Now, again, it is instructive to compare the flow of this deal at News Corp. with how it might play out at other companies. In other companies, if a deal is perceived as being likely to have a negative effect on the share price, there are few circumstances in which it gets done.
The presumed effect of News Corp.’s acquisition of Dow Jones is that the News share price will plunge. By some estimates the cost of this $5 billion acquisition could be more than $20 billion in shareholder value. DeVoe, Nallen, Jacobs, Ginsberg, and all those whose wealth depends on stock options should rationally be less than enthusiastic about such a deal—and finally be the voice of reason in not letting such a deal happen (by force of logic, foot dragging, or general negativity). In fact, only Chernin is the reasonable figure—his neutrality is the elephant in the room. While he can’t openly oppose Murdoch, he can, at least, not waste his time. In Murdoch’s view, Chernin has not been given an opportunity to have an opinion about the deal. And why would he? He doesn’t, as Murdoch often points out, even read newspapers.
The extrabusiness-like allegiance to Murdoch, the desire among the eighth-floor gang to please the boss even at your own expense, mirrors the extrabusiness-like characteristics of News Corp. itself. In a world in which corporations have long been conditioned to respond to shareholders’ short-term needs, News Corp. has always been more interested in expanding its power than in getting a high return on capital. It isn’t about what shareholders want; it’s about what Murdoch wants.
Indeed, the guys on the eighth floor save it for him. They could let Dow Jones go, but he wants it bad, and they want him to have it.
As the cleanup proceeds on the eighth floor, the Bancrofts’ draft of the editorial protection agreement finally arrives—eighteen days after the meeting in the Wachtell, Lipton offices.
Leslie Hill has solicited the opinions of lots of people on the Journal staff about editorial protections. In another of those extraordinary moments of helplessness or haplessness or suicidal optimism—quite similar to what had happened at the Times of London twenty-six years before—the Journal editors didn’t resist at all, but helped craft an idealized framework for their theoretical editorial independence. Marcus Brauchli, the new managing editor, who had officially taken the newsroom reins from Paul Steiger on May 15, was the most active participant in designing this instrument, which would, in the end, not protect him at all. Josh Cammaker, culling the family’s thinking and incorporating Brauchli’s advice, drafts the agreement that is finally sent on Friday, June 22.
When Marty Lipton delivers the agreement to Murdoch in the morning, he says, “You’re not going to like this.”
Later, after he reads it, Murdoch calls Lipton and says, “I’m not disliking it—I’m just insulted by it!”
The insult is that it actually does what they’ve been discussing—it protects the paper from Murdoch’s interference. It calls for a thirteen-member editorial board, for which the Bancrofts will appoint ten members, and what’s more, it gives this board control over not just the editor but the publisher as well.
So…
“I wrote a letter,” Murdoch will later tell me, “withdrawing the offer and telling them to fuck off.”
There’s a conclave that afternoon of the eighth-floor team—with James Murdoch calling in from London—and they get Murdoch to cool off.
While the storm and stress that Friday are genuine—there is nothing that so provokes Murdoch as someone trying to trump him—it is, nevertheless, ramped up several notches to accommodate a reporter from Time magazine, with whom Ginsberg has negotiated special access in return for special consideration. News Corp. is waging its campaign: Ginsberg will set up the scenes and vet the quotes in an effort to make Murdoch look like a reasonable (and, ideally, heroic) fellow trying to persevere in his dealings with the frustrating, irrational, odd Bancrofts—which is, basically, the Time cover story that appears the next week.
Murdoch revises the letter—there’s no “fuck off,” but it’s still harsh, laying out all the frustrations of the last two months of dealing with the Bancroft family—and gives it to his lawyers to send. But it doesn’t quite get sent. Instead, Ginsberg revises it once more. Murdoch, considering Ginsberg’s draft, calls Robert Thomson at the Times of London, getting him to take a stab. Thomson’s draft, reflecting Murdoch’s continued irritation, is less equivocal, outlining all the objections to the editorial agreement and setting out an ultimatum: It’s what Murdoch wants or nothing. This is on Saturday—with the Time reporter still sitting in Murdoch’s office. The plan is to release the letter on Sunday.
But Ginsberg once again weighs in and says he’d like to take a stab at calling Dick Beattie, his former mentor at Simpson, Thacher. Ginsberg spells out to Beattie all the nonstarters in the family’s proposed agreement. Without an immediate retreat, Ginsberg says, the deal is finished, over, kaput.
Now, this is, in many ways, the point: Some family members want to kill it—well, sort of want to kill it. The agreement is a passive-aggressive way to do just that. By calling Beattie, Ginsberg goes over the head of the family and puts it on the advisors’ plate, knowing that the advisors will raise their voices in concert—Beattie, Lipton, Cammaker, Costa at Merrill, the guys at Goldman—to say that if they don’t want to do the deal, don’t do the deal, but that it has to be a choice independent of the editorial agreement, which, written this way, does kill the deal.
So, do they want to kill the deal?
No. Maybe. Not yet—still thinking.
Okay, then, in order not to kill it, the Bancrofts are told, they’ll have to scale back on the editorial protections. So let the lawyers work out acceptable language.
By Sunday morning, the Bancrofts have retreated.
REMAKING NEWS
The joy, the anticipation, on the eighth floor is about Murdoch, once more, getting to reinvent himself. But the irony, of course, is that he is trying to reinvent himself with a newspaper. The guys on the eighth floor, in addition to getting the deal done, somehow have to get Wall Street not to notice the fact that the deal is for a newspaper.
In developing their story, they go with Robert Thomson’s digital blah-blah. Thomson, who will take command of the Journal newsroom if the deal gets done (no matter that News Corp. is, at the same time, saying it would not take over the newsroom), is all for the story being that the Journal will be the basis for an international platform of business data, sliced and diced for distribution systems and opportunities, both present and yet to be imagined. He sits down with the News Corp. PR people and dictates the digital language—and it works; people believe it, the share price holds.
Pay no attention to the fact that Murdoch doesn’t get e-mail, use a computer, or even, really, know how to work a cell phone. Or to the fact that he rushes to his desk every morning to flip through the paper he is trying to buy, ripping the broadsheets back, slashing at them with his finger, delivering—as the world with more and more equanimity accepts the imminent death of newspapers—a determined and aggrieved seminar on what makes a good newspaper page.
While the eighth floor is proclaiming News Corp.’s grand design for Dow Jones, it is, at the same time, wondering if the old man has any clue at all about what he is going to do if he gets it. Meanwhile, they are pleased to baldly misrepresent the old man’s real interest in Dow Jones being about digital hoopla. There is a large joke here with many nuances.
News Corp., the most retrograde, technologically resistant company in the media business—its newsrooms are outfitted with ancient computers, its Web sites are balky and cheap-looking—is, mostly by the sheer force of News Corp. people simply saying otherwise, actually thought to be technologically cunning and prescient and even hip (the one thing News Corp. has definitely never been).
The fact that News, in a fluke of dealmaking, has ended up owning MySpace, an au courant Internet company (well, au courant circa 2006), is amusing and baffling to most News executives.
Still, while the company knows no
thing, and cares less, about technology, it does know something about transformation. That it has experienced a greater level of speeded-up mutation than any other enterprise its size, that it has welcomed such constant overhaul and sudden shifts in direction, makes it, in a sense, a credible advocate for dealing with the exigencies and upheavals and revolutions of the information age.
This is lesson number one at News Corp: Nobody has the time, temperament, or perhaps the IQ for complicated explanations. So do it first and figure it out later.
No, no…that’s actually lesson number two. Lesson number one is that if he wants it, hell, that ought to be a good enough reason for everybody else.
ESCAPING HOLLYWOOD: 1990–1997
Everybody on the eighth floor will assure you that Rupert Murdoch knows all, always—except if you press just slightly, then, in an instant, you’ll have everybody marveling about the luck and happenstance and general disorganization and ad hoc nature inherent in everything that happens at News. In fact, it is all so frequently random, so uncorporate, so seat-of-the-pants, that the only explanation for the company’s epochal transformations—at the same time, oddly, that so many things stay the same at News—is that Murdoch must, in fact, however much the evidence contradicts this, know all. The proof is in the pudding? From 1954 until 1968, he was building a midsize Australian newspaper company; from 1968 until 1980, he was turning himself into an international publishing entrepreneur; and from 1980 to 1990, in a transformation almost as dramatic as the hand-tooled auto industry morphing into an assembly-line colossus, Murdoch turned his publishing company into an integrated multiplatform content-creation and distribution conglomerate.
Then, in 1990, along with so many businessmen of his type and period, he reaches the natural wall, the inevitable ebb, quite likely even the end, of his personal business cycle: a credit crisis. He can’t meet his short-term debt obligations. He has grave troubles renegotiating his loans because of the great number of banks holding his paper—if one bank refuses to go along, likely they’ll all push him into bankruptcy.
He shows up one evening in London at Prue and Alasdair’s house. He’s weary but calm, telling them that the likelihood is that he’ll lose the company. During the months when the outcome is in doubt, his hair will turn entirely gray (as opposed to the orange it became after that). The best case is to come through with a diminished, fractional company, whose growth will be constrained by its lenders. He’ll be working for the banks.
In some radical and magical transformation, though, the master of the media universe turns into a chastened hat-in-hand supplicant, and by 1991, having missed bankruptcy by a hair, he’s begun to recover from the nearest-to-mortal moment of his business life.
Still, it’s a funk. He’s seriously sidelined.
For his sixtieth birthday, he’s shipped off to a health farm in Tucson, Arizona, where BSkyB executives turn up to tell him that they won’t make payroll that week. Murdoch, at 10 A.M., in his track suit, pours himself a drink.
At a conference of company executives in Aspen at this time he even allows on the agenda the topic of himself. Maybe he’s the problem. His very inclinations and personality may be the problem—his need for constant change and new conquests. Of course, when some executives actually entertain the notion of his being a liability and see some merit in his pulling back, he immediately takes the subject off the table.
He’s stuck with intractable issues: banks—and his wife.
Anna is forty-seven. She’s steely, incredibly disciplined, and has been an absolutely vital adjunct to the management of his business—she’s been a great corporate spouse. But you can’t miss (he certainly hasn’t missed it) that she’s a martyr too. It’s not just that he’s been absent for so much of the time and that she’s lived with the constant agitation and upset of him arriving and departing, but that she’s had to struggle for, become so shrewish about, every little thing she’s wanted from him. By 1991, Elisabeth, twenty-three, is out of college; Lachlan, twenty, is finishing up at Princeton; James, nineteen, is at Harvard. She’s done the vast share of the parenting. She’s even raised—with great friction—stepdaughter Prudence, now thirty-three. His contribution to child rearing has been not much more than the star turn. They adore him; they suffer her. She can take that. But now, particularly with the children gone, she wants…a life. A place. An acknowledgment. A reasonable plan and design.
There is actually reason for her to believe she can get this, because Rupert is henpecked—at least when he’s around. He accedes to strong women—if they can catch him. He gives in, however begrudgingly. His life outside of the office—at least when he’s not in transit—is what she wants it to be. She gets him out to charitable events (although he gives parsimoniously) and cultural events such as the opera (where he sleeps).
She’s ambitious too. She’s gone back to school, gotten a college degree from New York University. Then, in the eighties, while he’s nowhere and everywhere (although not at home), she wrote two novels—bodice-ripping types. One, in fact, is about the trials of dynastic succession in a family publishing empire. This development irks him—and hurts her when he, under his breath (but not enough under his breath not to get into the papers), ridiculed her writing. Anyway, it’s part of the new understanding. She’ll stop with the embarrassing books if he’ll be a better husband.
The bargain in 1990 and 1991 is explicit. She’ll accept—and even be supportive of—his almost total emotional departure from their home life during his business crisis. She’ll grin and bear it on the understanding that things will be different upon his return. He’ll be a different person. He’ll slow down. Begin thinking about retirement, about the transformation to a post-empire, post-work life. Anna—a precise, organized, get-on-with-it type—has begun planning for their post-credit-crisis life together, their scaled-down, depressurized, semiretired life.
If he does get through his credit crisis, he figures he’ll renegotiate.
He does get through it. He’s been granted a do-over. So all the energy he’s spent for the last forty years on what next to buy and take and subsume, he decides now to refocus on running the businesses that he already owns. It will be a new sort of business discipline—a real, grown-up business discipline.
Focused on transforming himself and behaving himself, he moves to Hollywood, because this is where the company now has its big growth interests—the Fox network and the movie studio—and because this is where Anna wants to live. And because he no longer has the New York Post to hold him to New York. And because he can sell the Manhattan apartment—and, frankly, he can use the cash. While Hollywood isn’t exactly the retirement Anna wants, it does feel more relaxed than New York. (Plus the house here needs to be redone. It’s a tried-and-true strategy of the old-school executive husband: occupy the wife with decorating a house. He’ll employ this strategy with Wendi too.)
Murdoch sees his role in Hollywood as perhaps something like that of Lew Wasserman, the CEO of MCA and Universal, and, for more than a generation, the most powerful man in the business. A force in politics and the community. A man of respect. A godfather. The world parts for him. Murdoch is vastly richer and more powerful than Wasserman ever was—so why not take the title? (Also, he and Anna live in the former home of Jules Stein, who was Wasserman’s boss through the 1940s, ’50s, and ’60s.) This will also please Anna. Old Hollywood, the Hollywood of Lew Wasserman and the Reagans, is a place that could be home for her.
For Anna, it’s almost an acceptably transformed life, in Jules Stein’s hacienda-style house in the hills. She even has an office on the executive floor of the old Fox building, across from Rupert’s office. They’re on the lot. It’s got some magic. Anna herself, with her highly structured blond coif, seems, in the commissary, almost like a retired star.
Being the new Lew Wasserman, the new king of Hollywood, is an okay plan, except that there’s the Diller issue. Fox is Barry Diller. Murdoch hasn’t ever worked with someone who might be as important as Mu
rdoch himself, or as feared, or as central. At Fox, with Diller running it, Murdoch is in the way. Too many cooks. And to boot, Diller, the architect of News Corp.’s acquisition of the studio and the launch of the Fox Network, has broached the subject of his greater participation in the company, of his becoming part of the ownership structure, of being a meaningful stakeholder.
It’s a collision of cultures.
Diller represents corporate America’s upper managerial class with its inherent claim on equity. Diller also represents Hollywood—he’s the insider. Murdoch’s the outsider. If Murdoch wants in, it will cost him (it’s no different from the partnerships Murdoch will shortly be making in China to smooth his acceptance).
Murdoch, for his part, is fundamentally anti-corporate; he’s monarchical (pay no attention to his decades-long battle against the idea of monarchy). In his mind, it’s foreign, offensive, louche that an employee, a commoner, would suggest a leveling of their relationship, a dollar-and-cents reinterpretation of their relative position and value.
Actually, in some sense, he doesn’t even hear the offense; he blocks it out. In hindsight, Diller will recognize that as he himself was becoming more valuable to the company, as he became more identified with Fox, Murdoch was becoming less interested in him, colder, diffident. Diller is hardly the first News Corp. executive to have wholly misunderstood his value to Murdoch, to have assumed a three-dimensional relationship where only a flat one exists.
And, simply, Murdoch wants Diller’s job: Murdoch wants to be the Hollywood boss—has got to have it if he’s going to be out here.
They split relatively amicably, with Diller getting a vast payoff—and bequeathing Murdoch, in some ultimate mischief-making scenario, the frictionless, even transparent, future king of Fox and monarch of Hollywood, Peter Chernin.
The Man Who Owns the News: Inside the Secret World of Rupert Murdoch Page 31
