War at the Wall Street Journal

by Sarah Ellison

  Their sparring heirs formed the three branches of the family—each with a roughly equal share of the family fortune—who had faced down Murdoch. His $5 billion, $60-a-share offer boosted the value of the original Bancroft fortune by over half a billion dollars, enough to allow the thirty-five adult members of the family to envision a few more years in the lifestyle to which they had become accustomed. But the family had been deeply divided by the offer and was even further torn apart now that the decision had been made.

  Rupert Murdoch was a suitor more similar to their founder, Barron, than any of the Bancrofts would have liked to admit. (The year of his death, Clarence Barron broke with Dow Jones's late founder Charles Dow's decree that the Journal never endorse a political candidate and called for a vote for Herbert Hoover.) Like Murdoch, Grandpa Barron had multiple residences and an elaborate entourage. He traveled with sixty pieces of luggage, a secretary, a chauffeur, and a male nurse who buttoned his pants and tied his shoes for him since his girth prevented such exertions.

  As his company passed through the generations, Barron's descendants turned their lack of interest into a virtue, protecting their precious heirloom with a policy of noninterference. "Leave it to the professionals" became the mantra. Such benign neglect worked as long as the family had a clear leader, and for much of the newspaper industry's halcyon years that leader was Barron's granddaughter Jessie Bancroft Cox—irreverent, boisterous, and horsey in the Boston way. As her family gathered in April 1982 at Manhattan's '21' Club to celebrate Dow Jones's hundredth anniversary, the round grandmother entertained with characteristic stories—she once caught future president Franklin Delano Roosevelt trying to cheat her in a game of mahjong. She had lived her life in Boston and spent the summers a short drive away at the family's lavish twenty-eight-room summer home, "The Oaks," on Cohasset Harbor, complete with tennis courts, a boat dock, and equestrian-inspired china that acknowledged Jes sie's passion for horses. The house, originally designed by Barron as a wooden Victorian, had been torn down after his death by his son-in-law Hugh Bancroft, who rebuilt it in brick as a wedding present for his daughter Jessie. She had entertained President Eisenhower there and hosted elegant equestrian events, helping create what the local historian in Cohasset called "an illustrious chapter" in the town's history. At the time of the dinner at the '21' Club, Dow Jones was at the height of its success and power. Jessie's son, William Cox Jr., called the Journal "the best damn paper in the country."

  But that evening, Jessie was in a foul mood. As a Bostonian and a sports fan, she had developed a strong affection for the hometown baseball team. The Red Sox had lost six out of the last ten games and she was upset about the losing streak. When another dinner guest mentioned the losses, she responded angrily.

  "What the fuck's the matter with my Red Sox?" she cried, promptly knocking against the adjacent table before falling to the floor. She was rushed past her stunned relatives and died shortly afterward. With her died any remaining cohesion in the Bancroft family, and the "professionals" slowly adopted an ever more powerful role, dictating many of the family's financial decisions. That was until thirty-two-year-old Elisabeth Goth, the great-great-granddaughter of Clarence Barron, descended from the Hugh Bancroft branch of the family, decided to join forces with her third cousin Billy Cox III, Jessie's grandson, to challenge "the professionals."

  Despite their occasional eruptions, the Bancrofts had become one of the lesser-known dynasties, lacking the blood rivalries of the Kentucky Binghams, the visibility and influence of the DC Grahams, and the social cachet of the California Chandlers. At the start, after the early sizing up, Murdoch may have wished for better sport, but he would learn that where money and New Englanders are concerned, the process of seduction takes more than a few clambakes.

  The Bancrofts believed in the Journal name. Unambitious, a bit panache-deprived, they remained dedicated to their paper, from a distance. They never bowed, as others had, to the conglomerates, which would have stripped the publication of its identity and then puzzled over its failure. Unlike Murdoch, however, the family allowed their paper to espouse political views with which they disagreed wholeheartedly. The Bancrofts had, despite their largely liberal leanings, defended the Journal's deeply conservative editorial board, whose philosophy, "free markets, free people," and its flame-throwing editorials made it the vanguard of the conservative movement. That summer, however, Murdoch had presented a $600 million decision: turn down his offer, and they could watch the shares continue to founder at around $35, where they had been trading before he came on the scene. (There was the strong possibility that the shares would plummet, too, leaving the family stuck with their dwindling prize.) Or, they could accept Murdoch's offer, which boosted the value of their Dow Jones stake by more than half a billion dollars, and leave Dow Jones, once and for all, "to the professionals."

  The Hudson glimmered in the sun as Diller's party of fourteen guests surveyed his new $100 million building, which would mystify passersby and was home to IAC's holdings such as the Home Shopping Network, Ticketmaster, and LendingTree. Diller's decision to include Murdoch—his old boss, friend, and occasional tormenter—had been spur-of-the-moment. He had called Rupert that morning to congratulate him and found himself issuing an invitation. The two had a history.

  Diller had been instrumental in the creation of Murdoch's wildly successful Fox television network, which had taken on what seemed at the time the ironclad dominance of the big three networks. After nearly a decade of devotion to all things Murdoch, Diller left unexpectedly after Murdoch refused to give him partnership in the business he had helped build. Even then, Murdoch had an instinct for self-preservation through family control, though his own clan had weathered its difficulties, beginning in a predictable fashion when Murdoch became attracted to a younger woman.

  As he was falling in love in the 1990s with the opportunity that was China, he was simultaneously diverted by a young Chinese employee at Star TV. Wendi Deng, the daughter of a factory manager, was almost forty years Murdoch's junior. Unlike his second wife, Anna, Wendi didn't urge him to work less or spend more time at home. Romance blossomed—one that to this day Murdoch denies having begun until separating from Anna. Even his children—he had three with Anna and one with his first wife, Patricia Booker—doubted his version of events. "Absolutely it was going on. I know from his friends," one confessed. "He'll deny it to his dying day."

  On the night of the Diller fete, Wendi was traveling, unable to join the festivities. Anna Murdoch had held a spot on the News Corp. board, occupied an office in the headquarters, and had her own assistant. But in her position at the company she rarely ventured far afield from organizing social events for executives and their wives and protecting her children's future stake in the empire. Unlike Anna, Wendi launched herself, however peripherally, into News Corp.'s business, consulting on the company's MySpace online social network site in China. She was also planning to start up a production company with film star Ziyi Zhang. (Wendi had introduced her countrywoman, on Murdoch's own yacht, to Vivi Nevo, the Israeli venture capitalist and single largest shareholder in the Time Warner company. The two became a couple.)

  Lately, despite the efforts of his young wife, who was pushing Murdoch into the twenty-first century and into trendy black shirts, his age had begun to show. His eyes sagged. He meandered even more than usual in conversation and appeared, on occasion, more grandfather than rapacious mogul. Some of his executives saw his soft spot for the Wall Street Journal as evidence of his decline.

  When Diller reached Murdoch on the phone that morning, he had congratulated him and quipped, "I know you have nothing else going on, but I'm having some people on the boat tonight and wanted to see if you'd join me." Many empire builders would have had their own victory party planned, but Diller knew that Murdoch was neither a social animal nor a seeker of publicity. Murdoch had uncorked a bottle of Shiraz the previous afternoon with a few of his executives, but he had no wide group of friends to tap that night.


  "Well," Murdoch replied, "I'd love to come."

  Diller never liked his waters too calm. Releasing Sulzberger and Murdoch in the same room on this particular night added an interesting undercurrent. It was a worthy dramatic effort for Diller, a for mer Paramount chieftain whose social life seemed about as recreational as open-heart surgery. The other guests would enjoy sizing up the competitors.

  In the early-evening sun, Murdoch had slipped on board quietly and made his way with his uneven gait to New York City mayor Michael Bloomberg, the succinct former businessman whom he greeted with what appeared to be genuine warmth. Practical and pragmatic, Murdoch preferred politicians to Hollywood types, and Bloomberg's business background and higher ambition made him a friend who would almost certainly be useful. Bloomberg could talk engagingly about Murdoch's true loves: media and politics. The mayor's date and longtime companion, Diana Taylor, the city's regal and unofficial first lady, chatted with Anna Wintour of Vogue, who had admired Taylor's style enough to feature her in a five-page spread in the magazine several years earlier.

  Film director Mike Nichols and his wife, Diane Sawyer, talked nearby, pleasant fixtures when Diller held court. Vanity Fair editor Graydon Carter had become a Diller devotee after the mogul helped Carter establish Vanity Fairs legendary post-Oscars fete in Hollywood. On the yacht, Carter chatted with John Huey, editor in chief of Time Inc., and Lally Weymouth, whose family controlled the Washington Post Company. Weymouth's daughter Katharine would soon take over as publisher of the Post. Steve Rattner, a former Times reporter who had become a powerful media financier and confidant of the Sulzbergers, talked with Carter's wife, Anna.

  As Murdoch moved on to greet the other guests, Sulzberger and Diller chatted with Bloomberg, whose company had not long ago completed construction on a gleaming monumental headquarters building of its own. All three men had, in fact, braved the difficulties of construction. Sulzberger had just overseen the completion of the new Times headquarters on Eighth Avenue, a creation of architect Renzo Piano that resembled a minimum-security prison. Critics noted that the building reflected that part of the Times's ethos that tried too hard to show its import. Still, that special kind of ambition had produced the paper's thirty-five bureaus around the world and its global perspective. The Times had always been committed to giving its readers the world beyond our shores and our Brangelinas. The creation of an American publication comparable to the Times or the Journal seemed unimaginable now. Some at the party wondered, Could Murdoch have built such an institution, or was it his role to just buy one?

  On the boat, Sulzberger pulled Murdoch aside. "I don't really feel that we can have dinner together without my telling you that we have an editorial about your takeover of the Journal in tomorrow morning's paper. And I have read it, and I can assure you I don't feel it's faintly anti-Murdoch." Murdoch thanked Sulzberger for the heads-up. The two continued chatting, sharing their thoughts on the state of their business. Despite their differences and the tussles still to come, they were united in a special way, for there were probably no other two men on the face of the Earth more committed to the future of newspapers. Murdoch, straightforward as always, talked about what he hoped to do with the Journal and did not conceal his irritation at the Times's coverage of the Dow Jones deal. Despite the tension, their conversation was friendly, almost playful.

  As the boat neared the Statue of Liberty, the guests gathered around a large rectangular table for dinner, exchanged pleasantries, and avoided the potentially awkward topic of Murdoch's latest purchase. They returned to Diller's building for a quick tour, dutifully praising the plump, cavernous structure. As the evening came to its close, the Sulzbergers walked out onto the street. All the other guests, the moguls, editors, and moviemakers, had cars and drivers waiting in expertly chosen locations to whisk them off to their splendid sheets. The Sulzbergers found themselves contemplating the near impossibility of finding a cab on the piers on the far West Side of Manhattan at that hour. Taking pity, a fellow partygoer offered them a ride in his car, which they accepted. As they clambered into the car, Arthur laughed like a kid, very much unlike the media titan he was. "Wow," he said. The star-studded evening had left its impression.

  The next morning, Murdoch was in his office working on his next potential acquisition, swapping his once coveted but now stagnating social networking site MySpace for a stake in Yahoo!, and fuming. Under a spare headline—"Notes About Competition"—there was the editorial Sulzberger had warned him about. Far from an innocuous mention, the Times had, Murdoch felt, fired a shot across town to let him know the newspaper was watching him. "If we were in any other business, a risky takeover of a powerful competitor might lead to celebration," the editorial began. "Not in our business. Good journalism, which is an essential part of American democracy, thrives on competition."

  The piece did some predictable tut-tutting about the cutbacks in national and foreign coverage at the Times's impoverished competition, "such formerly formidable competitors as The Los Angeles Times," before praising the pre-Murdoch version of the Journal. Then, as Murdoch read on, the tone of the piece changed and he became the center of its attack: "The Times and the Journal have reported extensively about Mr. Murdoch's meddling in his media properties: How he reneged on his promise of editorial independence for the Times of London and how, to curry favor with China's leaders, his satellite broadcaster, Star TV, stopped carrying news from the BBC." The editorial concluded by suggesting, "The best way for Mr. Murdoch to protect his $5 billion investment is to protect the Journal's editorial quality and integrity." Doing so would "be good news for all Americans."

  Murdoch, who prided himself on being direct, stewed at Sulzberger's false assurances the night before. Here it was again, a piece attacking him in all the most predictable ways, dredging up examples he had long tired of answering for. "If that editorial wasn't anti-Murdoch," he thought, "I'd hate to see his version of what is." Murdoch dashed off a letter, beginning a new game of jousting with his crosstown enemy.

  "It was a pleasure seeing you again last night, although I don't agree with your characterization of today's editorial," he wrote. Then he stridently denied the Times's accusations point by point: "I don't know how many times I have to state that I did not take the BBC off Star TV for political reasons, nor have I ever given any sort of political instructions, or even guidance, to one editor of the Times or the Sunday Times." Toward the end of the letter, he penned a sentence that played to Sulzberger's vanity—as a scrupulous owner who never interfered in coverage—but that Murdoch meant as a dig. "On a broader basis," he continued, "I promise you that I will treat you as an example in my relationship with editors." It was a fitting ambiguity, similar to Sulzberger's "don't feel it's faintly anti-Murdoch." What type of example would Sulzberger be when Murdoch spoke to his editors?

  Murdoch couldn't resist a final dig. The last line of the letter stood alone in simple type.

  "Let the battle begin!"

  1. The Fix

  DOW JONES SEEMED destined for Rupert Murdoch long before the official dealing had begun. For decades, Murdoch had coveted the Wall Street Journal. His children couldn't remember a time when he wasn't talking about it. His most trusted colleagues called it a "preoccupation" for him (even more than the Financial Times, which he had tried and failed to buy, or the New York Times, which he also eyed). He was open about his admiration, and among Wall Street's bankers, brokering a deal between the Bancroft family and a deep-pocketed media mogul such as Murdoch was a tantalizing opportunity.

  So in the summer of 2002 when James Bainbridge Lee Jr. stood in his dark-wood-paneled office on the executive eighth floor of JPMorgan Chase & Company's midtown Manhattan headquarters, he prepared carefully for his upcoming call. He was contemplating how to break into one of the most difficult-to-crack media families in the country, the Bancrofts of Dow Jones & Company and the Journal.

  As Jimmy checked the market movements and news on the five computer screens on his desk, his image sta
red back at him from the framed Forbes cover on his bookshelf. Under the headline "The New Power on Wall Street," the photo displayed a slightly younger version of the Wall Street banker in his cufflinks and suspenders, his graying hair slicked back and curling slightly below the ears. The piece invited readers to "Meet the New Michael Milken." Jimmy, as he was known on Wall Street, could have served as the model for "investment banker" if the Museum of Natural History mounted a diorama of the species, but his thoughts that day were not on his appearance.

  Jimmy had made his reputation more than a decade earlier as a young banker making big loans to clients who wanted to make even bigger deals. His Rolodex was the source of his power, and he used it. He was sometimes derided as a glorified matchmaker. Every day, he started a new page on his yellow legal pad, jotting down in his all-caps scrawl a list of names to contact. By evening, after his usual frenetic day of jokes and ingratiating storytelling, the names were crossed off with his thin royal blue marker.

  That midsummer day in 2002, he had already scribbled through one page and had moved on to the next when he dialed Richard F. Zannino's number. Zannino had just been named the chief operating officer at Dow Jones & Company, an elevation that put him a single step away from the spot where Jimmy wanted him for the match he had in mind. Dow Jones, while a storied media firm, seemed increasingly small and outpaced alongside entertainment conglomerates such as Viacom Inc., Time Warner Inc., and News Corp. Even pure news outlets such as Bloomberg LP and Reuters PLC now dwarfed the parent of the Wall Street Journal, which had been struggling since the implosion of the Internet bubble in the spring of 2000 had dried up much technology and financial advertising. The Journal was in the process of losing more than $300 million in advertising revenue, and the paper would spend the next three years losing money. The company's stock had peaked near $78 a share in the summer of 2000. Currently it was trading in the low $40s.