Murdoch's eldest son, Lachlan Murdoch has been the publisher of The New York Post since 2002 and is chairman of Fox Broadcasting. It appears that his decision may have something to do with wanting to spend more time with his family. His wife gave birth to their first child, a boy, last year.
"I have today resigned my executive position at News Corporation. I look forward to returning home to Australia with my wife, Sarah, and son, Kalan, in the very near future," Lachlan Murdoch said in a statement.
His father's comments seem to suggest that Lachlan's decision is one that he would rather his son had not taken.
Rupert Murdoch said: "I am particularly saddened by my son's decision and thank him for his terrific contribution to the company."
The news puts a twist into the plot of the Murdoch family succession. Murdoch has kept the media world in the dark about who his empire will pass to when he retires, and has refused to name a date for his retirement.
The clear contender, with Lachlan Murdoch now seemingly out of the picture, is now James, a year younger than Lachlan, who took charge of BSkyB at the end of 2003 despite shareholder unrest about his suitability for the job and the impartiality of the selection process.
He has impressed observers by staying on course to meet subscriber growth targets after initially displeasing the City by committing large amounts of money to a marketing drive.
Prior to his arrival at BSkyB, James ran News Corporation's Asian satellite television network Star TV. Before joining the family business, he founded a hip-hop record label called Rawkus in the US, after dropping out of Harvard. He joined News Corporation to run its internet units and was made CEO of Star TV in 2000.
Murdoch's wife Wendy Deng, a former Star TV executive, could be another contender.
He has in the past hinted that his daughter Elisabeth would succeed him, before suggesting in 1997 that Lachlan was the favourite. However, Elisabeth left News Corp in 2000 to set up her own television production company Shine after a four-year stint at Sky, where she rose to head its programming business.
Lachlan's return to Australia follows News Corp's $580m acquisition of internet portal Myspace.com.
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