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

by Michael Wolff

  Freud, who grew up in the London media scene, has even drawn his father-in-law into this club (membership in which Murdoch has always been strongly averse to). Freud makes it all so…symbiotic (the one thing News Corp. has never been).

  He just happened to know Prue back when she was a researcher for the News of the World’s “What’s On” column; he kept calling to offer her tidbits. And he happened to know Sun editor and News Corp. star Rebekah Wade from when she was nineteen. And Rebekah Wade happened to be introduced to Elisabeth when Elisabeth first came to London, and then…well, the three became best friends when Matthew started to get to know Elisabeth better as the BSkyB PR rep.

  In short order, Elisabeth publicly fell for Matthew while she was married and with two small children (including a newborn). Then, after she left her husband, she went off with Matthew, and got pregnant by him, with Freud leaving her not long after she had their child. (This against the backdrop of Murdoch’s own marriage falling apart.)

  But then Freud returned and married her before her very unwelcoming family at a very public wedding. Made all the more tense by a very pregnant Wendi. (Since their divorce, Rupert and Anna have had to see each other three times: at the weddings of Lachlan, James, and Elisabeth.)

  And they started a business together. It’s an example, finally, of true media synergy: Her name and his connections jump-started a scrappy television production company. If in the beginning it was more a hobby or statement, Liz, who in theory wanted a business that would let her be a mother of (eventually) four, threw her all into it and, by dint of family cheapness and tolerance for the mechanics end of the business—its main focus isn’t making hits but licensing “formats” (e.g., reality shows) into niche markets around the world—built a significant business. Indeed, as her father pursues the Wall Street Journal, she’s getting ready herself to make a dramatic acquisition that will position her company among the biggest independent television producers in the world.

  She has managed to build a media company apart from her father’s media company. This confuses him as much as it impresses him. He frequently imagines her moving back to New York or to Los Angeles, and he solicits suggestions for business opportunities in the United States for his son-in-law.

  Elisabeth so clearly is keeping herself at bay. Of course, the very process of denying him makes her all the more alluring to him. She seems pleased with having achieved this tension.

  Not too long after the Dow Jones deal is completed, Elisabeth and her father are riding horses together. Her seventy-six-year-old father is thrown and lies there motionless for a terrifying moment. Elisabeth thinks (as she will later relate to Prue): I’ve killed him.

  JAMES

  James, now destined to take over the empire (and the Murdoch children do call it “the empire”), may be the kid his father understands least of all. On James’ part, this might be calculated. A certain cat-and-mouse game with the old man. You can dodge him by talking over his head.

  His record label was either a conscious or instinctive move into the one area of media that his father has no interest or experience in. Music hadn’t ever been among the Murdoch media businesses. But suddenly he had a son full of A&R talk. A semi-hipster son with his hip-hop acts and bleached blond hair, which would soon be traded in (as soon as Pop bought the record label) for sharp suits and black, thick-rimmed glasses when he got into the Internet business.

  James grabbed the Internet business at News Corp. during the boom, setting himself up, in his mid-twenties, as technologist and futurist and digital leader. His father had no idea what he was talking about—but was pleased someone was doing the talking.

  And then satellites. James took over the Asian satellite operation in 2000, just months after he was married. Satellites were a business his father had been successful in but which, in essence, he didn’t know beans about. The satellite businesses in the United Kingdom and Asia had been run by strong-willed managers and technical people. Murdoch had supported them from afar. Hence once more, in James’ canny appreciation of his father’s MO—dominate what he understands, find someone to trust when he doesn’t—he put himself out of harm’s way. His brother, running newspapers, was bound to be second-guessed by his father in every decision he made; James, dealing with satellites, had a much wider berth (not to mention he was six thousand miles away). Of course, James himself knew nothing about the satellite television business—except that he had taken for himself, at News Corp., the technology portfolio. On virtually any issue involving technology, from the mid-nineties on, Murdoch would seek his son’s counsel, regardless of his having no established technological expertise.

  But, like so many people in the early Internet boom, James sure could talk the talk.

  His father has, curiously, come to believe that James is not just so much smarter about all this stuff than he is but better educated too—which is, Oxford graduate to Harvard dropout, not exactly true.

  Certainty comes naturally to James. He is the most articulate member of the family—really the only articulate Murdoch (the underrated Prue is his only rival). He’s all about constant, declarative conversation (although he is the only one of his siblings to put direct quotes from our interview off the record). It’s all challenge and menace. He wants to joust, clash, correct, instruct, prevail. He’s emphatic. Contrarian. No niceties.

  This became a terrible problem for his brother and father during board meetings in the late 1990s and early 2000s. James, the polemicist with absolute confidence in his analytic skills, didn’t let up on Lachlan (whom he has not let up on since childhood), who, in his markedly less articulate turn, tried to keep up and defend himself. Neither their father nor the other board members ever figured out quite how to deal with these sibling rivalry events.

  His powers of certainty and emphasis are directed not just at his brother; his father, among others, takes it too, with not just good grace but something like pride in his take-no-prisoners son.

  Alastair Campbell in his diaries described a dinner with Tony Blair, Murdoch, James, and Lachlan early in 2002. “Lachlan,” noted Campbell, “seemed a bit shy of expressing his views whereas James was anything but.” Murdoch gave his usual, and deeply felt, defense of Israel, and James, from across the dinner table, told his father that he was “talking fucking nonsense.” Murdoch went on, saying that he failed to understand the Palestinian complaints, and James replied, “They were kicked out of their fucking homes and had nowhere to fucking live.” Murdoch then said he didn’t think James should be talking like that in front of the Prime Minister—who said later how impressed he was that Rupert let his sons do most of the talking.

  James’ certainty has become part of a signature aggressiveness that he seems to think mimics, or extends from, that of his father. When I see him in London at the BSkyB offices, not long after he flew back from meeting with his father and the Bancrofts, he discusses the advantages of his father’s menacing reputation—with a pleased glint in his eye. “A little menace isn’t a bad thing.”

  But his father’s menace, which is cowboy-or outlaw-style menace, has mutated in James into a sort of programmatic, techno-manager, automaton-like cultishness. He surrounds himself with a coterie of same-age, same-look (short hair, dark suit, open-necked white shirt) fellow automatons. And from his mouth comes paragraph after paragraph of super-abstracted business-speak.

  His sister Prue, with whom he forms a likely voting bloc of two on the Murdoch family trust, refers—half affectionately, half mockingly—to his OCD. (The first to have children, Prue noticed James’ horror one day as they ate dinner on his yacht and her youngest child, Clementine, then age five, ate her spaghetti with her hands. “Because James is almost obsessive-compulsive, he started having contortions,” Prue recalls. “I had hoped that he would learn the lesson about children when he had his own. But no, James’ children are perfect. Elisabeth’s children are perfect. Lachlan’s children are perfect. And I have got the ragamuffins.”)

  Each of Ja
mes’ siblings, and perhaps his father too, seems to view him as having particular Martian qualities—which may complicate things when he needs their support on the trust.

  For one thing, he’s not much fun. Lachlan and Elisabeth are highly social creatures, if not glamour-pusses, and Prue is relaxed and insistent that what you see is what you get, while James is…remote. Harsh, intense, judgmental, deeply involved with his own perfection. He seldom goes out. (When he does, his hosts are apt to worry about whom to seat him next to.) He avoids press. He leaves the people with whom he does interact feeling invariably lesser and one-upped.

  And, truly, he is rather fearsome.

  His arrival at BSkyB, which was met with some serious opprobrium, required a special brazenness. This was, after all, a major independent public company, and here he was, the inexperienced, barely adult son of the chairman of the controlling shareholder being handed the top job. True, his arrival was carefully orchestrated by his father (there was Murdoch’s deal with Conrad Black that his papers would go easy on Black’s legal problems if Black’s Telegraph went easy on James’ appointment at BSkyB), as well as Murdoch calling in favors from investors in London’s financial community. But what finally carried the day was James’ own relentlessness. He stared everybody down. As British investors were wiping 19 percent off BSkyB stock on one day in 2004, James was adamantly telling them that he would make the outrageous target of eight million subscribers by 2006. By the time his brother announced his resignation in July 2005, it was clear James would exceed all of the company’s goals—and suddenly the non-Murdoch British press seemed happy to call him the deserved heir apparent.

  And then he really made his bones: He faced down Richard Branson.

  The Virgin chief has long bedeviled the Murdochs. He’s been an occasionally irritating force in the media world—Virgin was one of the early partners in BSB, the Sky satellite rival—and has for years tried to insinuate himself into media significance. But more annoyingly, he’s confoundingly taken the entrepreneurial outsider role and fashioned himself into a cultural hero. And if Murdoch has never needed to be or even wanted to be a hero, it is nevertheless galling that this imitation rebel gets the role—and then uses it to bother the Murdochs.

  Branson was looking to invest in satellite’s nemesis: cable. Now, BSkyB had beaten out cable before, introducing digital television in 2002 and tying up key sports rights, in the process flattening dominant U.K. cable operator ITV. But, by 2006, ITV was back in the game, offering broadband service to its U.K. customers. BSkyB understood it needed a broadband option, too, but that would take some time to roll out, time it believed it had because the U.K. cable industry was so inept at marketing itself.

  But then along came master marketer Branson, whose Virgin Media might give cable what it didn’t have: a consumer brand and entertainment razzmatazz. Branson proposed merging Virgin Media with ITV, which would give him control. BSkyB—and James Murdoch, if not Rupert Murdoch—saw this as a threatening alliance of two organizations it had previously defeated.

  In 2006, as Virgin Media and ITV were negotiating their merger, James Murdoch swooped in, dead of night and all, and bought 17.9 percent of ITV, seriously lousing up the Virgin Media deal.

  It was so Murdochian: the suddenness, the secrecy, the game-changing aspect of it, the eight-hundred-pound-gorilla-ness of it, the lack of manners and civility, the audacity. Actually, it was audacious, in part, because it was such a crummy deal. News Corp. would never be allowed to buy the whole company (it probably wouldn’t want it anyway), it paid way above market value, and it would probably be forced at some point to sell its position (and, in fact, it is eventually ordered to do so), prompting losses of more than a billion dollars.

  On the other hand, this bad deal bought BSkyB probably three years to get its broadband play in place without a serious competitor. But it doesn’t really matter whether the three-year lead is worth the billion or so it costs—what matters is that the Murdoch kid did something his old man might have done.

  Throughout the Dow Jones deal, James is his father’s constant confidant. In James’ telling, everybody else—Chernin and Ginsberg not least of all—is resistant. It’s he and his father toughing it out. Dow Jones is their move.

  They’re in it together—on the same emotional wavelength.

  Indeed, on July 4, when James and his father, having traveled from Jamie Packer’s wedding in the south of France, are at the America’s Cup in Valencia, when it looks like the Dow Jones deal is heading south, when everybody else is trying to calm Murdoch down, James proposes the series of ads that will later appear as the valedictory announcement—the “agent provocateur” ads—but which now James suggests as the way to tell the Bancrofts to fuck off.

  The father is saying, “No, no, no, they’ll come around—we’ll just hold the line.” The son is saying, “Pull the deal—that’s the way to get them to be serious.”

  His father, perhaps most of all, is wowed by the boy’s pure aggression, by his fight, by his fearsomeness. Which is why the old man figures that, as he chases the Journal, it’s time to move James up. Having proved his Murdochness, he’ll get, in addition to BSkyB, all of Europe and Asia too—making him number three in the company.

  FIFTEEN Putting the Deal to Bed

  JULY 2007

  The message being sent about the Dow Jones deal after July 4—that Murdoch is ready to walk away from the deal—is entirely wrong.

  It’s true that he’s pissed off—pissed off by the hand-wringing of the Bancrofts. But it isn’t true that he’s going anywhere. This is just dealcraft: the walking-away gesture. Actually, by this point, it ought to be clear that, having so publicly endured such a bizarre and dysfunctional deal process, it ought to have been clear he’s not going anywhere. That he is as sentimentally and as fatally attached to this deal as the Bancrofts are.

  But for the Bancrofts, the image of Rupert Murdoch slamming shut the iron door and pulling up the drawbridge is suddenly a very primal and threatening one. It begins to feel like an existential moment to them—to be or not to be sellers.

  This figure of a mercurial and threatening Murdoch is drawn most clearly from the reporting in the Wall Street Journal itself and, to a slightly lesser extent, in the New York Times. Both papers have quite misunderstood the reality of the situation and of Murdoch’s desires. In the dominant narrative in both the Journal and the Times, the Bancroft family is resisting the deal and Murdoch is getting closer and closer to taking a hike. The real narrative is the opposite: Key Bancroft voting blocs are favoring the deal (while this represents just a handful of Bancrofts, it also represents enough votes to do the deal) and Murdoch understands that, in fact, it’s all going quite in his favor. Indeed, it’s going so much in his favor that he’s suddenly thinking he can save the sweetener he had been prepared to offer Dow Jones on the $60 offer—if need be, as much as another dollar or two.

  In fact, he’s able now to use Dow Jones’ and the Bancrofts’ sudden, late-inning bid for a little more money as a pretext for his contempt and mounting annoyance—and as a rationale to walk away (or pretend to). Murdoch, with his $60 bid, is the righteous one; Dow Jones and the Bancrofts are the greedy ones. They don’t deserve him.

  Such is the predicament that most of the Bancrofts, or at least the Bancrofts not directly involved with the deal process—which is most of them—come to understand: Their family’s greed and bad behavior have made Murdoch mad.

  At the Journal, the main reportorial sources are the most resistant, and most vocal, Bancroft family members: Christopher Bancroft and Leslie Hill, two of the four Bancroft family board members. The third family board member, Lisa Steele, who controls one of the most significant voting stakes, isn’t talking much; nor is Michael Elefante, the trustee with the most clout, who favors the deal. Reporters at the Journal and at the Times are also talking to the bankers and lawyers, all of whom are pushing the deal and, accordingly, the idea that Murdoch will walk away if it doesn’t happen soo
n.

  The family “farted around, they were dysfunctional.” Nobody “could corral the cats, and it dragged and it dragged and it dragged, and Rupert got pissed. We started losing Rupert’s goodwill,” one of the Dow Jones lawyers will say after the deal is done, in a reasonable précis of the message that the professionals are spreading.

  And then there is the Denver Trust. The Denver Trust represents Hugh Bancroft, Christopher Bancroft, and Kathryn Kavadas, with 9.1 percent of the voting shares, but it has no family members as trustees. Its trustee, Lynn P. Hendrix, a Denver lawyer, believes he has to act in the best interests not of the family, or Dow Jones, but of the trust itself. His job, in other words, is to get the highest return possible on capital. In this pursuit, he is aided by Rob Kindler from Morgan Stanley, who, when he was at JP Morgan Chase, had represented Dow Jones, and who has struggled since the early days of the offer to get in on the deal, finally snagging the Denver Trust as his client. Hendrix and Kindler, by early July, are taking an unreconstructed financial view: The controlling shareholder should get a premium. That is, if the Dow Jones shareholders get $60 for the shares, the controlling shareholders should get more because their vote is worth more. Or if $60 a share is the total price, then the common shareholders should get less of it and the controlling shareholders more of it.

  While a control premium is illegal in some states, it’s not illegal in Delaware, where Dow Jones is incorporated. Rewarding shareholders inequitably is, however, a lesser practice, a gaucherie, not a blue-chip way to go. The Dow Jones board—including the Bancrofts on the board—says it won’t approve a control premium deal. The Denver Trust’s initiative rattles many of the Bancrofts, highlighting the conflict between their ideas of fairness and their desire for more dough. In some sense, fairness wins out. In an inversion, not asking for a control premium and just selling the company for $60 a share actually begins to feel like a virtuous thing to do.