It's one of the world's biggest media companies, but
Murdoch, 84, plans next week to ask the 21st Century
Although not unexpected, the succession plan reflects Murdoch's will to see his own blood run the company he built out of a single newspaper in Australia 60 years ago.
The chance of a misstep can't be ruled out.
James Murdoch's reputation was badly tarnished in 2011, after the extent of the British tabloid phone hacking scandal became public. James Murdoch, 42, was in charge of Fox's British holdings during the phone hacking but his father beckoned him to come back to New York, partly to distance him from the scandal but also to groom him for the larger role.
Company executives and London-based media analyst Claire Enders contend that James Murdoch has since demonstrated his executive mettle.
Lachlan Murdoch, 43, has had his setbacks too. He left Fox in 2005, returning to Australia, after feeling the harsh sting of being on the losing end of internal corporate politics.
But Rupert Murdoch waged an unrelenting campaign to bring his elder son back into the corporate fold. The new structure does not include a role for any of Murdoch's daughters, including Elisabeth, who built a London-based independent TV production company before Fox bought out the firm.
The succession plan was detailed by people with knowledge of the matter who were not authorized to speak publicly. Company officials declined to comment.
Fox is publicly traded, but the Murdoch family controls 39% of the voting shares, giving them outsized influence on corporate decisions.
Enders said she can see James Murdoch in charge of the day-to-day operation while Lachlan serves as "an insurance policy" for the company.
Jeffrey Cole, chief executive of the Center for the Digital Future at the USC Annenberg School for Communication and Journalism, said the moves were not unexpected.
"We've all known for 10 years that this was how the story was going to play out," he said. "The only question was whether Rupert was going to wait until he was 90 to turn over the control of his company, and to his credit, he is not."
The succession plan, which was put into motion last year, bypasses the company's highly respected Chief Operating Officer Chase Carey, who is expected to remain with 21st Century Fox as an advisor through the end of his contract in 2016.
Although a family-first approach to running one of the world's largest media companies may please the scions, it's not always attractive to Wall Street. The market always viewed Carey as the tough, sensible manager who put the brakes on ideas that were not in the best interest of the shareholders.
Tuna Amobi of S&P Capital said investors may be concerned about Rupert Murdoch keeping everything in the family rather than looking outside.
"This could rekindle some of those types of concerns," he said. "It depends on what kind of role Chase will continue to have at the company, and for how long."
Fox shares initially fell about 1% on the succession news but recovered to close at $32.90, down six cents.
Carey is the second executive outside the Murdoch bloodlines to have the top job at Murdoch's company elude him. Peter Chernin — who had a highly successful run as chief operating officer for Murdoch's
The news of the sons' ascension did raise questions about the future of Fox News Chairman
Although Ailes has not always seen eye to eye with the Murdoch sons, company insiders say he has developed a cordial relationship with them. Analysts agree it would be in the best interest of the brothers and the company to keep it that way. According to figures from SKL Kagan, Fox News Channel generated $1.4 billion in profit in 2014 — a staggering 60% margin — and Ailes' contract is up in 2016.
"Roger is almost like an institution in and of himself, and you don't have to be a rocket scientist to know the company will do anything to keep him happy, especially when retirement does not seem to be in his vocabulary and when cable networks are the growth engine at the company."
The 21st Century Fox empire includes Fox Broadcasting Co., TV and film production studios, a major stake in Europe's largest pay TV service BSkyB, and an array of high-rated cable channels, including Fox News, FX and National Geographic. Both men are expected to depart from their father's management style.
"James is more reasoned," said one veteran executive in the company who was not authorized to speak publicly on the matter. "You can have a dialogue with him. He doesn't have Rupert's demeanor. He doesn't pound a fist on the table and make declarative statements and there is no room for debate."
Enders said James Murdoch has matured over time.
"James had a very instinctive and aggressive way that has been tempered in the last four years," Enders said. "He has turned over a new leaf. That is why he is stepping up to the bigger job. He was working directly for Chase Carey in order to absorb his wisdom."
Battaglio reported from New York and James from Los Angeles.