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

by Michael Wolff

  The very idea of a Wall Street Journal reporter changes—culture and lifestyle reporters come to business. Business, after all, is becoming the single greatest story of the decade: the deregulation and ensuing free-for-all of the Reagan years; the sea of liquidity created by a booming stock market; the rise of financial titanism; the birth and meteoric growth of the personal computer industry and the effect of personal computers on business culture (spreadsheet software arguably creates the finance culture); the ascendancy of the charismatic CEO and businessman superstar (Lee Iacocca, Donald Trump, Steve Jobs, Bill Gates, Andy Grove); the rise of Michael Milken and the pursuit of Michael Milken; and, not least of all, the development of a literature and media to celebrate business. Indeed, in many ways, the Journal is the preeminent source of this literature: Barbarians at the Gate, by Bryan Burrough, about the takeover of RJR Nabisco; Den of Thieves, by James B. Stewart, about the rise of Michael Milken; and Oil and Honor, by Thomas Petzinger, about the takeover of Penzoil, were all written by Journal writers, and each book began as a Journal story.

  Murdoch enters the decade as a minor, if voluble, figure in the publishing world and will leave it as one of the era’s business superstars. He will become one of the characters the Journal is writing about, which, in turn, helps create this business culture he is a beneficiary of. The eighties message is that playing the game means you’re worthy of the game.

  Arriving in the eighties, Murdoch is actually in a place disconcertingly similar to that of Donald Trump: He’s got ambition much larger than his asset base. And he’s faced with a similar conundrum: How do you jump-start your own standing? How do you get taken seriously?

  In London’s Sun, he’s got a good cash-flow engine, which (again like Trump) means that he can borrow money. This is another eighties point. If you’re underleveraged in the eighties, you’re going to recede; if you’re overleveraged, you’ll advance. Over-leveraging yourself, at a time before the geometric value of debt is understood (if you buy a $10 million enterprise with only $1 million cash down and it doubles in value—and the eighties are the decade of spiraling values—then you’ve just made a 1,000 percent return on your money), requires a particular eighties kind of temperament—which Murdoch, like Trump, has. It’s a high tolerance for uncertainty, the ability to keep numerous balls in the air, and a lack of any evident ambivalence.

  You’re an action figure. No nuance here.

  The internal financing of Murdoch’s restless efforts to enter and stay in the deal flow comes from a fundamental contradiction in his ideological position—and another alignment of the eighties stars. He’s an anti-monarchist. Almost everything about the British royal family annoys or repels him; everything about the people who surround the royal family nauseates him. The Sun is as dismissive of the royal family as any mass-market British publication could ever be. And yet the internal cash flow of News Corp. becomes highly dependent on the Sun’s obsession with Diana, Princess of Wales. The more Diana is in the news, the more papers are sold—particularly copies of the Sun. If the eighties represent a convergence of publicity seekers and publicity givers, each rewarded by the market for their efforts and their symbiosis, then the relationship of Murdoch and Diana is an apogee of the era. The great, roaring bull market for newspapers in the United Kingdom during the eighties and nineties is fueled by Diana—and when she dies in 1997, the newspaper business will also start to die.

  It’s cash flow combined with restlessness—a businessman’s ADD—that defines an eighties temperament. Murdoch is pulled by his sense (not so much strategic as nervous; it’s his impatience) that something is going on somewhere else. In the early eighties, he cannot yet articulate the global media vision—it doesn’t mean anything yet. What he’s pursuing is the wherewithal of money itself. If the banks will lend money, it’s a lost opportunity not to take it. It’s exactly the instrument that his father lacked—you get to take control with someone else’s money. He knows too—and it’s like a monkey on his back—that other people are also seizing this new opportunity.

  The temperamental restlessness is important. He literally can’t stop moving. This too becomes an advantageous eighties trait. He’s got an iron will coupled with an iron bottom. With the move to the United Kingdom, he was merely extending his range (and jet transportation was getting better). With the move to the United States, he’s at a level of dislocation and constant global movement that may not be matched by anyone in the world. It’s so extreme that it must be having an impact not just on his metabolism (the Chicago Tribune and the Independent in Britain have both reported that he “reportedly” takes enemas before long flights) but also on his sense of both place and possibilities. Not to mention how it’s exacerbating what we might already infer about his intimacy issues. What’s more, right up until the late eighties, he’s traveling on commercial flights, not private jets.

  His first eighties deal, the financially dubious acquisition of the Times of London and the Sunday Times in 1981, makes him one of the world’s most famous newspaper proprietors—arguably the most important private citizen (or, actually, noncitizen) in the United Kingdom. Presto! It’s another eighties point: The deal reinvents you.

  What Murdoch gets is a business that over the next twenty-five years or so will never make him any money—and which may cost him as much as a billion dollars. While the Sunday Times is Britain’s leading Sunday “quality” paper, at about 1.5 million circulation, and returns a robust profit, the paper’s problem is that, having been acquired in 1959 by Canadian Roy Thomson, who founded the Thomson Corporation, it got itself linked to a tar baby when Thomson acquired the daily Times in 1967.

  But the money-losing daily paper is among the world’s most famous journalistic enterprises. Over two centuries, it has been the consummate example of a paper coming to reflect the dominant values of the dominant class. Indeed, the Times helped to define the British idea of class. It exists for that reason more than for an economic one.

  By the eighties, it has become not just a poor economic proposition but an untenable one. This is partly because of its relatively small circulation—about 200,000 in the seventies—but mostly because the print unions have largely achieved economic control of the newspaper business and are bleeding it.

  Roy Thomson died in 1976 and his much less sentimental, less starstruck son, Kenneth, took over. In 1978, he announced that unless the company could get concessions from the typesetters’ union it would close the papers down. The unions went on strike anyway. The strike (or lockout) lasted a year, costing Thomson, who continued to pay the salaries of the other unions, £40 million, and in the end Thomson capitulated, rehiring the printers and getting no concessions or savings in return.

  Then, in August 1980, the journalists went on strike, which was the last straw and, as Thomson saw it, the final betrayal: He put the group up for sale in October. Eager to avoid severance costs of more than £35 million associated with closing the paper, which he announced he’d do if he couldn’t find a buyer, this was officially a distress sale.

  Among the potential buyers were Associated Newspapers, owners of the Mail; the ever-dubious Robert Maxwell; Atlantic Richfield, the American oil company, which, in a fit of odd diversification (characteristic of that corporate era), had bought the Observer; and separate groups led by the Times’ editor, William Rees-Mogg, and the Sunday Times editor, Harry Evans. And Murdoch.

  Nobody else except Murdoch would agree not to close the daily Times.

  Murdoch is beginning to practice eighties finance. The deal itself gives him access to greater deals, which, if need be, would cover the cost of this one.

  There is, too, the other element, not at all eighties: his newspaper fetish. He is, in some sense, helpless not to try to buy any newspaper that might be for sale. His advance here is to couple his newspaper fetish with a greater eighties avariciousness. Every purchase, every deal, is in service to the next deal. His compulsion to buy newspapers is becoming a compulsion to buy just about anythi
ng.

  And he’s started to conflate the idea of all media. Entering the eighties, separate media disciplines—newspapers, television, books, movies, music—had separate owners. Leaving the eighties, one owner will own all. This happens in part because of Murdoch’s cash-flow needs.

  His thinking is less visionary or abstract than it is practical. His television station in Australia has a significantly greater profit margin than his newspapers—allowing him to buy more newspapers (in other words, owning newspapers remains the point). In the United States, newspapers not only have unimpressive cash flows (at least second-tier newspapers, which is all he owns) but also don’t reach a national audience. He needs national impact. He’s really not interested in Chicago or Boston or San Antonio (this is one reason why he’ll continue to own the Post—it’s in New York). He needs to hear the sound he makes.

  Still, because he can, he buys the Herald in Boston and the Sun-Times in Chicago. News Corp. is suddenly, with his Australian, British, and American holdings, one of the largest publishers in the world. He’s got the two ingredients that make the business world take you seriously: the ability to get financing and the ability to command the attention of the media (not least of all because he is a buyer of the media).

  It’s a story—the Murdoch progression from wannabe to serious player—told most particularly by the Wall Street Journal.

  After Murdoch’s takeover of the New York Post and New York magazine, the Journal, itself in the earliest stage of trying to find a way to write about business as more than just share price or quarterly results, sent a young David McClintick to profile Murdoch. McClintick will later write one of the seminal eighties books, Indecent Exposure, about the greed, foolishness, and naked power struggle that nearly destroyed Columbia Pictures. But in 1977, McClintick and the Journal were still groping toward a style. The profile highlighted not just Murdoch’s newcomer status but the newcomer status of this form of writing in the Journal itself. The front-page piece opened with a description of a painting of two dead sheep being shorn in a drought, by Australian artist Clifton Pugh, which was propped against a wall in Murdoch’s new office at the Post. “Few if any New York Post editors or writers have seen the painting. Nor has anyone from New York and New West magazines and the Village Voice… But the starkly elemental yet ambiguous work serves as a rough symbol of the hopes, doubts and fears of the publications’ employees as they contemplate the prospect of working for Rupert Murdoch. Is he, as well as the field hand in the picture, interested in essentially making something good out of a bad situation? Or are they cynical opportunists, bent only on stripping a carcass of its profitable remains?” (This is the kind of narrative prose that will make Murdoch scowl the most when he later sees it in the Journal.)

  Although Murdoch is frustrated by the U.S. newspaper market, he continues to pursue it obsessively. He considers buying the afternoon Hearst paper in Baltimore, the News American, with the idea of making it a Washington, D.C., paper too. The Los Angeles Herald Examiner is also on his list. Neither purchase happens. He focuses, briefly, on making a bid for Newsweek, the newsmagazine owned by the Washington Post, but is talked out of it by Ed Kosner, his New York magazine editor, who spent much of his career at Newsweek. He’s envious of Gannett’s launch in 1982 of USA Today—and will offer to buy it.

  He’s entering what, in business terms, can only be seen as a manic phase.

  News Corp. has a surge in growth not only because of acquisitions but because of the dramatic upswing in advertising. (In 1984 the company’s revenues will top $2 billion; Time, Inc.’s revenues in 1984 will be $2.8 billion.) The Sun alone, fueled by the Princess of Wales, is throwing off $50 million a year in free cash flow—meaning it can finance upward of $500 million in new acquisitions.

  At the same time, he’s pushing the limit. The company’s debt at times exceeds its assets. One way to lower this ratio, counterintuitively, is to buy more: Get more cash flow by assuming more debt.

  The problem is that there just aren’t that many newspapers to buy.

  The idea of cross-platform ownership, although it is not yet called this, of a horizontally integrated media company is about to be born. It is born not out of a farsighted, sophisticated, abstract business construct, but out of the need to spend money, to do deals.

  Equally, Murdoch, whose real and in some ways singular intention is to buy newspapers, has come to understand that other kinds of cash flow might help him in this regard. He is, in effect, trying to rationally finance the sometimes irrational.

  Then there’s another element fueling the mania. Here too he’s demonstrating an eighties sensibility: He sees business as a competition among individuals. For him this goes back to the Fairfaxes and Packers, and, more recently, in London, to Robert Maxwell. In the United States, players are beginning to emerge. “The Wall Street Journal library,” the Journal says, “maintains books of clippings of stories about ‘personalities,’ the people who dominate the pages of this and other newspapers. In the past few years few individuals have accounted for more clips than Carl Icahn, Irwin Jacobs, Carl Lindner, David Murdock, Victor Posner and the late Charles Bluhdorn.” The Journal’s profiles of such individuals will come to define the era; a piece the Journal runs on Carl Icahn highlights the paper’s soon-to-be-classic use of anecdote, recounting the New York financier’s shouting match with C. E. Meyer Jr., the president of TWA, in a “half deserted bar at the Waldorf-Astoria hotel.”

  By the mid-eighties the cast of characters is set, with the Journal providing something like fanzine coverage: Drexel Burnham’s enigmatic financier, Michael Milken; the arbitrager Ivan Boesky; the British corporate raider Sir James Goldsmith; the Texas oilman-turned-raider T. Boone Pickens; Murdoch’s Australian nemesis (and sometime partner) Robert Holmes à Court; the upstart Ronald Perelman (with his surprise bid for Pantry Pride, the supermarket chain), and, of course, their bankers (e.g., Bruce Wasserstein) and lawyers (e.g., Marty Lipton).

  Murdoch is taken with the outsiderness of these guys—they all come as if from nowhere and are making king-size trouble. They’re playing his game, taking his role.

  There isn’t such a state of play in the newspaper business in the United States—it’s hard to make a splash. Murdoch is surprised to find the U.S. newspaper market a fairly tame and boring place. There are no personalities. There is little competition.

  Even in the greater media business—dominated by aging, entrenched players—he arguably has only one peer. Steve Ross built Warner Communications into a mini media and entertainment conglomerate. He started with funeral homes (owned by his father-in-law) and traded up to parking lots. Then, starstruck, he bought a talent agency and acquired the name and remnants of Warner Brothers to reconstitute the movie studio. From there he went into music and, presciently and disastrously, into video games.

  Murdoch’s view of Ross in a sense presages his view of the other media barons who will shortly begin to populate the territory. Assessing his competitors is the one place where Murdoch is systematically analytical rather than reflexive and instinctive. He loves to analyze other people’s weaknesses. He collects information about them—as they do about him.

  Ross’s Warner was until 1983 the country’s most high-flying media company. Then, with a radical drop in revenues at Atari, the video game company it acquired in 1976 (this might be the first instance of a traditional media company acquiring a new media company with catastrophic consequences), its shares collapse. Murdoch begins borrowing money to buy Warner’s shares.

  By the end of 1983, he has spent nearly $100 million to acquire 6.7 percent of the company. Not only is he now Warner’s largest shareholder, but since he’s exceeded 5 percent, he’s obliged to disclose his position—which, with its clearly threatening implications, makes him a presumed takeover player. With companies and industries becoming, in the eighties, like sets of dominos (once one goes…), Murdoch’s move can be seen as putting the whole media business in play.

  As it happens,
Murdoch is not that good at the game (yet)—he doesn’t end up taking over Warner. Still, because the Warner guys are themselves thought of as such tough players (thugs, relatively speaking), the fact that Murdoch has gone head to head with them—and, at that, forced Warner into serious lockdown mode—means that Murdoch emerges from this as a man who’s made his takeover bones.

  Indeed, the Warner guys react to Murdoch in such a way as to suggest that he is more capable than he really is. After all, it is far from certain that he could have put together the financing to take over Warner. But Ross, vulnerable in the wake of the Atari fiasco, freaks. He dives into a deal that will bedevil Warner for years to come, and of which, sixteen years later, Murdoch will be the ultimate beneficiary. Chris-Craft Industries, another mini-conglomerate with media-related assets, agrees to take a 19 percent stake in Warner in exchange for a 42.5 percent stake in a Chris-Craft subsidiary that owns independent (non-network-affiliated) television stations around the country—a company Murdoch will acquire in 2000.

  Because foreign nationals are not allowed to own more than 20 percent of any U.S. television station, the Chris-Craft deal makes it impossible for Murdoch to take control of Warner.

  Murdoch sues, not least of all because if he gives up the fight for Warner, its shares, including the ones Murdoch owns, will take a precipitous drop. Although News Corp. accuses Warner of “a pattern of racketeering”—echoing fraud charges then pending against Warner executives in connection with a shady investment in a theater in Westchester County, New York—Warner nevertheless manages to effectively paint Murdoch as the predator, the unsavory element. For Steve Ross, the former parking lot and funeral home king, long rumored to have mob ties, to successfully portray Murdoch as the unscrupulous one is a good indication of both Murdoch’s sudden credibility as a wheeler-dealer and of the fast-growing Murdoch backlash. Indeed, Harry Evans, the London Times editor whom Murdoch pushed out of his job, publishes his memoir, Good Times, Bad Times in 1983, with its devastating portrait of an amoral, duplicitous, and ruthless Murdoch—and is then promptly recruited by Steve Ross to help in the Warner anti-Murdoch campaign.