For his part, Murdoch has reporters from the New York Post—including his favorite, Steve Dunleavy—investigate Ross and Warner. Dunleavy goes as far as to call Ross’s old headmaster at Columbia Grammar and Preparatory School to ask about his grades.
Finally, in 1984, Warner pays Murdoch to go away, buying his stock back for significantly more than it is worth and giving him a quick profit of $40 million—effectively making him a green-mailer, that species of financial bottom feeder already becoming part of eighties mythology.
Murdoch, not surprisingly, likes the game. Both the conflict and the profits suit him, not to mention the publicity. He’s elevated himself from mere publisher to international financier—a player, a man to fear. And, perhaps most important, a man whom capital seeks out.
So he does it again two months later. Backed by a consortium of banks, he goes after the St. Regis Corporation, a paper company. A decade before, Time, Inc., in what turned out to be a disastrous combination, acquired a forest and paper company. But Murdoch, quite likely, does not really want St. Regis. He’s suddenly in a further business—beyond publishing, paper, or even media. It’s the barracuda business. And, with the quick $37 million he makes on his St. Regis stock when the company sells itself to Champion International Corporation to avoid Murdoch, he’s now making a lot more money in the barracuda business than he is in the actual media business.
He’s getting good at it. The takeover business—the financial bully business—requires somebody with the balls for conflict, the appetite for risk, and the ability to make quick decisions. And you can’t bother about being hated. Indeed, in that department, his two greenmail episodes in the mid-eighties further color his character: Long after the greenmail has been forgotten, the scent of bully-boy financial skulduggery will cling to him. But, unlike the other financial bully boys the Journal is covering during this time with great devotion—Icahn, Pickens, Goldsmith, Perelman, Asher Edelman, and others even less scrupulous—Murdoch feels guilty.
For Murdoch, it’s about owning stuff. As much as the quick cash and the heat of battle appeal to him, he’s a proprietor. His father did not own, and he wants to own. He’s old-fashioned. He’s a man not of capital but of assets. He wants to be able to walk through what he owns. Jet in and be part of it, however briefly. He wants to be able to explain it to his mother, who demands explanations. It is hard to explain greenmailing. What’s more, honestly, he’s not all that interested in just having more money. Between money used for personal cosseting and pleasure and status symbols and money used to buy another newspaper, there’s no contest.
Yet he is like those people—Icahn, Pickens, Edelman, Goldsmith, et alia—too. He understands, just as they understand, that the moment to act is now (“We don’t have a grand 10-year strategy,” he tells the Journal after the Warner battle. “We’ve gone where opportunity has led us.”) and that the action itself is self-sustaining. Plus he seems, as they seem, to have a temperamental advantage over other businessmen. It’s a lack of worry about the future. And, too, the willingness to do things alone.
At the end of 1984, thirty-one years since he took over the Adelaide News, ten since he moved to New York, he does the biggest deal of his career. He spends $350 million for a group of…hmmm…trade magazines. The tabloid publisher is now the world’s leading publisher of magazines for people in the aviation industry and for travel agents. If you want to price a six-year-old Boeing 767 coming off its first lease or get a discount on a block of rooms in Atlantic City in midsummer, go ask Rupert, proprietor of, among other titles, Aviation Daily and Hotel and Travel Index.
This unlikely acquisition actually has several vision points. This seemingly boring trade magazine deal has unexpectedly attracted a lot of attention. It’s one of the biggest sales ever of publishing properties. Bill Ziff, who, like Murdoch, took over some fledgling titles from his father thirty years before, has built a significant magazine empire, which has helped redefine the nature of advertising. His titles are all niche, special-interest, targeted publications. Along with his trade journals, there are his consumer titles: Modern Bride, Popular Photography, Yachting, Car & Driver. His decision to sell almost everything he owns is so unusual in the media business that he has to come up with an excuse: He’s dying.
The deal is so big that Murdoch can’t hope to afford it all (another indication that he never could have completed the Warner deal). So he bids for the trade publications, and CBS (with a hapless vision to diversify into print) bids for the consumer titles, ultimately paying $362.5 million.
The size of the deal and the active bidding for it suddenly open the door to other big media sales—indeed, within the next five years every significant media company will change hands. It will no longer be necessary to pretend you’re dying in order to sell a company—everybody’s doing it. (A few months after the Ziff deal is completed, Murdoch observes a comely young woman on the same flight he’s on to Palm Beach. As she disembarks, she runs into the arms of a tanned and fit Bill Ziff, who will live another twenty-one years.)
Murdoch, having played his part in opening up the media deal flow, is now at the heart of it. (Any property that comes up for sale he’ll be called about—he’s a buyer of first choice, first approach; he’s atop every investment banker’s call list.) The fact that he is stuck with $350 million worth of trade magazines, which could not interest him less, is not so much an inconvenience as part of the compounding effect of the deal flow that he’s helped begin. The market is further heated up by everybody’s efforts not just to sell or to buy but to sell one thing in favor of buying another. The media is now a trader’s business. Indeed, Murdoch will very profitably rid himself of these trade magazines—as will CBS rid itself, also profitably, of its part of the Ziff deal—as a way to move into the movie business.
At this moment, in 1985, Murdoch is still a dedicated newspaper proprietor—fully two-thirds of his time is devoted to his papers, half of his time to literal newsroom matters: stories, headlines, coverage, politics, editors. But, again, there just aren’t enough newspapers to buy with all the capital available.
Hence, television.
Television stations are one of his fixations—in part because, given his immigrant status, his inability to buy television stations rankles him. He has no particular feel for network programming, but he likes station cash flow—Channel 10 in Australia is one of his big earners. As early as 1977, after the acquisition of the Post and New York, he had the Squadron, Ellenoff lawyers research just what it would take for a foreign national to buy stations in the United States. Alas, there’s no way around this; it would take U.S. citizenship, which even in the seventies he started to consider—he was willing, but his mother was the immediate impediment.
Another fixation is HBO, the leading pay-television channel in the country. Murdoch has a great respect, or in some sense childlike awe, for technology, but he’s pretty clueless himself. He’s got no practical grasp and very little intellectual grasp of technological transformation. But certain things strike him—it’s almost the shiny-object syndrome. Still, while HBO catches his eye, cable, which is the actual technological revolution of the moment—the one that HBO depends on—doesn’t.
HBO speaks to his precise self-interest: It’s a form of U.S. television that, because it doesn’t involve television stations, he could own as a foreigner. What’s more, HBO, which Time, Inc. started in 1972, is distributed by satellite. Satellites tickle him. He likes their stateless sense—that they might be beyond ordinary controls, outside of political interference and regulation.
Also HBO is then just recycling Hollywood movies. He does the calculation in his head: Buy the movies for X, resell them for X+. It’s dealmaking, not programming.
His fixation logically becomes about the idea of the film library. If he can own the titles, he’s in the loop. Again, in order to understand this, it’s necessary to understand not the vision but the lack of vision. Two-thirds of his mind is still concentrated on newspapers, s
ome more than nine thousand miles away from Hollywood. What he’s doing with the balance of his attention is thinking about what he can do to ensure that he can buy more newspapers when he needs to.
Indeed, when he buys Twentieth Century Fox, there are few people who have ever come to Hollywood less enamored with the place, less temperamentally suited to it, than Rupert Murdoch. It rubs against his every grain: its excesses, its sexuality, its anti-work ethic, its lax dress code.
The fact that he will play the Hollywood game as well as anyone is quite possibly due to his antipathy for the place. He’s here not for glamour but for cash flow.
He buys 50 percent of Twentieth Century Fox from the real estate magnate Marvin Davis, who, with commodities trader and financial schemer Marc Rich—who shortly flees to Switzerland to avoid fifty-one counts of fraud and tax evasion (to be pardoned eighteen years later by Bill Clinton)—purchased the studio in 1981. Davis, who bought out Rich’s interest for $116 million, sells it to Murdoch for $250 million in March 1984.
Murdoch may be the first person to come to Hollywood who has no interest in the movies or stars or show business itself. Davis, Murdoch’s new partner, is an especially vivid example of a Hollywood grotesque—obese and starstruck—who appalled and annoyed Murdoch.
Now, the Murdoch without particular social aspirations has nevertheless always made a point of knowing other dealmakers. He has gradually pushed, in his ten years in the United States, to know everyone at the dealmaking level of American media. This, in itself, is a kind of new perception about the nature of business. He’s an early, consummate networker. He dispenses with the country clubs or the golf course and the artifice that he has any other interest but business. He’s not interested in social contrivance and ritual and propriety, which have imposed a formality and courtliness and exclusivity on the business world (and have had the effect of keeping interlopers out).
He’s interested in efficiently knowing who he needs to know.
This includes John Kluge, who has assembled the largest collection of independent television stations in the United States. In a sense, because Murdoch has no friends and therefore does not judge people on the basis of compatibility, he can get along with Kluge, a man with whom few people get along. Kluge is a media mogul prototype. A bully and vulgarian of limited interests, he takes his public company, Metromedia, private in a legendary screwing of his shareholders, which makes him the first media billionaire. (When Kluge, at sixty-seven, married his third wife—a thirty-two-year-old—Anna Murdoch was the matron of honor.)
In March 1985 Murdoch agrees to pay a huge premium for Kluge’s six stations—almost double what stations are selling for at the time. It’s a transformation premium: He goes, in little more than a year, with the Twentieth Century Fox deal and the television stations deal, from a print publisher to the first truly all-media media company.
The television deal sets in motion the kind of radical changes and conflicts of interest that few companies can endure. Which is a key difference between News Corp. and other companies: Murdoch reduces the corporate issues to personal issues—it’s about what changes and contradictions he can endure.
Buying Kluge’s stations is the quintessential too-much-risk, too-many-moving-pieces virtuoso deal that helps turn business into such a satisfying spectator sport in the eighties. You cannot miss its existential proportions. If he pulls it off, he’ll be among the most powerful men in the world; if he falters, he’ll be roadkill.
Initially Davis is in the deal as well—which means that the stations will cost News Corp. an out-of-pocket $832.5 million, significantly increasing its already serious debt load. But Davis backs out of the deal in the middle of the financing, and the burden on News Corp. doubles. Murdoch also determines to get rid of Davis altogether, buying him out of the studio, which will call for another $325 million—and put Murdoch just behind the biggest entities in the media industry, the networks and Time, Inc.
In part, this is just a sign of the times: the sudden tolerance for heretofore undreamed-of levels of debt. After all, this is the most fundamental eighties alchemy: producing cash when you don’t have any. But on Murdoch’s part, it is also a simple financial trick. It’s the strange and wondrous advantage of dealing through so many different countries and financial and legal systems. In the United States, preferred shares, the type Murdoch is granting to the television station bondholders, are considered debt—you have to pay their holders what you said you would pay them before you pay anyone else; these preferred shareholders are not, like common shareholders, owners who are part of the fate of the enterprise. In Australia, however, preferred shareholders are considered owners—hence the value of their interest is not a balance-sheet minus but a balance-sheet plus. In the United States the television deal makes News Corp. worth $1.6 billion less; in Australia this makes it worth $1.6 billion more, which Murdoch can borrow against. (The WSJ will further point out in 1988: “Under Australian accounting principles, TV licenses, titles and other intangible assets aren’t deemed to have any finite life and thus don’t have to be counted as good will and gradually written off against earnings. Another quirk of Australian rules: News Corp. can eventually write up the value of…assets on its balance sheet if it thinks the properties are worth more than it paid. Such a write-up would raise shareholders’ equity and increase News Corp.’s borrowing ability.”)
What’s more, while heretofore determined not to sell assets, he immediately resolves to sell assets. “I need to sell you to buy television stations,” he says to David Schneiderman, the publisher of the Village Voice. Likewise, he sells the Chicago Sun-Times. As it happens, each sale helps confirm the higher value of his assets, which helps him borrow even more money: The Village Voice, whose $7.5 million purchase in 1978 included New York and New West magazines, now fetches, on its own, $55 million. The Sun-Times, bought two years before for $90 million, commands $145 million.
Among the series of fraught and radical decisions involved with his acquisition of the stations, none is as emotional as the one to take up U.S. citizenship—except not to Murdoch. It is everybody else who has a how-could-you? reaction. The message is clear—or it is received in this clear form: He will do anything to get what he wants, even abandon his own country. Forgetting the fact that he has lived in the United States for eleven years, and will go on to live in the United States for, at the very least, the next twenty-three years, adopting U.S. citizenship seems to be proof of his extreme cynicism.
Emotionally, the most troubling aspect of his great transition from print to multimedia magnate turns out to be the prospective loss of the New York Post. He believes, in fact, he can stare down the rule against owning a television station and a newspaper in the same market. He’s succeeded in getting waivers from the FCC through 1987, and, as he prepares for Christmas with his family that year, he has every reason to believe that the waiver will be extended. After all, the money-losing Post has little chance of being bought by another “philanthropic” newspaperman. But in a move that has all the hallmarks of typical Murdoch stealth, his old rival Teddy Kennedy, whom Murdoch has so frequently maligned in the Boston Herald, manages to sneak a piece of legislation through Congress as an attachment to a catchall appropriations bill that prevents the FCC from extending any waivers to the cross-media ownership laws or granting any new ones. The Supreme Court will eventually strike down that provision because it is directly aimed at Murdoch, but not before he is forced to sell the Post to real estate developer Peter Kalikow, who shortly afterward goes bankrupt.
But most tellingly, he does the one thing he’s sworn never to do, risk his control of the company—if the stations don’t perform, the bondholders will take over News Corp. He’s betting it all.
In the eighties there are many figures playing as aggressively as Murdoch—and lovingly covered by the Wall Street Journal—who will be only ever so vaguely remembered two decades later. And then there are others, including Murdoch, who are not necessarily that different i
n intelligence or nerve or cash position, but who will become, by the financial plays they execute in the eighties, among the wealthiest people who have ever lived.
So what is the difference between the former and the latter? Luck? Audacity? Crookedness? Or some kind of true belief, some special trust, in the nature of market forces and how the system is being transformed that lends you some further ability to hold it together?
It is hard to see Murdoch, so consummate a figure of cynicism and opportunism, as a true believer. And yet, as the eighties progress, as he goes from, relatively speaking, your most basic baling-wire-and-duct-tape business guy to a new sort of figure in the world—a man who on the basis of his own reputation has seemingly unlimited access to capital—Murdoch becomes one of the most righteous advocates of the changes that helped make him. He is, and sees himself as, the ultimate product of the liberated market—that is, when he does not see himself as the liberator of markets.
This is the point in his career when he is perhaps most in danger of the overreach, of the hubris, that ruins so many other figures of the time.
Indeed, in him the triumph of the markets is, as it will be in others, suddenly infused with Hollywood style. Murdoch—who, over the millions of air miles he’s traveled, has up until now insistently flown commercial—learns that his subordinate, Barry Diller at Fox, has his own plane. Murdoch decides he ought to get one too. The mogul ethic is born.
The Man Who Owns the News: Inside the Secret World of Rupert Murdoch Page 20
