by Les Hinton
A good idea can overwhelm every cautious accountant’s gloomy spreadsheet — but a big financial mistake can bring disaster. In the summer of 1988, News Corp agreed to buy Triangle Publications, publisher of TV Guide, Seventeen magazine, and the Daily Racing Form. The price was close to $3 billion. It was the biggest acquisition in the history of US publishing.
TV Guide had a weekly circulation of more than 17 million and was the trophy of the deal. For decades, Rupert had imagined owning it; long ago, he had acquired a copycat publication in Australia, TV Week.
This acquisition was the high point of the biggest spending spree of Rupert’s career. In the 1980s, he spent billions buying TV stations across America, as well as the 20th Century Fox film studio, Triangle Publications, and more newspapers in America and Australia. Rupert didn’t like waking up in a town where he didn’t own a newspaper.
At the time of these deals, interest rates were low and banks saw Rupert as a safe bet. In 1987, he unlocked a river of new profits to service more debt when he won a year-long conflict with British trade unions whose shakedown tactics had strangled his newspapers and the entire industry.
These were high-stress years. I remember the day we closed the Triangle deal and handed billions to publisher Walter Annenberg. We were waiting in a motel near Triangle’s HQ in Radnor, Pennsylvania. Lawyers and finance people were working the phones in an ill-lit conference room, organising the wiring of cash to Annenberg’s banks. Rupert was standing in the lobby with me and a couple of others, talking about what we would do when we walked into Triangle’s huge offices to take over the business. Here was the tough and invincible mogul on the brink of another mega deal. But then I saw a red smear on his fingers, staining the white handkerchief he had taken from the breast pocket of his jacket. He had picked at the cuticles of his fingernails until they were bleeding.
At the time of the TV Guide deal, Rupert had built his company with debt instead of selling equity. He never wanted other shareholders to threaten his control. But in 1990 a global recession hit and interest rates began rising. The mountain of borrowed cash that had fed News Corp’s spectacular growth turned into a potentially fatal trap. The company’s share price plunged as details emerged of the debt — it had reached more than $7 billion — and free-lending banks became afraid News Corp could not meet its obligations.
At the time, News Corp was also losing £2 million a week on a risky new start-up in Britain. Sky was the satellite television service Rupert had launched against the country’s broadcasting duopoly — the BBC and competing ITV commercial channels. But Sky faced the competition of another newcomer — British Satellite Broadcasting — and the two were beating each other to death.
The debt crisis was the existential threat of Rupert’s career, far more dangerous than the phone-hacking scandal 20 years later. The company owed money to more than 140 banks, and it faced the immense and potentially impossible task of persuading every one of them to keep its debt and extend the repayment terms. A single bank’s refusal risked triggering an exodus by them all, and that could mean the company’s liquidation.
Bringing round these anxious bankers involved the most important show-and-tell in the company’s history. Executives of every bank were assembled in London and New York to be persuaded that, for all its overload of debt, News Corp was profitable, growing, and a sure success. Our life-or-death mission was persuading them to cut us some slack. Whatever fear I had of public speaking, that experience cured it. Nothing would ever compete with the tension of those days in the autumn of 1991. When we appeared first in the City of London in a steep-tiered auditorium, with a sea of sceptical faces looking down on us, it felt like the Colosseum.
Never again in the business would so much be at stake. The debt drama was a brutal experience for Rupert. His life’s work was on the brink of ruin. He called me at home one Sunday night to talk. It was a wandering, inconsequential conversation, just gossip and a discussion of the day’s news. We spoke only briefly about the banks.
His voice was low and drained. He was famous for inexplicable, long silences during phone calls, but this time the silences were longer than usual. After a long pause, he said: ‘How are you doing? You sound tired. Are you tired?’
Actually, I felt fine after a relaxed weekend, but I didn’t want to tell him that.
‘Yes, I’m exhausted,’ I said.
‘Me too,’ he replied, with relief.
The author William Shawcross, in his 1992 biography, gives a graphic account of Rupert about to place a make-or-break phone call to the president of a Pittsburgh bank. Everything was at stake. This bank was the last holdout; News Corp could disintegrate if it refused to roll over its $10 million debt, and Rupert had to stop them.
Ann Lane, a Citibank vice president, was Rupert’s chief adviser during the crisis, and she told Shawcross:
It’s not a pretty sight to see a great man like that. He was so vulnerable. One phone call could mean the end of his whole life’s work … But my job was not to show panic. My job was to keep Rupert calm and focused … He didn’t wig out. He was visibly shaking, but he didn’t go crazy. He wasn’t hyperventilating.
That Pittsburgh bank came through, and News Corp survived the debt crisis, wounded but pretty well intact. The banks were happy when Sky stemmed its cash drain by merging with its competitor and forming British Sky Broadcasting. But they also demanded the company raise cash by selling assets.
The company sold 8 of the 10 magazines I was managing, including New York, the city’s leading weekly; Seventeen, since the 1940s, America’s most popular magazine for girls; the film magazine, Premiere; European Travel & Life, the high-end bi-monthly peddling its illusory image of the old countries; and Soap Opera Digest. The two remaining were Mirabella and TV Guide. Mirabella was struggling to break even (it still hadn’t when sold to another buyer four years later), and TV Guide’s circulation was declining in a losing battle against local newspapers that were providing more detailed TV listings. It was no fun being required to help with the sell-off.
John Veronis, the New York media broker behind many of America’s biggest deals, was hired to help. He produced a string of interested buyers and I had to explain the business to them. The ultimate buyers surprised me. K-III Communications was an offshoot of the New York investment firm Kohlberg Kravis Roberts. They saw our titles as a trophy asset for the magazine group they were building, but they didn’t seem to know anything about magazines. After our first meeting, I felt my time had been wasted. I’d spent more than an hour answering their questions — and they were pretty basic questions. ‘These people will never buy,’ I told John Veronis. ‘They know nothing about what we do.’
But Veronis had made millions knowing how to sense a good prospect. ‘I think you’re wrong,’ he said.
I turned out to be both wrong and right — wrong to dismiss them as buyers, but right that they didn’t understand the business.
‘Looks like we’ve got a deal with K-III,’ Rupert said. ‘But there’s a catch. If they make the purchase, they’re going to make it a condition of the sale that you go with it. They need you to teach them about magazines.’
By now, I was president of the magazine division — John B. Evans had been given an assignment in London — and until that moment the plan was to put me in charge of US publishing, replacing Marty Singerman, who was due to retire. This group included the magazines we were not selling, TV Guide and Mirabella, as well as newspapers in Boston and Texas, the New York Post, and a highly profitable company that inserted cents-off shopping coupons in Sunday newspapers.
‘Go with them for a couple of years,’ Rupert said. ‘You’ll make a lot of money, and I promise that a job will be here for you when you come back.’
I wasn’t happy.
‘I don’t mind making money,’ I told him, ‘but I would sooner make it working for you.’
But I couldn’t refuse
and expect Rupert to forgive me. The magazines were the bulk of a $600 million deal (we were also selling them the Daily Racing Form newspaper) and News Corp needed the cash. It was 1991, and 32 years since I first worked at the company. I was enjoying how it continued to grow and change, and felt dismal at the prospect of hanging out with the K-III people. They were a joyless group set on turning around the magazines in a few years and selling them at a big profit for themselves. It’s a popular and reasonable activity in all areas of business; it just didn’t excite me. There was not much choice, however, so I continued with my meetings and tutoring. But as the deal looked stronger, I stopped being so enthusiastic in my efforts to help them, and that probably explained what happened next.
‘I’ve great news,’ said Rupert one morning. ‘Stan has got you out of the deal. You’re staying.’ Stan Shuman was a partner at the investment bank Allen & Co. He was part of the negotiating team and a good friend, and he knew how badly I wanted to stay.
The magazine sale was a painful retreat for Rupert. He had built his name as an innovator and conqueror whose empire only expanded. Now he had been forced to sell a business he wanted to keep, and he blamed himself. He was miserable about it.
He organised a dinner for the departing executives, about 50 of them, and we sat in his office early that evening discussing what he would say to them. He wanted to be sure to have a grateful remark for every individual in the room. He put down his pen at last and looked silently across his office, in the direction of a wall of television screens.
‘I feel like I’ve let them all down,’ he said.
CHAPTER 18
Down the Fox hole
There was an unreliable rhythm to life with Rupert. Sometimes he called several times a day, asked you to lunch, laughed at your jokes, seemed fascinated by everything you had to say. This experience felt great, especially for newcomers and rising executives; they thought the boss had admitted them to his inner circle.
Old timers, seeing new executives dazzled by this best-friend treatment, considered them Rupert’s ‘flavour of the month’. They knew it was unlikely to last because Rupert’s true best friend was always The Business. When the infatuation ebbed and another dazzling objective or person caught Rupert’s eye, there would be knowing looks as the bewildered and abandoned executive agonised over what he or she had done wrong.
I became good at providing therapy to executives and editors who suddenly felt out in the cold. Sophisticated people would come to me, wounded because ‘Rupert hasn’t called me for more than a month.’
My response was always the same: ‘Lucky you.’
I had been there, too. But experience made it easier to handle; it even became a relief when yet another moment in the sun had come and gone.
It was the way Rupert operated and an occupational hazard of working for him. The secret was to never take it personally; he was oblivious to hurt feelings. He was like a visiting comet, and the mysterious astronomy of Rupert made it impossible to know when he would appear and how long he would stay.
Rupert’s style, and his power over people, meant his was not a regular multinational, with tidy layers and streamlined channels of process. It became more conventional when it was very big, but that wasn’t the style of company that helped him triumph.
Maybe News Corp was a personality cult. It didn’t occur to me when I worked there, which might be the proof itself. Rupert’s attention was the drug of choice for certain needy executives. He could also be a tyrant, but big business has never been short of tyrants and not many earned the intense devotion he did.
Maybe he has what’s known as ‘charismatic authority’. The term was created a hundred years ago by the German philosopher Max Weber. In an essay analysing styles of leadership, Weber wrote of charismatic authority as ‘the wholly personal devotion to, and a personal trust in, the revelations, heroism, or other leadership qualities of an individual.’ These qualities, Weber said, were possessed by successful demagogues, warlords, and even prophets. Whether or not Rupert belonged in the company of warlords and prophets, he certainly possessed for a lot of people a special power to engender loyalty and obedience; when he had you in his beam he was impossible to ignore and difficult to refuse.
The most unfortunate time he turned his light on me was in the late autumn of 1992 when I was in New York, running the American publishing operation of magazines and newspapers. Marty Singerman had retired as planned, but luckily for me had agreed to remain as a consultant.
The group had been diminished by the forced sell-off during the debt crisis, but it was still substantial, and I was enjoying myself. Then Rupert started calling me.
For the first time, he had gained total control of the Fox operation in Los Angeles. Barry Diller, a Hollywood veteran with a powerful personality and a long record of success, had left to set up his own business. Diller and Rupert had not worked easily together; power sharing was not a compelling concept for two men so accustomed to having their own way.
I was with them in a meeting once when Rupert made a mildly dismissive remark about ‘you Hollywood types’ and Diller pounced like an alpha beast protecting its territory.
‘This is our town and these are good hard-working people,’ he said, glaring at Rupert.
Diller had an entertaining repertoire of glares and his top lip curled dramatically when he was angry. There was a bated silence. No one took any notice when I tried getting back to business. Rupert didn’t say a word. He just threw down his pen and sent it bouncing down the long table. The meeting soon ended.
Diller was only two years older than me, but he was a formidable figure in LA. At first sight, he looked mild — bald and short, with a mottled, relief-map complexion — but he was fierce and shouty, and people treated him as they would an unexploded bomb. Rupert held him in wary awe. ‘He’s smart as a barrel of monkeys and as tricky,’ he said. But Rupert was strategic and patient — most of the time — and chose his battles with care; he might have backed off that day, but he hadn’t succumbed.
A year after that bad-tempered meeting, Diller was gone and Rupert had a free hand to — as he put it after every purchase — ‘change the culture’. Diller and Rupert got along much better when each was running his own empire.
Each time he acquired a business, Rupert became manically restless until making it his own, sweeping aside old practices and purging executives he didn’t like, which was usually all of them.
For weeks, he had been calling me almost every day from LA, sometimes twice a day. The conversation was never about the companies I was running. He only wanted to talk about Fox and his problems there.
I knew my unplanned life was in for another change. Just like my army dad, I went where I was sent, and most of the time it worked out well. Far-off generals had moved me round the world as a boy, now High Command was on the phone each day, and these conversations were leading somewhere.
Eventually, in his low, matter-of-fact mumble, Rupert revealed himself. ‘I want your help,’ he said, and asked me to take charge of Fox’s television station group and its news operation. The group was nationwide, a big and profitable unit with stations in the largest American cities. I had zero experience of the television business, but Rupert already knew that. I was astonished by the offer, but couldn’t resist it.
I knew it was a risk, but what was the worst that could happen? If I had refused every job that scared me, I would never have gone anywhere. Sure, I could be fired, but every job worth having comes with that risk.
My colleagues in New York were full of congratulations about my Fox appointment. But they treated me with the tempered good cheer extended to a friend who has been assigned to cover a dangerous war. No welcoming calls came through from Hollywood. Maybe I shouldn’t have been surprised. With Diller’s departure, the West Coast had become even more suspicious of News Corp. Fox and News Corp were clashing cultures, and it was dawning on LA
that there could only be one winner.
My new boss was Chase Carey, the Fox group’s chief operating officer, but I didn’t hear a word from him until he telephoned me at home the evening before my appointment was to be made public. ‘You’ll have a problem doing this job if you’re not an American citizen,’ he said. American law had required Rupert to become a citizen in the 1980s in order to acquire his first television stations, but I had never heard that citizenship was required to manage them. Not that it mattered.
‘I’ve been an American citizen for seven years,’ I told Carey. He sounded thwarted, and ended the call without an encouraging word. Carey was a decent man, but never fulsome; his extravagant, curling moustache gave a misleading hint of flamboyance. But even for him it was odd, and I felt uneasy.
But I had been in charge of new acquisitions before. I was accustomed to cold welcomes and false smiles. I was good at this by now; I knew how to win over people. That’s what I thought.
I refused to let Carey’s call bother me. We were off to Hollywood, and a celebration was required. I called Mum and Dad in Australia and put them on a plane to Hawaii, where we all stayed for a week in adjoining oceanfront rooms at the Kahala Hotel in Honolulu. We had a great time, once Mum recovered from the shock that a boiled egg cost $8. At the end, Dad, who was in his eighties by now and still didn’t show his feelings much, told me in that ‘h’ dropping manner that I’m ashamed to say once embarrassed me: ‘Cor, it’s the best ’oliday I ever ’ad.’
—
We were both new in our jobs when I was invited to Bill Clinton’s White House in the winter of 1993. I thought it would be a friendly visit, but I was wrong. I didn’t meet Clinton — that happened a couple of years later — but went to the West Wing to meet George Stephanopoulos.
He was 32, and newly installed as the White House director of communications. He did not greet me warmly. ‘You responsible for that so-called news show called A Current Affair?’
