Conrad Black

by A Matter of Principle

  Technically, of course I did have control of the newspaper, but I was always wary, there as in the National Post and elsewhere, of imposing my will too strongly on valued editors, other than for the most overwhelmingly important issues. I asserted my views forcefully but have met the full range of editorial resistance tactics. Raising children is a good formation for dealing with editors and journalists. They are all fiendishly clever at promising compliance with the wishes of the owner, appearing to give superficial adherence while in fact continuing in their exceptionable practices. A cat-and-mouse game ensues, in which my refusal to be made a mockery of struggles for mastery with my desire not to have to micro-nanny every detail of the production of the newspaper and my concern not to be ground down by arguing endlessly with the editor and his entourage.

  In Moore’s case, the entourage was what is known as the leader conference, the editorial page writers. They were a medieval collection of learned eccentrics. Where Max Hastings had been impatient with comment and published banal editorials, except for those on military matters, Moore was preoccupied with comment. Both Max and Charles are elegant writers: Max a vigorous journalist and Charles a fine commentator. But where Max was impatient, Charles tended to adopt, or at least propose, positions that were, to say the least, impractical, which aggravated our problems of seeming to be an esoteric, or even reactionary, newspaper. I found myself fighting hard to prevent the newspaper from dedicating a section to the five hundredth anniversary of Archbishop Cranmer’s death at the stake.

  The lot of the proprietor, especially if he has an international business to run, is not easy if he aspires to uphold a line against the guerrilla activities of his editors. There may be more instances of proprietorial abuse than of irresponsible editorial positions, but finding the right balance depends on the relationship between the publisher and the editor.

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  WE GREW QUICKLY INTO A far-flung newspaper company. We rolled in the newspapers we had bought between 1969 and 1974 (Prince Rupert, B.C., Daily News; Summerside, Prince Edward Island, Journal Pioneer; and others) and those that David Radler had added since. We had a group of French-Canadian newspapers, including the slightly historic Le Soleil of Quebec City and Le Droit of Ottawa, and began acquiring small American community newspapers, ultimately owning such newspapers in thirty-one states. The Telegraph flourished, and we were able, in 1991, to borrow against its earnings to buy the largest stake in the leading Australian newspaper company, Fairfax, which had gone into receivership when a leveraged buyout put twice as much debt on the company as it could afford to carry.

  The Sydney Morning Herald, Melbourne Age, and Australian Financial Review were fine titles, but the Australians were paranoid about foreigners. Australian prime minister Paul Keating allowed us to raise our percentage of shares in these papers from the initial 15 per cent to 25 per cent but, frustratingly, did not allow us to go further, to 35 per cent as he had indicated a willingness to do. Keating was an extremely entertaining and in some ways brilliant man, a likeable scoundrel – a larrikin, in Australian parlance. But by this time, the legendary Kerry Packer, Australia’s most formidable resident businessman, owner of a television, magazine, and casino company, who had initially organized our bid and then been forced out by a combination of cross-media ownership rules and political pressure, had become resentful of our position. He was also hostile to Keating. Keating claimed that with the physically imposing Packer and me, he was choosing between “a 900-pound gorilla and a fucking Thesaurus.” He was not a solomonic judge. As political and business skirmishing accelerated, my talented friend and associate Dan Colson, with whom I had gone to the law school at Laval, visited the opposition leader and next prime minister, John Howard, arriving concealed – to avoid the press – under a blanket in the back seat of an automobile as it entered the garage of Howard’s office building. Finally, we concluded that owning 25 per cent of Fairfax but having entire responsibility for it was not a long-term strategy we wished to pursue. We sold out at a $300-million tax-favoured gain.

  In 1992, we bought a 23 per cent block of shares in Canada’s largest newspaper company, Southam. Torstar (publisher of the Toronto Star) had sold out to us because it had been ring-fenced and confounded by the independent directors and the remnants of Upper Canada’s old families who had controlled the company for most of its history. Southam owned the only, or the leading, newspapers in Montreal (English language), Vancouver, Ottawa, Edmonton, Calgary, Hamilton, Windsor, and several smaller cities. Southam was a serious contributor to the Canadian malaise, as I conceived it. Meekly publishing derivative, dull, and complacent newspapers, and without owning one in Toronto – Canada’s principal city – the country’s national newspaper company deprived itself of any influence. I was confident that Southam could be turned around quickly, in product quality and financial performance.

  As our newspaper company grew, I attempted to combine aspects of the traditional newspaper owner with contemporary requirements of corporate conduct. I did believe in trying to do things with a little style and to use the access accorded the press to become acquainted with leading figures in different fields while never forgetting the obligations of heading a public company.

  When I entered the newspaper business in Quebec in the late 1960s, it was a commercially good business, not particularly labour or capital intensive, generally yielding an operating profit margin of 20 per cent or more; that is, a fifth of its total revenues was profit, before allowing for depreciation and taxes. Managerial talent in the industry was spotty. There were some inspired cost-control managers, of whom the most famous was Roy Thomson.

  There were very few newspaper companies that were seriously concerned with both quality and profitability. The Washington Post was one of the few.

  In general, the chains deadened newspapers, made them bland, cookiecutter purveyors of wire service copy and uniform soft-left reporting and comment. Few managers had any newspaper editorial experience, and most assumed that if more money were allocated to the editors, this would improve the content of the newspaper in the hands of the reader. More often, it merely compounded the existing shortcomings.

  The key is to engage the best personnel, control the numbers of staff, and insist on – and reward – high professional standards. The old Southam was a prime example of the Faustian bargain in which non-interfering owners are praised as ideal as long as they are extravagantly indulgent of the editorial workforce. In the last great boom of the newspaper industry, profits were such that the editorial department could be given a blank cheque for cost and quality – profits would still roll in, enabling management to look good while basking in the praise of the working press. It was a commercially fragile and intellectually corrupt arrangement.

  The most important function of the editor or publisher is to assure a just tenor to the newspaper while encouraging lively writing and an imaginative variety of perspectives, and enforcing as strict as possible a separation between reporting and comment. We rarely asked the editors for more than equal time for our views, which were an economically conservative and, in foreign affairs, generally pro-American alliance position. We didn’t try to banish contrary opinion or slant reporting. Our record was not perfect, but it was pretty good.

  Gradually, I bought out my brother and the other partners at substantial profit to them. We privatized Argus Corporation, all of these share acquisitions financed by the sales of the old Argus constituent assets. In 1992, Argus Corporation and its affiliates owned about 40 per cent of Hollinger, which owned about 65 per cent of the Telegraph, 23 per cent of Southam, and one hundred of the smaller Canadian and American newspapers. The Telegraph owned 15 (and then 25) per cent of Fairfax (Australia). There was a fair amount of debt, but the group was solid enough, and the promise lay in the possibility of gaining absolute control of Southam and Fairfax.

  This was the scene shortly after I married Barbara Amiel in 1992. Hollinger was a good but modest company, with many bits and pieces and quite
a lot of debt but possibilities for dramatic growth. The central engine was the income generation of the Telegraph. If that continued and was amplified, if our Australian and Canadian positions could be transformed to ownership of the flows of cash those assets could produce under serious management, and if the newspaper industry did not give way under technological pressures or the deliteration of society, great prospects beckoned.

  I ALREADY REGARDED RUPERT MURDOCH as the greatest media proprietor of all time. He had come from a faraway place, had conquered the London tabloid field, buying the derelict Sun from the Mirror and swiftly outpacing the Mirror. He had cracked the Fleet Street unions that had reduced the industry to a financial shambles for decades, and I was the only Fleet Street chairman publicly to acknowledge the debt we owed to Murdoch for this. We all were able to pension off most of our workforces, automate the typesetting and printing processes, and see the whole industry move from the financial margin to solid profitability. Murdoch was a modern pioneer of media integration, buying a film studio and television stations, and he was about to crack the triopoly of television network domination in the United States and break new ground in satellite television.

  We had a joint printing venture in Manchester and several other direct arrangements with him. I had always found his word to be fairly reliable, and he was a straightforward negotiator. He developed astonishing enthusiasms at times. Once, he telephoned to urge me to buy the satellite transmission air space allocated to Canada by treaty with the United States in order to fill it with his American-directed signals. I replied that there would be an international dispute over which country would have the honour of prosecuting us: the Canadians for piracy or the Americans for trespass.

  Personally, Murdoch is an enigma. My best guess is that culturally he is an Archie Bunker who enjoys locker room scatalogical humour and detests effete liberalism. I have long thought that his hugely successful animated cartoon television program, The Simpsons, is the expression of his societal views: the people are idiots and their leaders are crooks.

  His airtight ruthlessness does have amusing intermissions. From time to time, he conducts a campaign to humanize himself in the media of others: appearing recumbent on a bed in one of the glossies; dressed in black, with dyed orange hair, pushing a baby carriage in Greenwich Village; explaining to the Financial Times that he was on guard against errors and arrogant misjudgment in his company; claiming to be a churchgoer and mentioning his possible conversion to Catholicism.

  Murdoch has no friendships, only interests; no nationality emotionally – the company he has built is his nation. Except Ronald Reagan, and perhaps Tony Blair, he has deserted almost every politician he ever supported, including Paul Keating, Margaret Thatcher, John Major, Jimmy Carter, and Hillary Clinton, to several of whom he owed much.

  In the summer of 1993, my wife Barbara and I chartered a boat with some friends in the Aegean. While loitering around the Greek islands, I read of Murdoch’s plan to restore The Times’s strategic position by lowering its cover price. He would start with a regional discount only. But, knowing Rupert as I did, knowing his compulsive belligerence as a competitor – and his daring – I was sure that if there was any encouragement in the response, he would cut prices very aggressively. Across the gleaming waters of the Aegean, with its splendid yachts and frolicking porpoises, I saw a disquieting vision of the economics of the British national newspaper industry being torn apart by my formidable competitor.

  It was not an idle concern. The preliminary results were encouraging enough, and the Furor Murdochus that I had feared ensued. The Times cut its cover price from fifty pence to thirty pence. The Telegraph was at forty-eight pence. We remained there for six months, gamely doing our best with contests, promotions, discount coupons, and so forth, and generally held the Daily Telegraph’s circulation at just above a million, almost as great as the combination of its three broadsheet rivals: The Times, Guardian, and Independent.

  The tabloid market was largely dominated by Robert Maxwell’s Mirror and Rupert Murdoch’s Sun and News of the World. Maxwell was a notorious figure, obscure, immense (more than three hundred pounds), bombastic, a vintage charlatan. A British government inquiry declared him unfit to be a director of a public company. His dealings with Iron Curtain dictatorships were particularly contemptible. “Tell me, President Ceaušescu, why do your people love you so?” he asked the Romanian president a few weeks before Ceaušescu was overthrown and executed amid popular rejoicing. Following Maxwell’s death in 1991 and the collapse of his company into receivership, Murdoch had cut the cover price of his own tabloid Sun, which had been running about even in circulation with Maxwell’s Mirror. The court-appointed administrators could not respond to Murdoch’s price cuts, and the largely working-class readership of the Mirror was very price-sensitive. The Sun opened up a circulation lead of almost six hundred thousand over the Mirror; Murdoch clearly thought he was on to something. He accompanied his price reduction at The Times with an intensified effort to clone the Telegraph, including our daily separate sports section and to hire our personnel (at which he was not very successful), and conducted a massive promotional blitz.

  A couple of years before, when Murdoch faced a dangerous financial crisis, I had given an address at the Media Society at the Café Royal, convened by Charles Wintour (former editor of the Evening Standard and father of Vogue editor Anna Wintour), and expressed confidence that Murdoch would come through his problems and that most of his critics were motivated by spite and envy. Murdoch wrote to thank me for my support. (He swiftly recovered from his financial crisis, as I had predicted.) I sought and expected no competitive quarter, but did not foresee the frenzied and relentless abuse I received from his organization when I passed through the valley of humiliation.

  As the price war developed, the Independent in particular squealed in pain and with the Guardian and others made several pilgrimages to the Office of Fair Trading, to complain about predatory pricing, which is defined in the U.K. as selling at below the cost of production and distribution. Of course Murdoch was doing just that, but so were many other people in various industries. I refused to join these protests and publicly stated that as a capitalist myself, I believed in a man’s right to lower his prices if he wished to. My supportive noises were reciprocated but led to no early de-escalation of the price war. Murdoch made it clear, including to a couple of our Sunday Telegraph reporters, that in a few years there would be only three newspapers in London: The Times, the Sun (both owned by his company), and the Mail. The Financial Times and the Guardian, he generously allowed, might survive as niche products for the financial community and the academic and clerical left, respectively.

  In London and Australia, Murdoch’s newspapers routinely referred to News Corporation’s ability to control Hollinger International’s profit by tuning the London broadsheet price war up and down. There was, unfortunately, some truth to this. Hollinger’s only revenue was dividends from the Telegraph only because the ineptitude of the Southam management had forced the cancellation of their dividend. Hollinger was short of cash and still had some debt to service. All this was known to Murdoch, and he put on all the pressure he could. In the early spring of 1994, we sold some Telegraph shares because of Hollinger’s cash needs.

  IN SUCH A SITUATION there was no alternative but to play it aggressively, as Murdoch himself would. Barbara and I returned to London from New York on June 9, 1994, and I was greeted the next day by a phalanx of determined editors and senior executives advising that we cut the cover price immediately or lose our position as market leader. The only dissenters were a couple of men approaching retirement who were very concerned with the options given them to reinforce the comradely esprit of the company and spread the profit around. I wanted all the employees to think of themselves also as owners. But it didn’t happen. As we were not a listed stock, every day the company secretary would calculate a reference price from the price/earnings ratios of listed U.K. newspaper companies, and descend
to the lobby of our building to post the price prominently before everyone entering. The company would buy the options at this price, once they had vested, though I hoped the employees would continue on as shareholders. With almost no exceptions, the employees sold as the rights vested.

  To Murdoch’s considerable astonishment, as was severally reported to me, we abruptly cut our cover price from forty-eight to thirty pence. He had assumed that I would react like other publishers he had fought: husband the profit, economize, protect short-term gain even at the expense of the franchise, and hope for a merciful relaxation of the competitive pressure. I knew better than to anticipate any mercy from Murdoch. He at once implemented a further cut, to twenty pence. The balance between circulation and advertising revenue in the United States and Canada is about one to four, but in Britain it is between one to two and one to one. Cutting our cover price from forty-eight pence to thirty pence could cost the Telegraph more than $50 million annually. Only a controlling shareholder, prepared to eat such a heavy loss and face the abuse of the minority shareholders, could afford to take such a step and jeopardize short-term profits so seriously. But nothing less was necessary if we were to preserve the leading position of the Telegraph.

  After our cover-price reduction, I tasted the temper of the city of London. Financial analysts stirred up the media with allegations that our sale of the block of Telegraph shares was fortuitously just ahead of our cover-price reduction. Cazenoves, who had been our broker for the sale and assured us that they would do nothing precipitate, abruptly resigned their association with us, telling the Financial Times that this was an unprecedented step for them. We had loyally stayed with the firm when one of their senior executives, David Mayhew, was facing criminal charges (of which he was acquitted). The London Stock Exchange investigated the sale and quickly discovered that there was no thought of cutting the price at the time the block of shares was sold and that this decision was made only after I returned from overseas to face an almost unanimous recommendation from the executive team, led by the editor. Two years later, we privatized the Telegraph at approximately the share price it had enjoyed before the cover-price cut, and all the shareholders departed happily. But the performance of Cazenoves was scandalous, a harbinger of some of what was to come when a much greater crisis developed nearly ten years later.