The most talked about thing on the Fox studio lot this morning, after Slumdog Millionaire’s eight Oscars, has got to be the news that CEO Peter Chernin is heading for the exit. Chernin has run the entertainment side of Rupert Murdoch’s empire since 1996, the year Murdoch launched Fox News.

The Chernin legacy is one of profound accomplishment. He is an old school Hollywood exec who demonstrated his skill as an effective manager in a creative business. He was also at the opposite end of the political spectrum of his boss. Chernin gave generously to Democratic candidates and causes. And he would have to be the person who gets credit for the humor directed at the right on programs like The Simpsons. Of course, he would also have to take the blame for reactionary programs like 24.

According to reports, Murdoch does not intend to replace Chernin, and will assume much of those responsibilities himself. I would expect that to be a temporary situation. One of the probable reasons for Chernin’s departure is that there is no upward mobility for him at News Corp. Murdoch will be grooming family members for expanded rolls in the future. He needs a successor and he isn’t going outside of his family to find one. So goodbye Chernin.

This is bad news for News Corp on many levels. Losing an experienced, respected, and connected Hollywood veteran is certain to be troublesome. But even worse is the prospect of Murdoch taking the reins himself. Chernin has had near autonomy running the entertainment group. It is not an area in which Murdoch has much experience or affinity. His focus has always been on his newspapers. And if we were to judge him on the performance of that sector, his future is bleak indeed. The New York Post has lost tens of millions of dollars annually for every year he has owned it. The percentage of the newspaper segment of News Corp is now 19%, the largest piece of the company. And the company is careening toward collapse, having lost about 70% of its market cap in the last year. That is significantly worse than competitors like Time Warner and Disney. Financial analysts are getting nervous about News Corp and Murdoch, and their ability to weather these storms.

The timing of this could not be worse for Murdoch. As the company is trying to stay afloat in one of the worst economic downturns in decades, and while still trying to integrate Dow Jones and the sickly Wall Street Journal into the company, Murdoch now has to divide his attention between his failing publishing interests, his falling stock valuation, and now the helm of the movie and television concerns that Chernin had managed so well. Why should any investor have confidence that Murdoch will succeed at Chernin’s job when he has failed so badly in the newspaper realm he loves so much and has been engaged in for over 50 years? More likely, he will do to the entertainment group what he did to the rest of the company.

Now if only Roger Ailes would leave Fox News and let Murdoch destroy that too.