LONDON (Reuters) - James Murdoch was not responsible for the phone hacking scandal that has engulfed his father's media empire, but that will matter little if his handling of the case does not improve quickly.
Tipped as heir to the empire, Rupert Murdoch's youngest son is under pressure to show he can muster his father's political touch to contain a scandal that is damning the family name and slashing by the day the value of media assets that have been in the business for decades.
So far, analysts say he has been slow to realise the enormity of the situation, or to show genuine humility over an episode in which his newspapers have been seen to harass the families of child murder victims, dead soldiers and bombing victims, all to generate stories.
"This is the most serious political crisis in a generation (for the Murdochs) -- but as a business crisis it is immense and immensely more significant," said Claire Enders, head of the Enders Analysis research group.
By the time James Murdoch took over at News International, News Corp's British newspaper stable, in 2007, the alleged hacking practices were over, but the scandal had hardly begun, and it fell to Murdoch this week to close the 168-year-old paper at the centre of the scandal.
At the heart of the problem, Enders says, is a sense that, after years of wielding a peculiar influence over British politics, James Murdoch and the rest of his company do not know how to handle a situation where they are in the wrong.
"This siege mentality is just not right," she said. "They have got to accept that other people in the world have got something to tell them. But that is just not a personality trait one has ever seen from them.
"Their attitude is 'We are better, we're different', and I'm afraid the word 'better' is no longer going to apply if these allegations are proven."
HIP-HOP RECORD LABEL
Born in 1972, James Murdoch dropped out of Harvard in 1995 to start a hip-hop record label and once billed himself as a professional cartoonist. Few then would have tipped him to overtake his elder siblings to stand in line to inherit News Corp.
Just 12 years later, he took control of the Asian and European operations of News Corp, which wields influence from Hollywood to Hong Kong and owns not only Britain's biggest-selling paper, the Sun, but also the film studio 20th Century Fox, the U.S. cable network Fox, the television network Star TV, publisher Harper Collins and the Wall Street Journal.
Whether he can match Rupert Murdoch's consummate empire-building ability in the long term is yet to be seen, but James has already shown hints of sharing his 80-year-old father's bullish approach to business.
Smart and clean-cut, James is capable of charming interviewers and the public, but inspires fear among many of those who work for him. He keeps a model of the Star Wars villain Darth Vader outside his London office.
"When James was in the building, you could almost hear the Darth Vader music," said a former News International editor.
"He came across on his TV interview this week as a nice, thoughtful guy. And he may be that. But he's a scary man around the office," said the editor, who declined to be named.
When News Corp's Internet business was founded in the early days of the dot-com boom, James became president. But as boom turned to bust, he moved on to Hong Kong-based Star TV before becoming chief executive of BSkyB in 2003.
That move was initially met with accusations of nepotism, but he quickly impressed analysts and investors by broadening the company from a pure pay-TV offering to include broadband and telephony.
But like his father, the younger Murdoch has courted controversy.
He stirred up a storm in August 2009 when he used a keynote speech at a major TV festival for a blistering attack on Britain's state-owned broadcaster, the BBC, echoing his father Rupert's speech from the same platform 20 years earlier.
James was promoted to run News Corp's international business from New York in March this year, a move seen as confirming his status as heir to the media empire. But he has still not moved fromLondon, where all of his direct reports are based.
TV OVER PRINT MEDIA
The younger Murdoch has always favoured the more profitable television and entertainment arms of the business over the traditional print media on which his father founded the empire.
But growing popular and political anger over the voicemail hacking saga has raised the chances of a delay in government approval for News Corp's bid to buy out the 61 percent of BSkyB that it does not already own.
Prime Minister David Cameron's right-of-centre government had already given informal blessing to the takeover, despite criticism that it gave Murdoch too much media power.
Before the controversy worsened, formal approval had been expected within weeks. But a decision now seems likely to take months.
"James Murdoch has not handled the situation well. He surely did know, certainly by 2008, what was going on," Peter Burden, the author of a book on the News of the World, told Reuters.
"The problem is they're all very loyal to each other, the Murdochs and their people," he said, in reference to the company's decision to back Rebekah Brooks, a close confidante and editor of the News of the World at the time many of the offences were alleged to have happened.
"James didn't grasp the enormity of the situation. A few months ago he said 'We've put it in a box now and it's contained', and of course he couldn't have been more wrong."
Beyond pure financial concerns, the Murdochs appear also to have also damaged their once untouchable position in British politics, where leaders of political parties openly courted Rupert Murdoch's support.
Andy Coulson, a former editor of the News of the World who quit in January as spokesman for Prime Minister David Cameron, was arrested on Friday over the scandal.
"They don't understand that you can't assume the kind of power they've had in this country without actually behaving as if you're part of the fabric," said Enders.
"And what that means is -- if your employee becomes an employee of the prime minister, you have some responsibility towards that employee being a credit to the prime minister rather than a discredit. They don't get that connection."
James Murdoch needs to show that he does.
(Editing by Kevin Liffey)
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