Murdoch empire hit by rift as eldest son quits

Mr Murdoch, 74, issued a statement reflecting his disappointment that his eldest son would no longer be in line to take over the media company, which owns The Times and The Sun in the UK, the Fox television network and the publisher HarperCollins.

"I am particularly saddened by my son's decision and thank him for his terrific contribution to the company," Mr Murdoch said. "I have respected the professionalism and integrity that he was exhibited throughout his career at News Corporation".

The younger Murdoch has been based in New York since 2000, when he became deputy chief operating officer at the international media conglomerate and publisher of the New York Post . He gave no clue about reasons for his departure.

"I would like to especially to thank my father for all he has taught me in business and in life. It is now time for me to apply those lessons to the next phase of my career," the 33-year-old said.

The only additional information added was that Lachlan Murdoch, whose wife Sarah O'Hare had a baby last November, would return to his native Australia. After graduating from Princeton in 1994, Mr Murdoch started out by working in a variety of management positions in News Corporation in Australia.

The news of his departure stunned media and financial circles. One analyst said: "Either he has had a row with his old man and been pushed, or he decided to jump. Both of their statements are emotional because, one way or the other, they've had a bust-up".

Lachlan's exit makes it a strong possibility that Mr Murdoch's second son, James, who runs the British satellite TV business, BSkyB Broadcasting, will become the most likely contender for the top job at News Corporation.

The company controls Sky by being its largest shareholder. Mr Murdoch overcame opposition from other investors when he moved 32-year-old James from his role heading up News Corporation's TV operation in Asia to becoming Sky's chairman in 2003.

The future of Mr Mudoch's daughter, Elisabeth, also looks more open. Ms Murdoch was director of programming at Sky until she left the firm in 1999. She set up her own production company in London, Shine, with Lord Alli, the former head of Planet 24 Television.

While his other children have proved themselves to be preciously proficient in the world of media business, it was Lachlan that Mr Murdoch was grooming as his successor.

In a 1997 interview for a book by Mathew Horsman, a media analyst for Mediatique, Mr Murdoch said of his family's position: "Currently it is their consensus that Lachlan will take over. He will be the first among equals, but they will all have to prove themselves."

Five years later, after Elisabeth had dropped out of the running, Mr Murdoch reassessed the strengths of his two sons. "Lachlan has great leadership abilities, he has shown it in Australia.

"James has great business abilities. He has done a fantastic job down there [in Asia]. He has not really had the love or closeness of newspapers that Lachlan has."

Seemingly signalling that James was gaining in the running, Mr Murdoch added: "I think they are very close and they will get on extremely well. It [the future leadership] will be more shared that it seems at the moment".

Lorna Tilbian, an analyst at the research house Numis, said: "This is a tragedy for the family. Rupert Murdoch was trying to build a dynasty but he only has one man left now".

Lachlan will officially step down on 31 August. Only last month he was named Media Person of the Year by the advertising community's annual meeting in Cannes, chiefly for the circulation increase he has overseen at the New York Post.

The Post is losing money, but it has boosted its readership dramatically under Lachlan and has lessened the gap with its main rival, the Daily News. The Post has also developed a strong record of breaking stories, especially in the arenas of media and business.