War at the Wall Street Journal

by Sarah Ellison

  The fax, sent from Goldman Sachs, arrived in Lon Jacobs's office; it boded ill from the beginning. That it was marked for the attention of "Rupert Murdock" was the start of a series of absurdities Murdoch perceived in the document. He had offered the protections as a sop to the Bancroft family but never expected them to be so earnestly attached to the details. Such niggling was absurd, especially for a piece of paper he had little intention of taking very seriously. He knew the agreement could offer some protection for the Journal's reputation among the self-appointed media police, but he intended to change the paper and had said as much in an interview with the New York Times just two days after his offer became public. Unlike in an interview with the Journal a month later, he had been unscripted: "I'm sometimes frustrated by the long stories," he told the Times, adding that he rarely managed to finish some of the paper's longer stories. "I might put more emphasis on Washington," he said, and later confided that he was not a fan of the Saturday edition of the paper, which had been launched in 2005. Murdoch said that if it was legally possible, he would rechristen his planned Fox Business channel with the Journal name in it. His intentions were clear from the beginning, and what the Bancrofts were asking went far beyond what he was willing to offer.

  As written, the proposal suggested that the Bancrofts would maintain a connection with the company through two board seats that would stay under Bancroft family control forever. Murdoch thought he had signaled his displeasure with that attempted power grab when they met weeks before. Furthermore, News Corp. would have to clear its nominations to the editorial independence board through the Bancrofts. News Corp. executives would have to check in with the managing editor of the paper and the publisher if News Corp. affiliates wanted to use the Journal name. The document suggested that the Journal's publisher retain authority—including budgets—over the news and editorial pages and be responsible for ensuring "that business operations do not interfere with journalistic and editorial integrity and independence."

  Rarely did Murdoch allow himself to feel truly slighted. But this, if nothing else, tried his patience. He had been waiting for weeks and had begun to think that the deal, which seemed so certain at the outset, might not happen. He had taken hits in the U.S. media over the past two months at a level he hadn't seen since his take-over of New York magazine thirty years before. That Friday afternoon his underlings, the vaunted members of the "Office of the Chairman," which operated inside News Corp. like a cool-kids clique, gathered around to craft a response. Gary Ginsberg called Time magazine's Eric Pooley, who had been working on a story about the takeover effort. "You might want to come over here. This is going to be the moment of reckoning," Ginsberg said. As with all things Murdoch, there was an appreciation for the media's take.

  Then Murdoch got on the phone and called Zannino back. He called Marty Lipton, the family's lawyer at Wachtell, Lipton, and Greg Lee, the banker handling Dow Jones at Goldman Sachs. He called his son James on a yacht in Valencia. He called Dave DeVoe, his chief operating officer, on his way to Albany. "Dave, you can put the $5 billion away."

  Jacobs and Ginsberg hovered around Murdoch as he worked the phones, and Pooley sat by, noting the events. James, on an eighty-foot yacht waiting to watch the America's Cup, had to walk to the opposite end of the boat to field his father's calls and avoid being heard by his fellow revelers. He had been growing weary of what he saw as the constant barrage of negative press for his father and the company. A child of his generation, James was perhaps more sensitive to the barbs of the media than his father. In that moment, hearing the run-down of the Bancrofts' requests, he wanted his father to publicly take his toys and go home, leaving the Bancrofts to wallow in regret after the bid was withdrawn and Dow Jones's stock price plummeted.

  His father almost listened. "If we clean this up to our satisfaction, the family will reject it," Murdoch mused aloud to his cohorts. "So why don't we just reject them?" His phone buzzed. It was Zannino. "Hello, Rich. I've read it," Murdoch said. "I don't know what you were thinking. Why would we be happy with this?" He told Zannino that the proposal was outrageous because it attempted to keep the Bancrofts in control of key aspects of the business and allow not only the managing editor, but the existing publisher, too, to call the shots on editorial independence under News Corp. The proposal was reasonable to anyone but someone who had an idea of the changes he wanted to make. "Oh, yes, we reject this," he said to Zannino.

  Almost immediately, Ginsberg sat down to work on a withdrawal letter, previous versions of which had been drafted by Jacobs and James Murdoch. It was something he doubted Murdoch would use, but something that might serve to vent some of the frustration in the musty room. Ginsberg mustered his best posture of the aggrieved, one he had perfected during years in politics and a position he found quite effective. Though able to twist the truth when necessary, Ginsberg had managed over the years to perfect high-minded indignation if someone questioned his or his boss's honor. It could only have been mock fury, then, that fueled his creative energy.

  "68 days ago News Corporation submitted an unsolicited but friendly offer to the Board of the Dow Jones Company," Ginsberg typed, using the most generous definition of friendly to suit the purpose of the moment. Murdoch and the three other executives still in the office that Friday night gathered around, playing with how much vitriol they could add to the withdrawal. They came to call the document the "Fuck You Letter." Part of the fun of composing it was that they were all on the same team and defending Murdoch's honor to boot.

  With a few exceptions, Ginsberg never felt the press coverage of Murdoch's offer had been so terrible. He had welcomed the positive coverage from high-profile reporters at the Times such as media writer Richard Siklos and mergers-and-acquisitions editor Andrew Ross Sorkin. He felt Martin Peers at the Journal had given Murdoch a fair shake. He had great hopes for the Dow Jones deal and what it could do to Murdoch's reputation. It might, Ginsberg thought, solidify Murdoch as the only real visionary in the media space today. Crying foul, acting hurt, and walking away would have set back the significant gains Ginsberg felt the company, and Murdoch, had made in the public's eye over the past two months. But he sublimated those feelings to please his boss and play along. Sitting next to John Nal len amid the noisy fans running to dry out the flood on the executive floor, he continued:

  Our expectation, born of 50 years of building a great media company, was that the process for weighing our offer would be rational, orderly and, most of all, fair. I was not so naïve to think emotions wouldn't play a role; when a newspaper is in play, especially one such as The Wall Street Journal, emotions almost always are a factor. What I did expect, however, was that at the end of the day, our offer would be accepted or rejected based on facts, rather than innuendo, false accusations, and fear.

  How wrong I was.

  For the past seven weeks, my company and my 57,000 professional colleagues have been subjected to a drumbeat of stories that cast us more as villains than as creators of one of the world's most innovative media companies. We've been caricatured as meddlers, misanthropes and sops. If believed, at various times we've tried either to topple benevolent governments or prop up despotic tyrants; no editor was free from my intervention, no newsroom impervious to my politics. Without stringent controls put on my ability to interact with an asset I am generously offering to acquire, the credibility and integrity of those assets—their most valuable currency I should add—would be lost forever.

  We patiently accepted this vitriolic abuse as part of the price of being an agent of change.

  And it might even have been amusing were it not so insulting and wrong.

  What's been lost in this noise is any sense that over the past fifty years, no other media company has done more to give newspaper readers, television viewers, moviegoers, book readers and internet users greater diversity of information than News Corp. No media company has salvaged more failing newspapers, and nurtured them to health, than News Corp. No company has provided for more jobs fo
r journalists, or fresh voices to stale markets, all accomplishments for which we are proud.

  If in providing all this choice we've proved too popular, I make no apologies. If we've at times upset the Establishment to give consumers what they want, then I've done my job.

  Armed with a steadfast confidence that we are not only a proper—but uniquely suited—suitor of Dow Jones, we proposed as a condition of our ownership the establishment of an editorial committee of the board to ensure that the business would continue to represent the highest standards of integrity and trust. We have some history in this regard. As a condition of our acquisition of The Times of London and The Sunday Times, we established a five member editorial board to ensure their editorial independence and integrity. That board has safeguarded these world-renowned brands throughout our 27 years of ownership. It was this structure that we offered to establish in our sole face-to-face meeting with some senior members of the Bancroft family nearly a month ago.

  Despite our proven track record, the Bancroft family chose to put their own interests—and their own misguided conceptions of who we are and who they are—ahead of sanity and reality. In conveying their proposal, made after nearly a month of intense deliberations and consultation, they have communicated unworkable conditions on our future ownership that effectively enable them to retain control of an asset for which I and my shareholders had been willing to pay dearly.

  In spite of our encouragingly friendly meeting, which was promised to be quickly resumed, we have now received, after weeks of waiting, a four page list of demands in which the family has insisted that they have the effective power to appoint five of the seven members of a proposed editorial board, a board that would control—in perpetuity—the key editorial positions and operations of the Wall Street Journal and Dow Jones Newswires. Equally astounding, that board would have the power to determine who will serve as Managing Editor, Publisher, Editorial Page Editor, and Dow Jones Newswires Editor. These key figures would then have the authority to run the paper, including how the brand is deployed and resources are allocated. As a final insult, they are demanding the power to appoint two Bancroft family members to the Board of News Corp., where we had invited as a courtesy one Bancroft to join us.

  In essence, the Bancrofts are seeking to reserve for themselves a new role as the sole controller of the content of the newspaper, as they take our $5 billion.

  We believe our offer made sense for both Dow Jones shareholders and News Corp. shareholders. Dow Jones has been starved of investment in a marketplace that demands constant investment and creativity. Without an owner willing to commit to the necessary investments, Dow Jones, a steward of some of the world's greatest brands, risks irrelevance and ultimately, extinction.

  This is a time of special difficulty for the printed word, faced as it is by the most disruptive technology since Caxton. More than any other company, we know how fragile a great creative institution is. This drawn-out process, with no obvious path to resolution, risks damaging Dow Jones' business, and more importantly, the morale of its employees. We would never want to be a part of that. Nor for that matter do I want to continue to subject my colleagues to unwarranted attacks and false hopes.

  On April 17th, I submitted my letter to Dow Jones' board outlining my offer to acquire the company. Today, I withdraw that offer.

  It was the night of the premiere of News Corp.'s 20th Century Fox division's latest addition to the Die Hard franchise, Live Free or Die Hard, at Radio City Music Hall, so as soon as he had finished the letter, Ginsberg rushed to meet his wife and two sons, arriving just as the lights went down. He felt a sense of accomplishment, having batted out the letter and managed to meet his family. But back at home after the premiere, Ginsberg couldn't sleep. It seemed foolish to let the deal—and the big reputational boost it might bring—fall apart. Besides, Ginsberg was harboring fantasies of becoming directly involved in the Journal. He had come to News Corp. from the respectable world of Democratic politics. Ever since George magazine, he had toyed with returning to journalism circles, this time to a more prestigious perch. He had to be able to bridge this absurd misunderstanding about the editorial agreement. At 2:00 a.m., it hit him: "I can deal with Dick," he thought. If he could have a conversation with his old boss Dick Beattie, Ginsberg felt reasonable heads would prevail. There were three things Murdoch found particularly bothersome in the Bancroft proposal: the means of selecting editorial committee members, the number of board members, and the broad powers over budgets granted to the publisher of the Journal. In all the back-and-forth between James and Gary and Lon and DeVoe and Murdoch, "it was all fuck 'em, fuck 'em, fuck 'em," Ginsberg thought. "If I can talk to Dick we can make this right," he resolved.

  In the early hours of Saturday morning, Ginsberg e-mailed Murdoch's wife, Wendi, whose BlackBerry Murdoch relied upon for e-mails on weekends and after hours. Once he got in touch with Murdoch, Ginsberg told him he wanted to call Beattie, to see if Beattie couldn't get the Bancrofts to back off on some of their demands. "Fine, get him," Murdoch said. Still, Murdoch asked Robert Thomson to edit Ginsberg's letter, so it would be ready to go.

  Ginsberg knew that the threat of pulling the bid would mean something to Beattie, who was the lawyer for Dow Jones's independent directors. He knew that having the letter written gave him some leverage. He immediately phoned his old boss. But Beattie didn't pick up, and Ginsberg left a message for him. "It's urgent you call me. Everyone wants to withdraw, but I think we can put this right." Meanwhile, another banker on Murdoch's team, Blair Effron of the boutique investment bank Centerview Partners, called Rob Spatt, Beattie's partner at Simpson Thacher, to try to get in touch.

  Once Ginsberg told Murdoch about his plan to call Beattie, Murdoch latched onto the idea and called in regularly, almost hourly, to see if Ginsberg had reached him. In the absence of any meaningful dialogue, Murdoch could be almost autistic in his repetitive and unrelenting focus. "Here I am talking about how close I am with Dick," Ginsberg thought, "and I can't even get him on the phone." Saturday evening, while out to dinner with his kids, Ginsberg received a call from Murdoch. "Did you talk to Beattie?" he asked. "No, I haven't," Ginsberg said apologetically. "I'm still waiting to hear back from him." Murdoch called Thomson in London to check on his edit of Ginsberg's letter. They would move ahead with the plan to send it at 3:00 p.m. on Sunday. During the dinner, Ginsberg's phone rang again. It was Beattie.

  "Where the fuck have you been?" Ginsberg cried.

  "I'm in Montana, fishing with my grandkids," Beattie replied, slightly amused at the unlikely circumstance.

  "We have twenty-one hours," Ginsberg said. "We have a letter to withdraw the offer." He explained his objections to the editorial agreement from the Bancrofts.

  "I haven't even seen the proposal. McPherson never sent it to us," Beattie replied. "I just got a copy faxed to me so let me look at it." On the phone, the two went over the three issues Ginsberg raised. Beattie thought they seemed minor and could be resolved. The two got off the phone and Ginsberg immediately called Murdoch, who had by then flown to the Mediterranean to his Rosehearty yacht, to give him the update.

  At 5:00 a.m. Sunday, Ginsberg woke with a start to the ringing of his cell phone. It was Murdoch. "The deal's done," he said. "Lon is going to talk to Joe Stern." Like Ginsberg and Beattie, News Corp. general counsel Lon Jacobs and Dow Jones general counsel Joe Stern had known each other for years. They had worked together on numerous deals when Jacobs was on the board of Sky Mexico, and Stern represented one of the country's wealthiest businessmen. After a series of meetings with a small core group of Dow Jones directors, Stern trudged over to News Corp.'s headquarters Monday afternoon to meet Jacobs. The two men reached a compromise on the editorial independence agreement. News Corporation won most of the concessions, and Murdoch would later remember the compromise as one in which he gave up very little: "They caved on everything," he said. "They gave us everything."

  The Bancrofts felt they had gotten Murdoch to agree to
more than he ever had before. They thought they had the best editorial independence agreement that one could craft. Leslie had spoken frequently with Brauchli about the content of the agreement and hoped that he would stand up for the newsroom. Brauchli, who had tackled the creation of the agreement like a research project, doggedly looking at a wide range of independence agreements at publications across the globe, felt satisfied by how much better the agreement was than the others.

  14. Decisions

  THE LOBBY OF THE Hilton hotel in Boston's Financial District, flanked on both ends by revolving glass doors, made it difficult for the Bancroft family members meeting inside to hide from the reporters gathered around both exits. To reach the restrooms from the windowless conference room on the ground floor in which they sequestered themselves, family members had to cross both the length and the width of the lobby, leaving ample time for ambush. The more press-averse members of the family asked hotel security for accompaniment from the conference rooms to the restrooms and back. They didn't want to be questioned. Not today.

  It was a Bancroft family reunion, but one far different from that at which many of these same adults had gathered twenty-five years before around Jessie Cox's magnetic presence in the '21' Club in New York. This time, the family, already naturally divided by its three branches, had nearly splintered under the strain of the offer thrust upon it by Rupert Murdoch and his News Corporation. It was the family's last reunion. With virtually nothing else in common except their ownership of Dow Jones & Company, the entirety of the Bancroft clan would have little reason to gather once Dow Jones was gone. Even now, as the decision loomed whether to sell the company their founder Clarence Barron had willed to them, several of them didn't deem the discussion important enough to attend in person. Vacations had been scheduled, and not even the fate of one of Amer ica's most vital newspapers would keep some in the family from their Spanish cottages, Sardinian cruises, or other relaxing summer pursuits.