annals of communications
The New Yorker - November 13, 1995
Rupert Murdoch often shuns the normal practices and principles of business and the media to get what he wants. It's a strategy that's working in China but hasn't with Time Warner.
When Rupert Murdoch arrives at his office on the Twentieth Century Fox lot, in Los Angeles, the single television is set to CNN, and the sound is off. At about eight-thirty, Dot Wyndoe, Murdoch's assistant of thirty-three years, spreads newspapers out on a shelf across from his desk: "TOP COP NICKED MY WIFE," blares one of his London tabloids, the Sun; "LOVE JUDGE COMES HOME," screams the New York Post. These are the only noisy elements in the office. Even the phones are quiet. Numerous calls stack up and are announced on an electronic monitor at his right elbow. Pastel paintings by Australian artists hang on snow-white walls over white couches and armchairs.
Murdoch's hair is turning white. He is sixty-four, and his shoulders stoop slightly. His voice is soft, and his manner is unfailingly courteous, as he sits with one leg tucked under the other. Only the hard brown eyes suggest that he is a predator.
He spends most of his time on the phone. He phones while driving his BMW to work, and he starts phoning from his desk as soon as he arrives, about 7 A.M. He always apologizes for disturbing an employee at an odd hour or on vacation, but the apology is more a ritual than a sign of genuine contrition. He hardly ever says hello or goodbye.
Murdoch lives in Beverly Hills, in a Spanish-style house, on six acres, formerly owned by Jules Stein, the founder of MCA. He's often away, doing business out of a Gulfstream jet he owns, or from one or another of the offices he keeps in several cities, including New York, where he works from a high-rise on Sixth Avenue near Times Square. This office is also white, and it has seven silent TV sets.
"Eric, sorry to wake you," Murdoch was saying from the New York office one recent afternoon. It was before dawn in Australia, and he had reached Eric Walsh, a lobbyist based in Canberra, who has been advising him on how to get the Chinese government to sanction his Star TV satellite system. "I was going to go to Hong Kong for a week, but I've been invited for a one-day conference in Beijing," he told Walsh. Murdoch wanted to know if he should reach out to the Chinese. And, if so, when? "Do I need an alibi?" he asked Walsh. "Or can I just write and say, 'I need a half hour of your time'?"
Walsh cautioned Murdoch to stay in the background. "Nobody understands what's going on in there," Murdoch mused in response, slipping down further in his soft leather chair, until his head was not much higher than his desk. "Everyone has different readings. You just never bloody know."
Without the support of the Chinese government, Star TV can have no paid subscribers, and advertisers stay away. That situation translates into big losses--projected at eighty million dollars in the current fiscal year, Murdoch says. He owns a satellite service that can potentially reach two-thirds of the world's population, yet, because of widespread concern in Asia about "cultural imperialism" and the impact of uncensored images and information, he has had to curb his aggressive tendencies. "My Chinese friends tell me, 'Just go there every month,' " he says. " 'Knock on doors. It may take ten years.' " This is not the message that Murdoch wants to hear.
Murdoch is the chairman, C.E.O., and principal shareholder of a company, the News Corporation, that produced nearly nine billion dollars in revenue this year and more than a billion in profits, but he feels frustrated. He is frustrated by China. He is frustrated because he has no international news network to supply his Fox network here, or his Sky or Star satellite services in Europe and Asia, while Ted Turner has CNN. And until last month he was frustrated because he owned the rights to televise sporting events all over the world but didn't own a sports network, like ESPN.
Over all, however, these frustrations present mere skirmishes in a global war that Murdoch is winning. All the media deals and maneuvers of the past few months have come about, in part, because Disney and Time Warner felt that they had to catch up to Murdoch. "He basically wants to conquer the world," says Sumner Redstone, the chairman of Viacom. "And he seems to be doing it." Former press lords, like Lord Beaverbrook, William Randolph Hearst, and Henry Luce, were dominant figures in a single medium on a single continent. Rupert Murdoch's empire spreads across six continents and nine different media: newspapers (his company owns or has an interest in a hundred and thirty-two); magazines (he owns or has an interest in twenty-five, including TV Guide, which has the largest circulation of any weekly magazine in the United States); books (HarperCollins and Zondervan, the dominant publisher of religious books); broadcasting (the Fox network; twelve TV stations in the United States; fifteen per cent of the Seven network, in Australia; and Sky Radio, in Britain); direct-broadcast satellite television (Star TV, in Asia; forty per cent of BSkyB, in Europe; half ownership of Vox, in Germany; and a yet to be named joint venture with Globo, in South America); cable (the fX network, in the United States; Canal Fox, in Latin America; and half ownership of Foxtel, in Australia); a movie studio (Twentieth Century Fox); home video (Fox Video); and on-line access to the worldwide Internet (Delphi). Murdoch not only reaches readers; he also holds the electronic keys to their homes.
Murdoch moves more swiftly than most rivals, takes bigger risks, and never gives up. In fact, despite public denials he has made, in late October he was still contemplating ways to reverse the deal that Time Warner announced in September to buy Turner Broadcasting System--a deal that blocked some of Murdoch's own expansionist plans. One scheme that he discussed internally and ordered his bankers and lawyers to dissect carefully was to attempt a takeover of Time Warner valued at more than forty billion dollars. "We're working hard at it," a central figure in the News Corporation said in late October, days before Murdoch became convinced that the effort would fail. The impediment, two participants say, was not finding partners but figuring out how to avoid the steep capital-gains taxes on the sale of Time Warner's various pieces to eager buyers. The idea was to make a bid for Time Warner in the next few months, before the merger with Turner was consummated. There were internal discussions about such potential partners as the Bronfmans, whose Seagram already owns just under fifteen per cent of Time Warner; US West, which owns twenty-five per cent of Time Warner's entertainment assets and opposes the terms of the Turner merger; and John Malone, the president and C.E.O. of Tele-Communications, Inc., the world's largest cable company.
MURDOCH created the first global media network by investing inboth software (movies, TV shows, sports franchises, publishing) and the distribution platforms (the Fox network, cable, and TV satellite systems) that disseminate the software. Within the next few years, the News Corporation's satellite system will blanket South America, in addition to Asia and Europe and parts of the Middle East and Africa. "Basically, we want to establish satellite platforms in major parts of the world," Murdoch explains. "And that gives us leverage here." If a cable-box owner or a programmer--John Malone or Time Warner, for instance--wants to reach a foreign market covered by one of Murdoch's satellite systems, Murdoch can extract favors from the programmer in the markets it controls in the United States. "What we're trying to do is put ourselves in a position in other countries that some of these cable companies are in in this country," he says. He wants to be the gatekeeper.
To advance his grand plan, Murdoch arranged a summit meeting in suburban Denver on August 10th with John Malone, of TCI. Murdoch called the meeting because he believed that Malone was necessary for capturing two of the missing pieces in his empire--the sports network and the news network. Malone owns fifteen regional cable sports channels and is a partner with Charles Dolan's Cablevision Systems in other regional sports channels around the country; these, when joined with Murdoch's and Malone's overseas sports holdings, could become the foundation for an inter-national sports network. In addition, Malone was Ted Turner's most influential shareholder and could link Murdoch with CNN. Murdoch was assuming that Turner was a possible partner, and Malone was openly dismissive of Time Warner's management.
The day before the meeting, Murdoch summoned to his California office Chase Carey, the chairman and C.E.O. of Fox Television, and Preston Padden, the president of network distribution for Fox and the president of telecommunications and television for the News Corporation. Murdoch, from behind the oak table he uses as a desk, began by noting that at that moment Malone was trying to help Turner finance a bid to acquire CBS, which would compete with Fox. "I think he intends to screw us," Murdoch said.
The three men held another caucus the next day, huddling in green upholstered armchairs on Murdoch's Gulfstream as it headed toward Denver for the meeting, at 2 P.M. They knew that Malone and Turner needed cash to take over CBS, and they talked about how Turner might be encouraged to sell something.
"The only asset we'd be interested in is CNN," Carey said.
Padden asked what might happen if Fox became a one-third owner in CNN.
"You don't want to hand over all your news efforts to Ted," said Murdoch, who is as wary of Turner's being too liberal as Turner is of Murdoch's being too conservative.
A car waited at the Denver airport to take Murdoch, Carey, and Padden to TCI headquarters. The meeting was held in a stark, glass-walled conference room dominated by a black granite oval table. The only refreshments were a few cans of diet soda and a thermos of coffee on a granite sideboard; each corner of the room was occupied by a rubber plant. Malone, attired in a red-and-white checked short-sleeved button-down shirt and chinos, was careful not to sit at the head of the table. Flanked by two TCI executives, he took a seat across from the Murdoch trio. The table was bare except for a single folded sheet of paper in front of Malone.
The six men, who did not rise from their seats for the next four hours, began with industry gossip, which soon bored Murdoch. He changed the subject: "Are you getting it together for Ted and CBS?"
"We know where the money will come from," Malone answered. "The question is Time Warner. I think their strategy is to drive Ted nuts." Time Warner, which, like TCI, then owned about twenty per cent of Turner Broadcasting, had the right to veto all acquisitions, and it was thwarting the takeover of CBS. Malone said, contemptuously, that he thought Gerald Levin, the Time Warner chairman and president, was seesawing, because his man-agement was engaged in an internal war.
Rather offhandedly, Murdoch asked, "Does Ted want to sell any assets?"
"No," Malone replied, with equal aplomb. "I don't know of any asset Ted wants to part with." He knew that Murdoch was fishing, hoping he could hook CNN.
Privately, Murdoch describes Malone as "the most brilliant strategist" he knows. Malone says the same thing about Murdoch, and over the years they have been both adversaries and allies, depending on the venture. It's dif-ficult to keep track of partnerships in the communications business these days, because the players change sides depending on the country or on the deal.
Malone had several goals in this meeting. He wanted to see if there were areas where he and Murdoch could do business together, and he wanted to avoid conflicts. Both were interested in creating a sports network that could compete with ESPN, and he thought he could get Murdoch to invest in the regional sports channels that TCI shared with Charles Dolan's Cablevision.
"The fact is," Malone told Murdoch during their summit, "we tried to merge our sports with Chuck's maybe fifty times." Each time, the plan unravelled because Malone and Dolan could never agree on who would run the partnership. But Malone was convinced that if a third party came in--someone "who may be more objective than we can be with each other," perhaps Murdoch--a successful merger could be achieved. "Between us, we have all the regional sports networks in the country controlled--except Minneapolis," he said, and that came to thirty-three million subscribers. "The real value for us," he went on, "is putting these together," thereby creating a powerful entity for buying worldwide sports rights, as ESPN does.
Malone and Murdoch then began a tour d'horizon, starting with a review of what each of them was doing to reach the estimated seventy million television households in Central and South America, and how each was faring in Europe. Malone did most of the talking. "I guess at this point Europe is pretty stable," he said. A short time later, he said, "The thing we haven't talked about is Ja-pan." He barely moved as he spoke, keeping two fingers pressed to his tem-ples. "We have a deal there in sports, and we have to discuss how that relates to Star."
"Star isn't there at the moment," Murdoch said. "But we are pretty far down the road." He asked how Time Warner was doing in Japan.
"They're running way behind us," Malone said. "They came to us and asked, 'Why don't we do a joint venture?' " He went on to say that he had rejected this for two reasons: first, it was dumb politics, since most nations carefully limit foreign ownership; second, "Time Warner is brain-damaged in terms of making decisions. You've got to move fast." Malone then returned to sports: "All these pieces fit, Rupert. We ought to be able to arrive at this"--a sports merger--"in painless fashion." He added, "We think Asia will take a while."
"Japan is now," Murdoch said.
"Either you guys get in or ESPN will own sports," Malone warned.
"We got to go in and kick ass," Murdoch agreed.
Dolan was difficult to negotiate with, Malone warned.
"If we have to go without him, we'll go without him," Murdoch said. They could always fold in Cablevision later. What Murdoch needed was some numbers from Malone.
The single sheet of paper slid across the table. It contained, Malone explained, what TCI thought each of its fifteen regional sports channels was worth.
Afterward, I asked Murdoch and Malone separately if there was anything they had discussed alone. Only one thing, Murdoch replied: in a private moment, Malone had "tried to talk me into buying five per cent of Time Warner to put it in play." Malone also conceded that they had talked about Time Warner.
Murdoch thought that he had accomplished half his mission. He was confident that he and Malone would make a sports deal, but he felt that CNN was slipping away, not least because Turner would probably spurn him. A fair number of communications-company C.E.O.s think that Murdoch is a pirate.
CNN became even further out of reach the following month, when Time Warner announced a merger with Turner. This was a real blow. Murdoch and Malone had been outmaneuvered. Malone no longer sat in the cockpit with Turner. His role had been reduced to that of a passenger and an investor. "The picture is confusing," a subdued Murdoch told me in late September. "Strategies are changing day to day." He partly blamed Jane Fonda, who is Turner's wife. "I surmise Jane had a great hand in it," he said. " 'We can change the world together.' "
Despite the setback, Murdoch and Malone's meeting did produce some concrete results. Murdoch chased Charles Dolan, and when, as Malone had anticipated, they could not reach an agreement the News Corporation and TCI negotiated, and on October 31st announced that they had agreed to become partners in a new, worldwide Fox sports network to compete with ESPN. They also have tentatively agreed to become partners in a direct satellite system in South America.
Malone sees Murdoch's strategy as much broader than that of his foes. He is not just trying to "get big," Malone observes. "He sees the nexus between programming and platform." Unlike Disney and Viacom, which have both concentrated on programming, Murdoch owns satellite distribution systems that span the globe. And, unlike his competitors in the satellite business, he owns a programming factory--Twentieth Century Fox. Competitors like NBC own neither. And TCI, Malone admits, has cable platforms but is "too weak in programming." Furthermore, unlike Time Warner and Viacom, Murdoch doesn't have a lot of debt: he has several billion dollars of investment capital available. And, unlike any other communications giants except perhaps Sumner Redstone and Bill Gates, he has a controlling interest in his company. "Rupert is a bit like a painter with a canvas, but in his mind the canvas has no perimeters," Arthur Siskind, the general counsel for the News Corporation, observes. "He's going to keep painting and painting."
MURDOCH is a pirate; he will cunningly circumvent rules, and sometimes principles, to get his way, as his recent adventures in China demonstrate.
Sometime in 1992, Murdoch took his initial look at Star TV, which was then a five-channel satellite service operating out of Hong Kong and reaching fifty-three countries. He wanted to enter into a partnership with the owner--Li Ka-shing, a Hong Kong billionaire, who was on good terms with the Chinese government, and with Li's son, Richard, who ran the company on behalf of his father--but only if the News Corporation could manage Star. In July of 1993, Murdoch offered five hundred and twenty-five million dollars for sixty-four per cent of Star, and that led to an agreement.
Murdoch was confident that Li and his son could run political interference from China. Others were less certain. Robert Wright, the president of NBC, recalls that one reason NBC had not pursued a deal with Star was the fear of opposition from the Chinese government. Perhaps Murdoch, too, should have worried more about this. The Chinese were still smarting from an abortive attempt he had made earlier that year to buy thirty per cent of Hong Kong's largest broadcaster, TVB, despite a law stipulating that no foreign entity could own more than twenty per cent of a communications company if it also owned another media outlet, and Murdoch did--the South China Morning Post (which he subsequently sold).
Murdoch seems to have thought that he could get around the Chinese authorities' hostility toward his ownership of Star, because technically he did not need the sanction of any government to deliver pictures from space. Besides, Murdoch is supremely confident--to the point of arrogance, perhaps--that he can get what he wants. "Rupert figured he could find a way to deal with China," George Vradenburg, who was then an executive vice-president of Fox, recalls.
If it had not been for the Speech, Murdoch might have found a way. On September 1, 1993, he invited hundreds of advertisers to Whitehall Palace, in London, and gave a speech explaining why the News Corporation was at the cutting edge of the communications revolution. He declared that George Orwell was wrong. "Advances in the technology of telecommunications have proved an unambiguous threat to totalitarian regimes everywhere," he said. "Fax machines enable dissidents to bypass state-controlled print media; direct-dial telephony makes it difficult for a state to control interpersonal voice communications. And satellite broadcasting makes it possible for information-hungry residents of many closed societies to bypass state-controlled television channels."
A month after the Whitehall speech, the Chinese Prime Minister signed into law a virtual ban on individual ownership of satellite dishes, and a suddenly chastened Murdoch was forced to show solicitude to-ward a totalitarian regime. He consulted many experts. He moved to Hong Kong for six weeks, and he reached out to Chinese officials. "He analyzed the problem objectively," his public-relations adviser, Howard Rubenstein, recalls. "He didn't make any excuses. It was an error that he made."
Murdoch had spoken like the libertarian he has professed to be, but now he chose to be reeducated, and among the lessons he learned was how deeply the Chinese government detested the BBC, whose World Service news was carried on a Star channel. The regime was especially angered by a BBC documentary that investigated Chairman Mao's unorthodox sexual habits. And, since the BBC was British, it was seen as the ally of forces that sought to keep Hong Kong independent of the mainland.
In April of 1994, Murdoch removed the BBC from the Star network in China and replaced it with Chinese-language films. "The BBC was driving them nuts," Murdoch says. "It's not worth it." The Chinese government is "scared to death of what happened in Tiananmen Square," he says. "The truth is--and we Americans don't like to admit it--that authoritarian countries can work. There may have been human-rights abuses in Chile. But that country under Pinochet raised living standards. And now it has a democracy. The best thing you can do in China is engage the Chinese and wait."
How does Murdoch explain his new tolerance for dictatorships? "I'm not saying they're right," he replies. "You don't go in there and run a controlled press. You just stay out of the press."
As he did with the BBC?
"Yes," he replies. "We're not proud of that decision. It was the only way."
Murdoch was not the only media potentate to grovel to a repressive regime. In Asia at about this time, Ted Turner, after meeting with Chinese broadcasting officials, criticized the United States for trying to "tell so many other countries in the world what to do" about human rights. And, when the former Prime Minister of Singapore and his son, the deputy prime minister, threatened to sue for libel because of an article in the International Herald Tribune suggesting that the deputy prime minister had been appointed to his post in an act of nepotism, the paper, which is owned by the New York Times and the Washington Post, issued an abject public apology.
Murdoch's campaign to win over the Chinese authorities was multifaceted. It included replacing Star's English-only format with programming in Chinese; buying sports rights to badminton and other sports popular with the Chinese; joining with four international music companies to create a music channel for local Chinese talent; becoming a partner with the Tianjin Sports Development Company in the construction of four television studios and post-production centers; starting a pay-TV channel in Mandarin; and putting up five million four hundred thousand dollars for a joint investment with the Communist Party organ, People's Daily, to provide, among other things, an on-line version of the kind of dull newspaper that he would never publish in the West.
Last winter, Basic Books, a division of the News Corporation's HarperCollins, brought out a hagiography of Deng Xiaoping by his youngest daughter, Deng Rong, who wrote under her nickname, Deng Maomao. Ms. Deng has long served as her father's personal secretary, and is married to He Ping, the head of Poly Technologies, one of the country's largest military conglomerates. The HarperCollins catalogue announced that the book by Ms. Deng, who Murdoch said received an advance of ten or twenty thousand dollars, would benefit from promotional efforts that would be cooerdinated with News Corporation media outlets. Despite the meagre advance, Murdoch feted Ms. Deng as if she were Tom Clancy. Last February, he attended a book party on the top floor of the Waldorf-Astoria sponsored by HarperCollins. He gave a private lunch for her at his ranch in Carmel. And he and his wife were hosts at a dinner for her in a private dining room at Le Cirque. There were six tables of eight, and among those who attended were Cyrus Vance and the Chinese Ambassadors to Washington and the United Nations. After a four-course meal, Murdoch rose and, a guest recalls, toasted Deng Xiaoping as "a man who had brought China into the modern world." This summer, Murdoch was confident enough of victory in China to have the News Corporation invest three hundred million dollars more to buy the thirty-six per cent of Star TV that it did not already own. In a further development that perhaps reflects Murdoch's solicitousness toward the Chinese gov-ernment, in September HarperCollins dropped out of the bidding for a book by the Chinese-American human-rights activist Harry Wu, who is despised by the Chinese government.
Murdoch's decision to boot the BBC out of China was condemned as "the most seedy of betrayals" by Christopher Patten, the governor of Hong Kong. To espouse freedom of speech at home "but to curtail it elsewhere for reasons of inevitably short-term commercial expediency" was, he implied, immoral--or, at least, amoral. Some businessmen have defended Murdoch. "Being tough is sometimes confused with being amoral," Sumner Redstone says. "They are not the same thing. He's doing what he has to do to solve his problems with the Chinese government. He's being smart to do that." It's just business, in other words.
But some of Murdoch's colleagues demur. "When matters of principle and expediency clash with Rupert, expediency wins every time," says Frank Barlow, who, as the managing director of the London-based media conglomerate Pearson, is chairman of the Financial Times and oversees the Penguin publishing group. "I don't think we would have dumped the BBC. From time to time, the Financial Times gets banned in some countries. But that doesn't alter our approach. We published the Salman Rushdie book. And stood behind Salman Rushdie." Joe Roth, who successfully ran the Fox studio for Murdoch and has called him a "visionary," nevertheless suggests that he can be coldly amoral. "I think of him in business as a guy who will do whatever he needs to do to get it done."
MURDOCH'S detachment can be traced to his childhood, in Australia. Sir Keith and Lady Elisabeth Murdoch, his parents, sent young Rupert to a boarding school, Geelong Grammar, near Melbourne, which featured military discipline, cadet parades, and occasional canings, and he rebelled against all of them. He was teased a lot at school, he recalls. "I was always a bit of an outsider. That undoubtedly came from my father and his position." Sir Keith ran a chain of newspapers, and the sons of the landed gentry at Geelong considered journalism a low-rent business. Asa Briggs, a social historian who was Murdoch's "moral tutor" at Oxford, recalls that Rupert "always had to have an enemy." Another strong emotion that goes back to his boyhood is a disdain for intimacy. "I learned early that getting very close to people can be dangerous if you're going to be in a position of public responsibility," Murdoch told me.
The lonely young rebel grew up to be a rebel capitalist. Murdoch's News Corporation is a large company run like a small one. A single individual makes big decisions, quickly, and for reasons he sometimes does not explain. For example, members of Murdoch's board have wondered about the dollar drain imposed by a favorite Murdoch toy, the New York Post. Murdoch himself says that this year the Post will lose "close to twenty million dollars"--a figure that will raise the net total losses Murdoch has endured in the thirteen years he has owned the paper to more than a hundred million dollars. Yet he wouldn't think of closing it. It offers a powerful political platform. And, besides, at heart he thinks of himself as a newspaperman.
As a manager, Murdoch employs an instinctual and hands-on style. He will plunge into one of his businesses for a week or two, focussing all his attention on it until he masters it. He has a minimal staff of experts and shuns formal meetings, preferring the telephone or one-on-one encounters. In most cases, all that Murdoch requires from those who run his various properties is a one-page weekly financial report containing no narrative--just a recitation of expenditures and revenues, budgeted versus actual totals, and this year's revenues versus last year's.
There is no chief operating officer at the News Corporation. The board is composed of thirteen people, only three of whom are non-employees, non-consultants, or non-family members. George Vradenburg says, "He operates the company as a private, independent family company. And it has the strengths and the weaknesses of that. The strength is quick decisions. The weakness is that no one else has independent knowledge of what is going on in all of the company. Everyone is vulnerable to his health."
Murdoch delegates--except when he doesn't want to. He is clearly not as deeply engaged in the movies as he is in, say, Post headlines. "The long lead times frustrate him," says Peter Chernin, the chairman of Twentieth Century Fox. "It's hard to get him involved." Joe Roth, who preceded Chernin as the studio's chief, guesses that Murdoch reads maybe one script a year.
Murdoch's fabled do-it-alone impatience was one of several things that led the News Corporation to the precipice of bankruptcy in 1990. For example, Murdoch negotiated the nearly three-billion-dollar purchase of TV Guide from Walter Annenberg without calling on his lawyer, Howard Squadron, or his investment banker, Stanley Shuman.
Murdoch has had only one chief operating officer, Gus Fischer, and Fischer lasted only four years in that position. "He never told people in New York, 'You are now reporting to Gus.' It was difficult," recalls Fischer, who left the News Corporation in March and is now an independent entrepreneur. "I think he feels much more comfortable having someone who calls him if he wants to go to the bathroom. Don't get me wrong. I'm not saying this in a negative way, against Rupert. I'm just saying it's his style." While many executives have been with Murdoch for decades, there has been carnage near the top of the company. Murdoch, observes Joe Roth, who now runs the Disney studios, "makes you feel fungible." Even Barry Diller, whom Murdoch himself has credited with building the Fox network, was pushed out--despite denials at the time--when he asked for a larger slice of the company. Other Fox executives who "were feeling too proprietary," as Howard Squadron phrases it, also have gone.
Personally, Murdoch is a gentleman. He treats executives as part of his extended family: he invited them to his son Lachlan's engagement party, he remembers spouses' names, he rarely raises his voice. "He's not abusive," a senior News Corporation executive says. "But when he turns on you, it's"--he snaps a finger--"like that." In the past decade, Murdoch has had four deputies who appeared to be his No. 2--Donald Kummerfeld, Gus Fischer, Andrew Knight, and Richard Searby, the chairman of the board for ten years and a friend of fifty years.
When Sir Keith died, in 1952, the twenty-one-year-old Murdoch prepared to take over his father's business. The son had always thought of his father as a press lord, but in fact he had been employed by a newspaper chain; Sir Keith had owned only two newspapers, the Adelaide News and the Brisbane Courier-Mail, and the Brisbane paper was sold to pay taxes. So in 1953, when Rupert returned home from Oxford and a stint at a London paper, his empire consisted of a single newspaper with a daily circulation of under a hundred thousand. But before Murdoch was thirty he had acquired a number of newspapers and a TV station. He became a British press lord in early 1969, when he bested Robert Maxwell for the News of the World, a London Sunday tabloid with a circulation of approximately six million. Murdoch employed his charm to induce the Carr family, which had controlled the paper for nearly eighty years, to spurn a richer offer from Maxwell, whom the Carrs, like others, thought an odious man. Murdoch was seen as the safe choice, and he pledged to run the paper in partnership with the Carrs. But, as with so much of Murdoch's life, his acts are open to multiple interpretations. He argues that his pledge to the Carrs conflicted with his responsibility to shareholders. "It didn't take me long to realize that it was a total wreck of a company," he explains.
His treatment of the Carr family intensified an impression that would grow and forever shadow Murdoch: that his word is counterfeit, and he can't be trusted. The impression is widespread that people in journalism and business help him at a critical point and are then discarded. Eight years after he bought the News of the World, he started courting Dorothy Schiff, the owner of the Post. They had been brought together by Murdoch's friend Clay Felker, the editor and founder of New York. Murdoch induced her to sell the Post to him, and he transformed it from a dull liberal paper into a racy conservative one. Around that time, Felker confided to Murdoch that he was having difficulties with his board. Weeks later, Murdoch betrayed Felker by going behind his back and acquiring New York. Murdoch said at the time that the board wanted to sell the company, because it thought that Felker was profligate. Most of the editorial staff--including this writer--sided with Felker and quit.
The feeling that Murdoch is a betrayer has been heightened by shifts in his political position. The purchase of the London Sun, in 1969, for instance, roughly coincided with Murdoch's transformation from an Oxford leftist who had kept a bust of Lenin in his room into a passionate capitalist. The political epiphany came, he recalls, when he grappled with England's trade unions. "This sounds very subjective and selfish," he told me, "but living in Britain and having to handle fifteen print unions every night and wondering if your papers were going to come out--if anything could make you conservative, it was handling the British print unions as they were in those days." Not long after Murdoch bought the Sun and tarted it up with topless women and gossip posing as news, compelling the other tabloids to follow his lead, the editorial voice of the paper veered to the right, and by the end of the decade it had become a fight-to-the-death defender of Margaret Thatcher.
A Conservative had rarely had the editorial backing of a working-class English newspaper before the Sun supported Thatcher in the 1979 elections. "I believe we were right to support Thatcher in critical times when she had no other supporters," Murdoch says now. "I think what people don't understand about me is that I'm not just a businessman working in a very interesting industry. I am someone who's interested in ideas." Throughout the eighties Murdoch was protected by the Thatcher government in ways that were crucial to his business, most notably in the broadening of his base as a newspaper owner.
Despite his disdain for the establishment, Murdoch always wanted to own an influential newspaper--one read by the establishment. First, in 1976, he tried to buy the London Observer, but was rebuffed by journalists fearful of his reputation for political interference. Then, in 1981, he pulled off a spectacular coup, gaining control of the biggest quality weekly, the profitable Sunday Times, and also of the loss-making daily Times. Since he already owned the Sun and the weekly News of the World, it was expected that his bid would get mired in a protracted review by the Monopolies and Mergers Commission, but a recommendation of a referral to the commission was overruled by the government on the ground that the papers would die if Murdoch wasn't allowed to save them.
The staffs of both the Times papers were seduced by a pledge that an independent board would approve the hiring and firing of editors and that Murdoch would not interfere in the editorial operations of the papers. In a year, however, the editor of the Times, Harold Evans (the husband of the editor of this magazine), was ousted by Murdoch. The paper became an editorial partisan for Thatcher.
Encouraged by the political climate that Thatcher had created, Murdoch audaciously schemed to break the stranglehold of the newspaper unions--whose contracts called for eighteen men on a printing press when only five or six were needed--by secretly building what came to be called Fortress Wapping, a modern printing plant and headquarters surrounded by tall fences topped with coils of razor wire. He carried out the Wapping gamble with military precision. While he was negotiating, he ordered computers and new printing presses to be installed and tested in an abandoned warehouse on the Thames, and when ne-gotiations collapsed he stunned the unions by transporting this equipment to Wapping, along with non-union workers to operate it. When mayhem threatened and thousands of angry workers paraded outside, more than a thousand police were on hand to preserve law and order. Murdoch concedes that he could not have succeeded if Labour had been in power.
Although the Conservatives remain in power in England, Murdoch worries that the government will "screw" him--an expression he often uses.
Might his papers support the British Labour leader, Tony Blair?
Murdoch laughs. "We're not tied to any party," he says. "The big question with Tony Blair, who's very impressive, is what he will be allowed to do by his own party if he ever achieves power." In July, Murdoch flew Blair to Australia to speak at the News Corporation's weeklong management retreat, on Hayman Island. Unlike previous Labour leaders, Blair is prepared to entertain the deregulation of much of the communications business. Over cappuccino a few blocks from Parliament, one of Blair's associates said to me that although many Labour backbenchers had made a commitment to limit the percentage of broadcast outlets and newspapers that Murdoch could own, "I would be extremely surprised if that commitment was honored." What the Party is trying to do, the associate admits, is fudge the issue. Though this associate is privately critical of Murdoch's power, he says, "It would be absolutely mad for me to talk about Murdoch publicly." Blair's goal, he admits, is to get Murdoch's support, but the Party would be happy just to keep him neutral.
RUPERT MURDOCH is a bit of a prude-- "I guess it's my Scottish blood," he says--and a conventional family man. The only photographs in his New York and California offices are of his family. He has four children: a daughter, Prudence, from his first marriage, and two sons and a daughter with his second wife, the former Anna Torv. Elisabeth, twenty-seven, is married to Elkin Pianim, a Ghanaian whom she met in college. Until recently, the couple owned two TV stations in northern California. Lachlan, twenty-four, joined the News Corporation last year and is based in Australia. And James, twenty-two, has completed his junior year at Harvard and has dropped out to start a record company with two friends. Anna Murdoch is thirteen years younger than Rupert. They met when she was a cub reporter on Murdoch's Daily Mirror in Australia. Today, she is a novelist, and serves on the News Corporation board. Their son James says, "I don't know of any confidant other than my mother. I couldn't imagine him going to anyone but my mother. She's as tough as nails." She is also more conservative than her husband. A devout Catholic, she is implacably opposed to abortion and thinks it should be illegal; he does not (though he would eliminate federal funding). "She doesn't like 'The Simpsons,' " Murdoch says. "I think it's brilliant." She voted for George Bush in 1992, he recalls, while he voted for Ross Perot, as a protest. Today, she favors Bob Dole for President, while Murdoch likes Colin Powell. "He appears to be a man of very fine character," Murdoch says. "I agree with a lot of what he says."
Murdoch's family values and taste have rarely interfered with what goes on in the pages of his papers or in his television programming. The sexually raunchy shows are manufactured rather cynically. "I wouldn't let a thirteen-year-old watch 'Melrose Place,' " Murdoch admits. Yet Fox not only broadcasts "Melrose Place" but has shifted it from 9 P.M. to 8 P.M., the traditional children's hour. Murdoch introduced tabloid TV news magazines to America in 1986, with "A Current Af-fair," on Fox, encouraging others to follow him and to push the envelope, as they say, of bad taste. "He's confirmed the suspicion that shit sells," a former network president observes.
Prurience, whether manifested by the bare-breasted women who appear daily on page 3 of the Sun, and who are referred to as "Sun lovelies," or the sexual escapades of politicians or the Royal Family, is a staple of Murdoch's newspapers. This summer, for example, the New York Post got a lot of mileage out of pillorying Judge Kimba Wood for allegedly having a romance with a married investment banker. The Kimba Wood story passed three Murdoch tabloid tests. First, he says, "it's a soap opera," an entertaining spectacle. Second, it fuels envy and resentment--and thus circulation--because it's about "high society," as he calls it. It tells the little people how the other half lives--repressed-schoolmarm judge likes sex! Third, it displays what Anthea Disney, who has worked on Murdoch's London tabloids and now serves as a top Murdoch executive, calls a "visceral" Fleet Street attitude of rebellion against social pretense. She also edited TV Guide for four years, and she recalls that Murdoch would always say to his editors, "Do you think this is too upmarket? Do you think it should be more mass?" Kimba Wood was "mass."
There was another reason the Kimba Wood tale pleased Murdoch, he confesses: "She put my friend in jail for ten years." Wood presided over the trial of the investment banker Michael Milken, sentencing him to a stiff ten years in jail for securities fraud (but allowing him to serve only two in return for cooeperating with authorities). Murdoch has been loyal to Milken. Last spring, Milken was retained as a consultant in a deal in which MCI committed two billion dollars to the News Corporation; and "Payback: The Conspiracy to Destroy Michael Milken and His Financial Revolution," by Daniel Fischel, was published recently by HarperCollins and excerpted in the Post.
Murdoch's journalism follows a pattern. When he plunged into editing the News of the World, in 1969, he immediately applied lessons he had learned as a subeditor at Lord Beaverbrook's Daily Express the year after he graduated from Oxford. Murdoch believes that a paper--particularly a working-class paper--has to be "fun," a form of entertainment. The true public trust is to give the public what it wants. "Populism" and commerce drove Murdoch's papers to invade the bedrooms of the Royal Family and to print jingoistic headlines, and populism combined with commerce accounts for the introduction of softer features in both the Sunday Times and the Times after he took them over.
But is what Murdoch's tabloids do so different from what tabloids have traditionally done in England? "I think it's fair to say that the British don't have the same sense of dignity about the press that Americans have," says Roger Laughton, who spent much of his career at the BBC and is today the C.E.O. of Meridian Broadcasting. "The British press is far more competitive, and very professional, but I wouldn't say it has a range of ethical considerations that it takes into account. That predates Murdoch. He didn't behave out of character with the way the press operated here, or in Australia. Others have tried to do the same many times in the past. That's what being a press baron implied."
Certainly Murdoch's products do not speak with one voice. The Australian--Australia's first national daily newspa-per, which he launched, and, he told me, nurtured for twenty years, until it turned profitable--was used as a political weapon in the 1972 and 1975 national elections, but it is a respectable publication today. As are the daily and Sun-day Times. Nor are Murdoch's politics as simple as the conventional view of him suggests. He is, for example, a fi-ery advocate of law and order, yet a quiet opponent of the death penalty. "It brutalizes society," he explains, echoing an objection often lodged against his newspapers.
Murdoch has not tried to insert his conservative views into his movies or television, according to Hollywood associates. This is not true of his approach to news. "He never called me and said, 'Don't do a story.' Or 'Do a story,' " recalls the former Fox News executive producer David Corvo, who is now a vice-president of NBC News. "But once, when I went over the list of network contracts coming up--Bryant Gumbel, Leslie Stahl, Steve Kroft, and so on--he just brushed them off. I felt that he wanted a conservative. I don't know how you build a credible news division with an agenda."
Murdoch believes that his critics do what he does, the difference being that they're hypocrites and he's not. He complains that reporters for the Times and the Wall Street Journal, for instance, "write more subjectively" than reporters do in England. He seems suspicious of anyone who proclaims journalism a calling. "Journalism has been mistaken over the past two decades for some kind of profession," says one of Murdoch's favorite journalists, Steve Dunleavy, who has worked for him on many continents since 1967. "We're not doctors. We're not lawyers. We're not architects. It's not a profession. It's a craft. We're the same as carpenters or mechanics."
But Murdoch is not a traditional press baron. Frank Barlow points out the dif-ference: "I don't think there was ever any suggestion that the old press barons received any benefit for their businesses. Maybe because they weren't in any other businesses. Now it is not unusual to read that Murdoch gets benefits." This goes to the heart of the critique of Murdoch's journalism: too often, it becomes the servant of his political or commercial interests. What gives him the most pleasure in all his empire, Murdoch told me, is this: "Being involved with the editor of a paper in a day-to-day campaign. Trying to influence people." Barry Diller says, "Rupert is a pure conservative, except for purposes of manipulation."
Murdoch's papers do influence people, and he has used this influence to support political figures, who may then be in his debt. The Sun made Thatcher acceptable to its working-class readers. His Australian newspapers have influenced elections. Reporters on both the Australian and the New York Post protested in the seventies that Murdoch used their news pages to reward favored candidates and to savage those he disliked. The Post helped elect the current Republican mayor of New York City and governor of New York State, and the state's Republican and Democratic senators. When the new governor, George Pataki, wanted to meet with corporate leaders after his election last year, he asked Murdoch to act as host of the meeting. When Mayor Rudolph Giuliani's wife, Donna Hanover, was rehired as a TV reporter, it was Murdoch's Fox-owned station--WNYW--that recruited her.
MURDOCH nearly lost his empire in 1990, when he was on the edge of bankruptcy, and another threat surfaced in late 1993. The New York chapter of the N.A.A.C.P. filed a petition charging that Murdoch had misled the F.C.C. in 1985, when he was launching the Fox network. Federal law stipulates that a foreign citizen cannot own more than one-quarter of a broadcast station's capital stock, and it was then that Murdoch changed his nationality, becoming an American citizen. But a tenacious volunteer lawyer for the N.A.A.C.P., David Honig, discovered while digging through Fox's applications for station licenses that although Murdoch himself had seventy-six-per-cent voting control over Fox, his Australian holding company, the News Cor-poration, indirectly owned more than ninety-nine per cent of the equity of its stations. Thus, the N.A.A.C.P. claimed, Fox had exceeded the foreign-ownership limit, thereby depriving minority Americans of an opportunity to bid for a broadcast license.
Murdoch viewed the N.A.A.C.P. allegations, Preston Padden notes, "as a minor irritation." It wasn't until the fall of 1994, when NBC filed a similar petition, that he began to fret that it was more than a nuisance. NBC charged that all of Murdoch's 1985 station-license applications were false. This was war. Murdoch directed strategy meetings, edited press releases, and camped with Padden in Washington and visited members of the key congressional committees. "We were not asking anybody to do anything," says Padden. "Our pitch was 'This outburst by NBC was because they didn't like competition in the marketplace.' " It was the O.J. defense: us versus them.
Although Murdoch has never been a major financial contributor to politicians, he bet heavily on a Republican victory in 1994. In the months after the election, and so far without attracting much notice, a subsidiary of Murdoch's News Corporation--an entity that had never made a soft-money contribution--donated a total of two hundred thousand dollars to the Republican House and Senate Campaign Committees. According to Fred Wertheimer, the former president of Common Cause, this dwarfed contributions made previously by any of Murdoch's companies. "These guys haven't played the Washington game that much," Wertheimer says of Murdoch and his people. "But they know it's a candy store. There's an awful lot to be purchased." Immediately after the election, Padden arranged for Murdoch to visit a total of seventeen public officials, including eight Democrats. One of the first visits was with Speaker-elect Gingrich. "It was a ten-minute meeting--maximum," Murdoch says. "We met in the hall, because there were too many people in his office. It was just chitchat. We talked about the chances of his getting his Contract with America passed." Padden, who was also present, says, "None of their conversation had anything to do with this business." Then he adds, "I piped up at the end to say that NBC was going after us." However brief this part of the conversation was, it was initially denied by a Gingrich spokesman, who said that neither NBC nor any other matter before the F.C.C. or before Congress was discussed.
One month after this hallway encounter, it was revealed that Gingrich had signed a two-book contract with HarperCollins worth four and a half million dollars, likely the largest book advance ever received by an officeholder and the third-largest advance ever received by an American public figure. Murdoch denied that he knew anything about Gingrich's book contract. "I was telephoned in Beijing on Christmas Eve and told that it had happened," he says. "Howard Rubenstein called me. I went crazy. I knew critics would explode." Gingrich denied knowing that Murdoch was connected to HarperCollins. The denials did not quiet the Democrats or the editorials. It was unseemly for a public official to take such an advance, and Gingrich implicitly acknowledged this when he belatedly announced that he would accept no advance and would take only royalties that the book actually earned. The most charitable interpretation is that there was an appearance of conflict for Gingrich to receive such a large amount of money from a company with business before Congress; the least charitable is that it was a bribe.
HarperCollins has a history of signing book deals with leaders of countries that the News Corporation has a commercial interest in--from Margaret Thatcher to Deng's daughter, from Mikhail and Raisa Gorbachev to Boris Yeltsin, from a Saudi prince to Dan Quayle. And in some cases (those of Thatcher and Gorbachev) Murdoch actually negotiated the deals. But it is possible that Murdoch was not told ahead of time of the Gingrich book deal. William Shinker, a former publisher of HarperCollins, says the C.E.O. of HarperCollins, George Craig, had the authority to approve payments of that size without clearing the decision with Murdoch. Murdoch says he has since amended the policy; now he must personally sign off on any advance above a million dollars.
Murdoch wrote a letter to the F.C.C. chairman, Reed Hundt, in December in which he expressed "personal anguish" about the storm surrounding his motives and declared that he was an American citizen and exercised "de facto control of the News Corporation and all its businesses." He felt mistreated by the establishment, and in his deposition to the F.C.C. he said he felt that the agency would be playing a game of "semantics" if it counted News Corporation equity as foreign ownership but did not count Murdoch's voting control of the stock as American ownership. It was, he said, "a witch hunt." Republicans agreed. Larry Pressler, the chairman of the Senate Commerce Committee, and Jack Fields, the chairman of the House telecommunications subcommittee, began making calls to the F.C.C. lambasting the Democrats for picking on Murdoch and Fox. Fields threatened a "top to bottom" review of the F.C.C. if Murdoch was persecuted further. The conservative Heritage Foundation issued a paper on rolling back regulations in which it urged the abolition of the F.C.C.
Murdoch was crafty, but he may have been lucky as well. In January, Apstar-2, the satellite that NBC had counted on to distribute its programs in Asia, blew up shortly after liftoff. A month later, NBC, which had accused Murdoch of making craven deals to advance his interests, made a craven deal with Murdoch: NBC withdrew its F.C.C. petition in return for a lease of two channels on Murdoch's Star satellite system.
By spring, the tide had turned in Murdoch's favor, and he knew it. On the morning, in May, when the F.C.C. was to rule, he arrived forty minutes early at the hearing room where the decision was to be announced, flanked by his photogenic wife, Anna, and his daughter Elisabeth and her husband. Murdoch had in his hand a statement thanking the commissioners for exonerating him and Fox from the charge that they had "lacked candor." When the Murdochs took seats in the second row, Preston Padden leaned over to them. "The commissioner has arranged for you to sit in the first row," he whispered. A phalanx of photographers snapped pictures of Anna Murdoch patting the shoulder of her husband's navy-blue double-breasted suit and straightening his red-and-blue polka-dot tie. The five commission members filed in and listened as the F.C.C. general counsel, William Kennard, announced that although the foreign ownership of Fox did exceed twenty-five per cent, the evidence did not support a conclusion that Fox misled the F.C.C., and that an American citizen--Rupert Murdoch--did indeed control the parent News Corporation. Moreover, Murdoch was invited to apply for a "public interest" exemption from the regulations requiring Fox to restructure its equity, and he promptly did so.
Murdoch was jubilant. David Honig, of the N.A.A.C.P., was not. His view of the ruling was this: "The process was tainted. I think they threw the Communications Act in the garbage. Murdoch's Republican cohorts blackmailed the F.C.C. by threatening its existence." Others marvelled at Murdoch's political dexterity. "I wish we could be as successful as he's been," Sumner Redstone says.
A FEW days after the F.C.C. ruling, MCI announced that it was investing two billion dollars in a thirteen-per-cent stake in the News Corporation, and not long before Murdoch had revealed that he would finance a new conservative magazine, the Weekly Standard, based in Washington and edited by William Kristol. He acquired a hundred-per-cent ownership of Star TV, and he anointed his son Lachlan its deputy chairman. In August, he combined Delphi, his Internet operation, with MCI's Internet operation. The same month, he raised fifty thousand dollars at a "21" fund-raising lunch for the Senate Commerce Committee chairman, Larry Pressler. Last week, in addition to concluding a sports link with Malone, Fox launched a children's-television venture with Saban Entertainment. This week, Fox and NBC expect to announce that they have acquired the rights to televise major-league baseball.
In recent days, Murdoch has concluded that he could probably not bring off a takeover of Time Warner at this point, but the mere fact that he contemplated it is testimony to his extraordinary bravado. He would enjoy claiming Warner Bros., with its huge film library, and HBO, and Time's various magazines.
The Time Warner-Turner merger--like Murdoch's expansion--has fuelled the debate over whether media behemoths like the News Corporation and Time Warner will monopolize the production and distribution of information and entertainment. Murdoch would argue that, in the long run, no one will be able to monopolize information. Eventually, even in China, customers will be able to bypass middlemen like Murdoch or the government and summon to their TVs, computers, or telephone screens any news source, any channel, any desired program. It would be difficult for any entity to screen E-mail or books or newspapers downloaded from one computer to another. Technology makes it possible for every citizen (who can afford a computer and a high-speed modem) to become a publisher. Those who fret about monopolies are seen as being trapped in a time warp, railing against past dangers. If government regulators try to im-pose new anti-monopoly rules, they risk suffocating the world's fastest-growing industry.
On the other side of the argument are arrayed those who believe that Murdoch approaches a monopoly, certainly in Australia and in England. News Corporation newspapers control more than fifty per cent of the daily and Sunday circulation in Australia and a third of the United Kingdom's national newspaper circulation. As part of a deal with Murdoch's BSkyB, TCI entered into a partner-ship with US West to carry Murdoch's programming on cable in the U.K. By making long-term deals with all the major Hollywood studios for movies, and by using Fox programming, BSkyB dominates most of the product and the chief means of reaching pay-TV customers in the U.K.
A traditional objection to a monopoly is that it restrains trade in order to control markets. When the distributor also owns the product distributed, conflicts arise. For example, it has been charged that before American cable companies like TCI and Time Warner would give channel space to CNBC, they insisted that it provide only business news, so as not to compete directly with CNN. Media companies, which are becoming entangled in local politics and multiple partnerships, are heading inexorably toward their own version of global keiretsu, the informal back-scratching system used by Japanese companies.
The issue of monopolies and what to do about telecommunications legislation will be discussed this week in Washington as nine House and eleven Senate members confer on how to reconcile bills passed in each chamber. On the agenda are matters of momentous significance for communication companies like Murdoch's News Corporation. Among them: Should broadcasters like Murdoch be allowed to own stations reaching thirty-five per cent of American viewers, or should the limit stay at twenty-five per cent? Should broadcasters like Murdoch have to bid on extra channels that technology will make available, or should this extra spectrum space be a gift to existing broadcasters? Should cross-ownership restrictions be lifted, allowing a broadcaster like Murdoch to own a newspaper in the same market where he owns a TV station?
Whether the News Corporation is a monoply or not, Murdoch wants to keep it a family company. "Lachlan is only twenty-four," Murdoch points out. "He's a young man. Certainly he is conduct-ing himself well. His sister Lis is very keen on coming back into the com-pany. Soon, I hope. I think James is undecided. He's determined to do his own thing. I took all three out to our man-agement conference." To turn over the News Corporation to his young, un-tested children presupposes three things: that Murdoch will remain in charge perhaps another ten years, allowing them to gain valuable experience; that if he cannot stay another decade Anna Murdoch might be installed as C.E.O. for a period of time; and, finally, that a public company board would deem a family member a suitable replacement.
Murdoch believes he has built things that will endure. Still, while the Fox network and Sky and Star TV provide viewers with more choices, they are rarely better choices. Unlike the Sulzbergers or the Grahams, William Paley, or Henry Luce--no matter their many flaws and sometimes outrageous vices--Murdoch will leave no monument except a successful corporation. He has boldly built a worldwide company, but he has rarely elevated taste or journalism. Competitors envy Murdoch's financial success and his bold vision, and politicians fear his power, but the News Corporation is a business that relies on a singular man who is now in his sixty-fifth year. Rupert Murdoch has created a much bigger empire than his father did, but his success may be just as fleeting. "I believe," Roger Laugh-ton says, "that we're talking about Gen-ghis Khan, not the Roman Empire." (c)