The Man Who Owns the News: Inside the Secret World of Rupert Murdoch

by Michael Wolff

  Rupert’s brief few months on the Daily Express become the basis for his assumption of the chief executive role at News Ltd., owner of the 75,000-circulation Adelaide News.

  It’s really hard to say what running a newspaper in the 1950s might prepare you for. Most people who run newspapers in this era, or even work for them, will fade away, sell out, or drift into some other line of work over the next generation.

  It’s an archaic vocation, an experience and skill set that become progressively less relevant. It is, for one odd thing, a factory business. Everything you do is mechanically driven. If you run a newspaper, you are at least as concerned with machinery as you are with journalism. You are in the trucking, hauling, and delivery business. The noises, the smells, and the people are industrial. The sound on the newsroom floor when the presses come on is loaded, heavy, primal. While in years hence newspaper labor unions will come to seem like some odd conceit for what will have become an otherwise white-collar line of work, in the 1950s it is clear that the business operates on the backs of very big men.

  The very idea of the newspaper proprietor, which Murdoch at twenty-two has become (later, he will appoint his own son Lachlan, at twenty-two, the general manager of Queensland Newspapers), is itself feudal. It is much like inheriting the estate and the big house—and all of the servants and workers and other dependents who belong to it. It comes with outsized authority. You inherit power. Arguably, the more entitled you are, the better a proprietor you are. Newspapers are about throwing your weight around. Modesty is not a newspaper virtue.

  Rupert Murdoch is having, by the mid-fifties, the full flower of the experience of the family proprietor. And he is perfectly in character. He is to the manor born. He dives into the job without skipping a beat to learn it. His supreme confidence is born not just from arrogance but from incredible, relentless energy. There is in Murdoch’s paper, as in so many other under-resourced papers, a sense of Let’s put on a show. Adelaide, after all, is twelve hours by car from his home in Melbourne. He’s got nothing else to do but put out a paper. To learn the business and to meddle in it.

  The corollary to the idea of a newspaper as a feudal base is the idea of newspaper wars—another feudal kingdom trying to put down your feudal kingdom. In Australia’s media business for most of the twentieth century there are three kingdoms that control the continent: those of the Fairfaxes, the Packers, and the Murdochs. It’s like the Hatfields and McCoys in the turn-of-the-century Ozarks, or the five Mafia families in 1950s New York, or the Medici and Sforza families in fifteenth-century Italy.

  The Fairfaxes are the establishment family. In their self-importance and stodginess—and ultimate collapse—they bear a distinct resemblance to the Bancrofts. The Packers are the arriviste family, vulgar, bumptious; Kerry Packer will become Australia’s richest man. And then the Murdochs: in some sense the least transparent, the most disciplined and deadly, and most intelligent of the bunch.

  In the 1950s, after Keith Murdoch’s death, the enemy begins its advance.

  The first shot is fired by Keith’s former firm, the Herald and Weekly Times. Trying to get the Murdochs to sell the Adelaide News, the company advises the Murdochs that the HWT paper, the Adelaide Advertiser, plans to start a Sunday edition to go up against the Murdochs’ Sunday Mail. Murdoch actually fights the Herald and Weekly Times to a rather modern draw—they merge their paper with his, leaving him in control, and giving HWT a 50 percent interest.

  This is what newspapers do: fight great wars of attrition. If you can hold on longer than the other guy, you win. It’s not so much a marketing business—headlines only get so big—as one of endurance. How much pain can you tolerate? Rupert Murdoch can always tolerate more. This becomes Murdoch’s model: He forces himself and his competitors into a no-win spiral, your basic game of chicken, and they blink. It is, in so many ways—given its costs, its risks, its creation of lasting antagonisms, its psychic mayhem—the exact opposite of modern business strategy.

  In the 1960s, Sir Frank Packer and the Fairfaxes, fearful of Murdoch’s inroads in Sydney, put aside their differences and form Suburban Publications. The whole rationale of Suburban is to squeeze out Murdoch and his newly acquired Cumberland Newspapers Group, with its small local papers.

  The battle reaches its peak on June 7, 1960, when the two sides square off over the sale of a dilapidated printing plant. Murdoch gets a bunch of thugs to head to the plant in the dead of night and push out Packer’s men, who are guarding the presses in anticipation of Packer sealing the deal for the acquisition. Expecting the brawl that erupts about one o’clock in the morning, Murdoch has dispatched photographers from his newly acquired Sydney tabloid, the Mirror. Among the toughs captured throwing punches on the printing-room floor are Packer’s sons Clyde and Kerry, whose photographs are splashed across the front page of the Mirror the next day, under the headline “Knight’s Sons in City Brawl.” Murdoch will eventually win the printing plant after a yearlong court battle.

  A generation later, Murdoch’s son will be in business with Kerry Packer’s son.

  The other point about many newspapers at midcentury is that they’re a penny business. You want to make your product as cheaply as you can, and sell as much of it as possible, which you do by pricing it as cheaply as you can. It’s a classic race to the bottom. There is no such thing as added value; there is no such thing as premium pricing. The business math is terrible.

  Except for one thing: If you do manage to kill the other guy, it’s a great cash business. The nickels and dimes pour in. Every copy you sell beyond your base amount—kept low by printing few pages and hiring fewer reporters—represents profit.

  Advertising, which will later become both cash cow and, when it departs, the ultimate killer of newspapers, isn’t a meaningful part of the equation—not yet. The business is selling copies at the newsstand. This is one reason why newspaper families have been so powerful—they don’t just have a voice, they have a river of cash. Newspapers in their heyday are something like dealing drugs. After you kill your competitors, it’s just you and your windfall profits.

  Murdoch, beginning with a severely curtailed kingdom, seems to see his needs differently. While he could be the prince and the playboy of Adelaide, he understands that in order to remain a Murdoch—to compete with the Fairfaxes and the Packers—he is going to have to figure out a way to get back a kingdom. The answer—and this is not obvious or intuitive in the 1950s—is debt.

  This isn’t a small understanding or the beginnings of a minor play—it’s the first move in a transformational strategy that will distinguish the new business world from the old.

  There’s another point here: He learns how to be a bank customer. And that banks, like newspapers, compete against each other. When he took over the Adelaide News its bank was the National Bank of Australia—also the Melbourne Herald’s bank. Dissatisfied with its lack of eagerness to support him in his expansion ambitions, he switches to the much smaller Commonwealth Bank in Sydney. In a short time, he’s one of their biggest clients, confirming that elemental adage: If you borrow a little, the bank owns you; if you borrow a lot, you own the bank.

  Within a few years of his arrival in Adelaide, he’s bought, on borrowed money, a Melbourne magazine publisher, a weekly women’s magazine, and the Sunday Times in Perth, seventeen hundred miles away from Adelaide—beginning more than fifty years of constant dislocation and travel.

  Here’s yet another point about debt and newspapers: The more you can sell, the more you can borrow. The louder, bloodier, and larger than life they are—the more they cater to a less rarefied audience—the more you sell. The lessons he learned at Beaverbrook’s Daily Express help to finance a Murdoch acquisition spree across Australia, rebranding Beaverbrook journalism as Murdoch journalism wherever he goes.

  It is the debt, more than the newspapers, that becomes his essential business, transforming him and allowing him to march into his father’s old company thirty years later and take it over. (No matter
that, within two years, he will effectively close the Melbourne Herald, merging it into his more profitable tabloid the Sun.)

  Oh, yes, and while beginning his new life in Adelaide and traversing the country in old propeller DC-3s and DC-4s—a kind of role play, if you will: Rupert Murdoch, boy publisher—he gets married in 1956, in spite of his mother’s and sisters’ displeasure, to Patricia Booker, an airline hostess, department store saleswoman, and sometime model. With the birth of his daughter Prudence in 1958 begins the next generation and the first of his three families.

  FALL 2005

  It is in so many ways his lack of modern business manners that makes him the particular player that he is. The game, in the most primitive business terms, is about relative levels of weakness.

  He is beginning to get a stream of anecdotal information from Andy Steginsky and from whomever else he might pull a tidbit from about the weaknesses of Dow Jones.

  Peter Kann is clearly growing ever weaker—and it is Kann who has so systematically blocked every Dow Jones suitor.

  Arthur Sulzberger Jr., for instance, who first petitioned Peter Kann for a Dow Jones–New York Times Company merger after the Telerate disaster in 1997, was back with the same message after the 2000 Time Warner merger with AOL. There was a lunch with Sulzberger and Times president Russ Lewis. Kann on the subject of the Times’ interest in Dow Jones remained transcendently remote from the conversation—a seemingly disinterested observer.

  “Do you understand that he wants to merge the two companies?” questioned a Dow Jones executive at the lunch.

  “Of course I understand that,” Kann replied.

  “Well, you didn’t respond.”

  “Of course I didn’t respond.”

  In 2004, Ken Auletta, in a piece in The New Yorker about Dow Jones, hinted that the New York Times might have made inquiries about buying the company. This was the first time that members of the Bancroft family had heard of such possible options. There was, especially among the younger Bancrofts, an almost slack-jawed response: “How come…? Why didn’t…? Shouldn’t we have at least considered it?”

  By mid-2005, when it had become clear that the fall-off in business advertising was not merely the result of a down market, that the entire newspaper industry was rapidly contracting, and that the Dow Jones share price—then at $33—seemed destined to further erode, a sense of additional anxiety had overtaken the family and its advisors. It came mostly from the younger generation, who seemed suddenly aware of their own preposterous out-of-it-ness. They simply had no mechanism, no knowledge base for asking for (not to speak of commanding) a change in the company’s direction. They seemed like fools even to themselves.

  A series of meetings began in the summer of 2005 and continued into the fall between members of the family trying to express their frustations and the Dow Jones managers—which Murdoch, with his keen gossip antennae, has started to be aware of. Kann himself, sensing the drift, began to talk about moving up his retirement schedule. He will be sixty-five in 2007. Instead of leaving then, he proposes giving up the CEO role earlier, while continuing to hold the chairman’s spot until his official retirement day.

  There are further politics here: Kann wants to give his wife, Karen House, the paper’s publisher, the top job. An indication of Kann’s own confidence about how well he knows his company and how reliant the company (and the Bancroft family) is on him is his belief that he can overcome the fact that House is a figure of great contention within the company.

  Earlier in the year, the Dow Jones board had appointed a committee of board members to begin to consider the succession issue—or what some were calling the House issue: Should they give her the job, or could they resist? The committee included Roy Hammer, of Hemenway and Barnes; Harvey Golub, the former CEO of American Express and executive chairman of the board of Campbell Soup; Irv Hockaday, CEO of Hallmark; and Jim Ottaway, whose family newspaper chain was sold to Dow Jones, making him, after the Bancrofts, Dow Jones’ biggest shareholder. When Hammer retired in April 2005 and Michael Elefante, a Hemenway and Barnes partner, replaced him as family trustee and Dow Jones board member, Elefante also took Hammer’s seat on the ad hoc committee.

  Various members of the committee continued to believe that the succession ought to happen as it had always been anticipated—when Kann turned sixty-five in 2007 he’d step down as chairman and CEO before the annual meeting in April. The further logical idea was that a successor ought to be anointed and groomed under Kann but not formally given the top job until the spring of 2007. Then too, there was the also reasonable view that a search firm should be retained so that, in addition to inside candidates, people from outside the company might be considered. This was the most politic way to get around the House issue. The minority view—Elefante’s view, hence the majority shareholder’s view—was that there was no time to waste, that whatever was to happen, the process should be accelerated.

  Nevertheless, the process goes slowly. There might be dissatisfaction with Kann, but it is dissatisfaction mixed with something like awe—and an inability to imagine the future without him. He remains the parent. There are 360-degree reviews of all the internal candidates, in which everybody in management reviews everybody else. Internal candidates are interviewed by the committee. Outside search firms are identified, but as the end of the year nears, none has yet been approved by the board.

  A Dow Jones directors’ meeting is convened in New York on November 12, 2005. Present are the twelve directors representing management, the three independent directors (Golub, Hockaday, and former Michigan State University president Peter McPherson), Elefante, and the three Bancroft family directors representing the three branches of the family. The three family members are Elizabeth (Lisa) Steele, who runs a little company that does environmentally friendly development in Vermont, representing the Cook branch—she’s the daughter of Jane Bancroft Cook (daughter of Jane and Hugh); Leslie Hill, an airline pilot, representing the Cox-Hill branch—she’s the daughter of Jane Cox Hill MacElree, from Philadelphia; and Christopher Bancroft, an “investor,” who lives in Texas and represents the Bancroft branch—he’s the son of Hugh Bancroft Jr. from his marriage to Jacqueline Everts Bancroft Spencer Morgan (Hugh junior died young and Jacqueline, with a big inheritance, married a doctor named Spencer; she divorced him and, three years before she died, got remarried—to her gay interior decorator. Years of litigation ensued).

  There are three key presentations at the meeting, by the three key managers below Kann—the three who have become the leading internal candidates to replace him.

  One is by House herself. The next is by Gordon Crovitz, the forty-nine-year-old Yale Law School graduate and Dow Jones lifer who rose from the editorial page, did time with Dow Jones in Europe and Asia, crossed over to the business side, and now supervises the Journal’s Internet strategy.

  The third is by the company’s COO, Richard Zannino. Zannino came to Dow Jones just five years ago, first as the chief financial officer, with a finance background at retail and fashion companies Saks and Liz Claiborne. He’s held the COO spot now for three and a half years. Although he is considered as a possible successor to Kann, he was initially rated the least likely contender, for the substantially disqualifying reason that he is not a journalist. The Dow Jones CEO has always come out of the newsroom. This is company culture—how can you understand and value the company culture if you haven’t come out of the newsroom?—and, for all intents and purposes, the company grail. Still, as the ad hoc committee explored the issue, there was increasingly a challenge to this idea. Why did it have to be a journalist? How much talent were they excluding on that basis? Wasn’t it obvious that with all the issues the company is facing, it needs a broad business kind of mind in the leadership role?

  Crovitz’s and Zannino’s presentations are uneventful. House’s presentation, on the other hand, is nothing short of a disaster. She’s high-handed and charmless. She’s condescending. She’s acting like the board doesn’t count.
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  Well, the next item on the agenda is the CEO search. The management committee is set to recommend that a recruiter be hired—one has been selected and lined up—and that outside candidates as well as inside candidates be interviewed for the top job.

  And then, following something more than a mere nod of the head, something less than a full discussion, the family members of the board—Lisa Steele, Leslie Hill, and Christopher Bancroft—together with their trustee, Michael Elefante—say no. Although these are the people who control the company, they have only ever been bystanders to its business.

  But here they are saying no—this isn’t working for us. Blindsiding everybody.

  It won’t be a long process, the committee tries to explain. It’ll all be done in the spring.

  Well, no thanks, says the family, essentially doing something they have never done before, which is to exert their control.

  Indeed, one of them says, it’s clear, after this morning, that it can’t be her—that won’t fly.

  Somebody else then analyzes that if they pick Crovitz, Zannino will surely leave, but if they pick Zannino, Crovitz will probably stay.

  So, five minutes and it’s done. Zannino. Kann’s exit as CEO will be announced on January 3, just after the holiday (there’s actually a move to make Zannino’s appointment immediate—even before he’s told that he has the job); Kann begrudgingly will be allowed to hold on to the chairman’s job until he reaches the Dow Jones mandatory retirement age; Zannino, before accepting the job, will get the board to agree that he can get rid of House.

  The Bancrofts have raised their voice.

  FOUR Opposing Families

  2006

  In a certain sense, the Bancrofts are sticking it to the company with Rich Zannino.