (£3.7bn) purchase of the Chris-Craft TV stations, which will further enhance his successful Fox TV network; he sold the Fox Family Channel to Disney for a ridiculously high $5.3bn (so high, in fact, that Disney's credit rating might now be downgraded); and his motion picture studio's remake of Planet of the Apes is breaking box-office records.

Now the big enchilada is about to fall in his lap: in the next week or so, after months of negotiation, but with only due diligence to complete, he will acquire DirecTV from General Motors, giving him the same sort of broadcast satellite distribution in America that he currently enjoys in the UK and Asia.

It is hard to overestimate the importance to Murdoch of this latest deal. Throughout his struggle to break out of newspapers and into television, he has been hampered by the fact that others used their control of distribution to thwart him. He was kept out of ITV by cross-ownership rules that forbade the combination of national newspapers and television. Even a Tory government would not give him a satellite licence: it went to the ill-fated BSB, and he had to use a Luxembourg-based satellite station to launch Sky. In the US, the cable companies have regularly conspired not to carry his channels: he had to battle long and hard for Time Warner Cable to carry his Fox News in the crucial Manhattan market.

Now Murdoch is on the brink of adding the lucrative North American market to the UK and Asia as key areas of the globe where he is in control of his own distribution system and has plenty of his own content to show on it. The experience gained with BSkyB in this country will be put to formidable use in the US, although he will face stiff competition. The American cable industry is consolidating: Comcast is trying to take over AT&T's cable interests, while AT&T is cosying up to AOL Time Warner, which has plenty of content of its own. Cable will give even a Murdoch-owned DirectTV a run for its money.

As Britain enters the digital age, Murdoch is in the driving seat. BSkyB, already in almost six million homes in the UK, is now clearly the digital platform of choice. The pay-TV - and hence the profits - will be on BSkyB. The British will rely on regulation to control him (BSkyB is currently under investigation by Oftel for the allegedly uncompetitive way in which it sells its channels to cable), but that is always an unsatisfactory solution. Murdoch will anyway use his political connections to mitigate the impact of regulation. His love affair with Tony Blair has won him few specific favours, but new Labour has presided over a friendly environment that has allowed Murdoch to go about his business largely unhindered.

Ever with an eye to the future, Murdoch's affections have now turned to Gordon Brown. He admires his handling of the economy. He has come to regard Blair as an amiable lightweight; he sees Brown as a policy heavyweight with whom he can do business. Neither is an enthusiast for the euro. They share a Scottish Presbyterian background (Brown's father was a minister; so was Murdoch's grandfather and great-grandfather) as well as a belief in the work ethic and a consuming interest in ideas. When they met in Downing Street four days after the June election, Rupert took along Lachlan to meet Brown and his closest adviser, Ed Balls. They exchanged economic information to build a picture of where the global economy was going. Balls, who hit it off with Lachlan, quizzed him about developments in the Australian Labour Party. Blair's people had kittens when they found out about this encounter.

Murdoch starts his eighth decade in better shape than ever. His is an inheritance worth having. Whether it falls to Lachlan, or his bright younger brother, James, or Elisabeth, or a member of the Murdoch-Deng dynasty, remains to be seen. My guess is that it will be none of the above. News Corp is very much one man's creation and it will likely die with him: the non-Murdoch shareholders, which include some of the world's biggest financial institutions, will see more value in breaking the company up than keeping its disparate parts together so that a Murdoch can fulfil his (or her) inheritance.

There are already forces for fissure inside the company, encouraged by the fact that, no matter how bright and successful you are at News Corp, you cannot make it to the very top jobs without Murdoch genes. These pressures will rise to the surface when Rupert Murdoch, to whom nepotism matters more than meritocracy, shuffles off to the great satellite in the sky. Soap operas always end in tears, especially when they are based on family rivalries. The Murdochs is likely to be no different.

Andrew Neil is the publisher of Sunday Business and the Scotsman group of newspapers. He was editor of the Sunday Times and executive chairman of Sky Television