Rupert Murdoch's vast News Corp media empire was thrown into turmoil today as the man seen as his immediate next in line quit, leaving a massive question mark over the 77-year-old mogul's succession plans.

The media world reacted in shock today at the departure of Peter Chernin, widely thought of as the most talented media executive of his generation. He was expected to take the helm after Rupert Murdoch retires while son James Murdoch gains more experience in his current role as chairman and chief executive of News Corp Europe and Asia.

But the failure after months of discussion to sign a new multi-million-dollar contract today saw him resign his position. Rupert Murdoch said six years ago that Chernin, chief operating officer at News Corp, would take over if he "went under a bus" before his children were ready to run the company.

James Murdoch remains the clear front-runner in the longer-term succession stakes over sister Elisabeth and brother Lachlan, who was being lined up by his father but now works on his own business interests in Sydney.

Meanwhile, Rupert Murdoch is to take personal control of the Fox film and TV business from Chernin, highlighting how crucial he is to the company, and the lack of clarity about who will fill his shoes when he's gone. Murdoch also risks taking his eye off the ball at his recently acquired Wall Street Journal, where he has been spending much of his time leading the battle against the Financial Times and the New York Times.

Media watchers and News Corp executives were today playing a guessing game about who would take up Chernin's roles. Apart from James Murdoch, Fox executives Jim Gianopulos, Tom Rothman and Tony Vinciquerra are expected to step up.

Murdoch said the decision not to replace Chernin was due to the strength of Fox's executive team but also indicated cost-saving was a factor. He added: "There will be cost savings as a result, but the more important aim is to be leaner so that we can better leverage our collective talent and expertise."

Murdoch takes over amid tough times for the industry. The recession has cut TV advertising and a shift to online viewing has caused DVD sales to plummet.