Murdoch's World

by David Folkenflik

  In 2000, Lachlan, the oldest son, was the anointed one, then the head of News Ltd, the corporation’s Australian wing. He moved to New York City to oversee News Corp’s American television and newspaper holdings, a springboard to the top. He resigned five years later amid Machiavellian machinations, unconvinced that his father would protect him against the power plays of News Corp president Peter Chernin and Fox News chief Roger Ailes.

  Lachlan’s father saw the son’s retreat as a sign of weakness. Dame Elisabeth had tossed the five-year-old Rupert into the deep end of a pool on an ocean liner pitching back to and fro to force him to learn how to swim. She would not allow anyone to rescue him, even though he was screaming for help, he recalled as an adult. Rupert effectively repeated the lesson with his son Lachlan at the headquarters in New York: sink or swim. Lachlan did not want to play anymore; he returned to Australia to set up his own media company there.

  The boys didn’t seriously entertain the idea that their older sister Elisabeth posed any threat. She was a girl, after all, and proved an ambivalent figure from the outset, alternately dipping in and out of careers within the company. She had married (much against her father’s wishes) the son of a Ghanaian investor she met at Vassar. Elisabeth Murdoch worked at News Corp’s basic cable channel FX in Hollywood, and then the couple briefly bought and ran two NBC stations in central California, with a loan secured by Rupert Murdoch. The stations were sold at a profit less than two years later.

  Elisabeth Murdoch moved to London in the mid-1990s to work for BSkyB, rising to become the number two to Sam Chisholm. Chisholm referred derisively to Elisabeth in private as “the management trainee.” Rupert Murdoch made clear his daughter would not succeed Chisholm at Sky, and while she won credit for several ventures, her handling of the broadcaster’s failed bid to acquire Manchester United, the most famous soccer team in the world, counted against her.

  “She’s ambitious, she’s aggressive, but she’s simply not as good as she would like to be, and she’s not as good as Rupert would like her to be,” Jim Hytner, a former BSkyB marketing director, said in 1999. “She wants to impress her father. I don’t blame her, everybody has those desires. . . . The more she doesn’t impress him, the more she wants to impress him.” Elisabeth Murdoch left her husband for public relations executive Matthew Freud, who would become her second spouse and greatest champion.

  The younger boy, James, had grown up on New York City’s Upper East Side, though he spent long stretches in his parents’ homes in California, Australia, and the UK. He had been a gawky youth, awkward with girls and trying fitfully to connect with his father. As a teenage intern for his father’s papers in Australia, he famously fell asleep at a press conference, camera in his lap. (A photographer for the rival Sydney Morning Herald immortalized that moment by snapping a picture that ran in the next day’s paper.)

  James found a circuitous path to his acceptance. He dropped out of Harvard (kicked out, according to the wedding toast of his college friend and later New York Post publisher Jesse Angelo), got two tattoos and an earring, and in the mid-1990s provided the funding to establish a rap label, Rawkus Records. Initially seen as the dilettante move of a billionaire’s son, Rawkus earned street cred by cultivating Mos Def and other emerging hip-hop stars. Rupert Murdoch awarded him oversight of News Corp’s fledgling Internet operations.

  James had lost the earring and adopted a highly managerial mien, with closely tailored suits and thin-rimmed glasses. Over time he perfected a bureaucratic techno-speak that suggested a more professional generation of the family was on the rise. More than one News Corp executive described him to me as the Murdoch most likely to have made an excellent consultant for McKinsey & Company.

  Others believed the younger Murdoch had much to learn. At one of the annual conferences convened by Rupert Murdoch, a News Corp newspaper editor found James insultingly dismissive. Conversation turned to how the newspapers would come to terms with the implications of the Web—by this point, functionally two years old as a widespread consumer convenience. The walled-off email and content service AOL was cresting in its popularity but beginning to face challenges from free search engines and other sites.

  Newspapers had to give away their articles for free, James told the assembled editors. It was the only way to ensure the continued loyalty of their readers. His family’s editors argued back that giving away articles priced their value at zero, they said. It was a bad precedent.

  You simply don’t understand people’s relationship to their computers, James responded. You don’t get it.

  “He did not seem to realize people only put such weight on his judgments and pronouncements because of who he was,” the editor recalled.

  James was running News Corp’s Asian operation and earning praise for his work steering its endeavors away from China, and toward India. His father had been consistently blocked by China’s ruling classes from expanding the reach of Star TV within China, despite the elder Murdoch’s efforts to win their favor. At one point, Rupert Murdoch dropped the BBC there after a documentary about Chairman Mao offended the Chinese authorities; at another, News Corp’s HarperCollins withdrew from publishing the memoirs of Chris Patten, the last British governor general of Hong Kong. Patten’s blunt account of the transfer to China appeared certain to ruffle powerful government figures. When Murdoch married Wendi Deng in 1999, it was seen by some as, in part, yet another way to ingratiate himself with the Chinese and to better comprehend their culture.

  But the attempted appeasements had limited effect. The Chinese struck partnerships but held tight to control. The outsider could not work his magic—even with his younger Chinese wife at his side. India would prove to be more profitable. News Corp’s satellite service Star India was on course to become that most populous nation’s leading pay-TV service.

  In 2003, at the age of thirty, James Murdoch had become the CEO of BSkyB. And soon enough, with Lachlan’s departure, James abruptly supplanted his brother as his father’s successor in the making. Later, as executive chairman of News International—the company’s British newspaper wing—and News Corp’s top executive over Europe and Asia, he became the nonexecutive chairman of the company.

  James made his peace with Wendi Deng amid his work on the company’s ventures in China. But all three children of Rupert and Anna Torv Murdoch felt burned by Rupert Murdoch’s divorce from their mother. Lachlan took it particularly hard; former colleagues in New York said it colored his emotions about the company and his father. Anna had sat on the board of News Corp; now Wendi was pushing for formal recognition of her daughters. In 2006, during an interview on the Charlie Rose Show, Rupert Murdoch announced young Grace and Chloe would share the fortune in the family trust with their four siblings, but not have the right to select the trustees who held the shares’ voting powers over the corporation. It caused strife with Wendi Deng Murdoch. The next year, Rupert gave each of the six children $160 million; the money gave Elisabeth the capital to run her own production company and Lachlan the seed money for his own Australian investments, most notably in non–News Corp media. James, however, sought to create a self-fulfilling destiny as the next Murdoch to lead News Corp.

  It was with that ascending stature that James Murdoch traveled to Edinburgh in 2009 to deliver the MacTaggart Lecture, the UK’s signature annual address on media and especially television. It had become a venue for industry heavyweights—top-tier writers, anchors, producers, thought leaders, and, especially, broadcast executives—to sketch out their sense of where the business was headed.

  He started with more than a trace of humor: “Does this finally mark my invitation to join the British broadcasting establishment? While that thought does terrify me, I am comforted in the knowledge that after my remarks my membership will have been a brief one.”

  There it was again, “the establishment” against which generations of Murdochs had consistently campaigned. Ironically, the James MacTaggart for whom the event had been named produced dramas for theat
er and television; the lecture was first delivered in 1975 by a socialist colleague at the end of a retrospective honoring his controversialist spirit. It became part of “a wee gabfest” for TV programmers with radical and often explicitly political agendas until the organizers realized that, as the Guardian later noted, “the suits started to come.” The MacTaggart speaker had often been a top BBC official and occasionally a severe critic, such as the playwright and screenwriter Dennis Potter, who called the BBC and its programming “ponderously anodyne.” (He also named his terminal tumor “Rupert.”)

  In 1989 the real Rupert Murdoch cemented the speech’s status with his own appearance. He spoke presciently of the age of digital innovation ahead and warned of the country’s centuries-long history of warring impulses between expression and censorship. “For fifty years,” the elder Murdoch said, “British television has operated on the assumption that the people could not be trusted to watch what they wanted to watch, so that it had to be controlled by like-minded people who knew what was good for us.”

  And indeed, by statute, news programs had to be rigorously balanced; advertising, children’s programming, and dramatic shows were all subject to limiting regulations.

  No more, he announced in Edinburgh, invoking the free markets championed by that famous Scot Adam Smith. Thanks to satellites and other digital technologies, the elites would lose their grip. Murdoch thought so highly of his address that his aides distributed copies of it to leading public officials, not only in the UK but in President George H.W. Bush’s White House. Like his father two decades earlier, James Murdoch used his address at MacTaggart to single out two establishment players that required challenge: the BBC and the regulators who constricted its private sector competitors.

  Where the elder Murdoch had cited Adam Smith, the younger Murdoch chose Charles Darwin’s Origin of Species. “It argued that the most dramatic evolutionary changes can occur through an entirely natural process,” James Murdoch said. “Darwin proved that evolution is unmanaged.” Broadcasters cling to a kind of technological and information creationism, he argued: “It threatens significant damage to important spheres of human enterprise and endeavor—the provision of independent news, investment in professional journalism, and the innovation and growth of the creative industries.”

  James assailed what he called unaccountable institutions, especially the BBC and OfCom, the independent government regulator. And he attacked the regressive taxes of the licensing fee—the £145 a year ($230)—levied on every home with a color TV. The fee underwrote the only true competitor to the Murdochs’ growing television powerhouse in Britain.

  Chase Carey, the chief operating officer who effectively ran the company, had been a News Corp exec before leaving to run the American satellite television provider DIRECTV; on his return, Murdoch said, Carey demanded they try to find a way to get BSkyB back for themselves. “In hindsight, I regret I ever agreed to an IPO,” Rupert Murdoch said.

  The younger Murdoch’s campaign to win BSkyB was months in the making. Although News Corp owned nearly 40 percent of the company and its executives dominated the firm’s board, a full takeover would enable News Corp to recapture more of BSkyB’s profits and to distance News International from its past in newspapers. By the end of the first decade of the twenty-first century, BSkyB generated revenues exceeding $10 billion a year and a pretax profit of $1.37 billion. It was at once the UK’s dominant satellite television and broadband Internet provider and a creator of content. Sky blended high-end digital TV shows and movies with some of the most desirable sports programming and premium channels available in the country.

  The takeover was to be an audacious stroke. But James Murdoch would need to rely on a new generation of political allies to execute his plans. His father had supported Margaret Thatcher’s Conservatives with gusto but had such severe reservations about her successor, John Major, that he switched to Labour’s Tony Blair. Under Blair, the Labour media policies that could have threatened Murdoch with heightened regulatory scrutiny soon withered.

  By the time of his speech in Edinburgh in 2009, James Murdoch concluded that his father should pivot back toward a new breed of forward-looking, business-friendly Tories. James and Rebekah Brooks convinced Rupert Murdoch to shift his support to David Cameron, a center-right Tory, despite the media mogul’s affinity for Blair, and for that matter despite Brooks’s friendship with Gordon Brown’s wife, Sarah. Brooks had helped stage a pajama party for Sarah Brown’s fortieth birthday.

  Gordon Brown took the reversal hard. The Sun announced it to the world on its front page at the Labour Party’s annual conference in late September 2009, just weeks after the MacTaggart speech.

  Brown might not have been so surprised if he had known all the details of the courtship on both sides building up to that day.

  AS DAVID Cameron plotted to take command of the Conservative Party, George Osborne served as his chief political strategist. The two rising Tory stars embodied British privilege. They were young, wealthy, ambitious, and had belonged to the same exclusive club at Oxford University a few years apart. Cameron was a direct descendant of King William IV, while Osborne’s father held an aristocratic title that dated back nearly four centuries.

  Osborne’s prospects could have been shattered in 2005. The News of the World and the rival, liberal Sunday Mirror obtained a photograph of a young Osborne from the early 1990s, his arm around an escort, seated at a restaurant table before what the papers suggested was a dish of powdered cocaine. He attributed its presence to a friend who became an addict.

  The tabloids feasted. The News of the World ran a headline that said the politician “parties with a cocaine-snorting dominatrix” and quoted the woman saying she had witnessed Osborne consuming the drug with friends. Osborne and Cameron had adopted a hard line against illegal drugs as they devised policy platforms for the party. The charge of hypocrisy, a favorite of the tabloids, could have stuck.

  But the News of the World published an accompanying editorial with a sympathetic tone. Though Osborne and Cameron faced questions about drug use, the paper, known for twisting the knife, wrote instead: “Osborne was a young man when he was caught up in this murky world.” In its judgment, the Conservative Party leadership was still “Cameron’s for the taking.”

  Cameron refused to answer questions about his possible youthful drug use. Thanks in part to the News of the World, Osborne and Cameron endured the headlines that week.

  They looked for ways to build stronger ties to the media. Once firmly in place as leaders of their party, the two men discussed “politics and policy” over lunch one afternoon in January 2006 with Rupert Murdoch, Les Hinton, Rebekah Brooks, and Trevor Kavanagh, the Sun’s associate editor and chief political columnist.

  When Andrew Coulson resigned from News of the World in early 2007, Osborne told Cameron that they wanted this man on their team. Coulson would be a conduit to Rebekah Brooks, his friend and mentor who was then editor of the Sun; and he would be their interpreter for all things Murdoch. The Conservatives had ignored warnings from the Guardian and elsewhere. A News International man stood inside Cameron’s inner circle.

  In June 2009, as she became CEO of News International, Rebekah Brooks emailed Coulson: “Have we any Tories coming to KRM party?” The initials stood for Keith Rupert Murdoch. Ten minutes later, Coulson replied: “I will encourage.”

  By July Cameron, the leader of the opposition, declared his hostility to the nation’s media regulator, OfCom. It had recently angered News Corp executives by suggesting that Sky had too much control over movies and sport in the country. His social circle appreciated his stand. The Camerons and Brookses and Elisabeth Murdoch and her husband, Matthew Freud, all lived within fifteen miles of one another, in a particularly rustic corner of the Cotswolds called Chipping Norton. They dined, partied, and socialized together.

  That August, Cameron dispatched Jeremy Hunt, the shadow minister of culture, media, and sport, to New York City to meet with executives at News
Corp headquarters, including Rupert Murdoch. Hunt later maintained that the fate of BSkyB never came up during those meetings. A few weeks later, just days after his Edinburgh address, James Murdoch invited Cameron to drinks at the George, a private club in one of London’s most exclusive neighborhoods. He revealed that Cameron could rely on News International’s uniform and vigorous support.

  So, in fancy restaurants, private clubs, corporate boardrooms and retreats, quiet dinners and boisterous garden parties, did Gordon Brown’s hopes of retaining Murdoch’s backing come undone.

  THE SWITCH from Labour to Tory inspired a widespread conviction that Murdoch insisted on an act of fealty from his new political allies. “The perception is that, in return for Rupert Murdoch’s support for David Cameron before the last election and subsequently . . . his Conservative government would pass through his bid for BSkyB,” the Independent’s then editor in chief, Simon Kelner, told me later, though suspicions surfaced even at the time.

  Murdoch biographer Michael Wolff said News International had additionally extracted promises to strip the BBC of some of its subsidy and to rein in regulators. Officials inside the company say there was never any such deal, merely an understanding that the government and the country’s most powerful media company were philosophically aligned.

  As the 2010 elections approached, Kelner’s Independent ran a marketing campaign to underscore its identity supposedly free of outside influence. In its first full-page ad, the paper singled out the News Corp chairman: “Rupert Murdoch won’t decide this election—you will.” After a meeting in the same office complex, James Murdoch strode unbidden into the paper’s offices with Brooks by his side, sought out Kelner and berated him as a “fucking fuckwit.” As it happened, Elisabeth Murdoch’s husband, Matthew Freud, one of Britain’s leading PR executives, had advised the liberal paper on the campaign.