Autumn of the Moguls

by Michael Wolff

  “It’s a price question. We all now know the price was vastly wrong. We accept a dramatic reevaluation of the price,” said Bewkes.

  “So you’re just saying that your former colleagues were bad deal-makers?”

  “Yes,” said Bewkes, resolutely.

  In other words, I was seeing business as a dramatic whole, a psychological reflection, a complex community of relationships—indeed, a thing to be written about—whereas they were seeing it as, well, business. Shit happens. I was the romantic, and these guys were practical, no-frills, nuts-and-bolts guys.

  I turned to Terry Semel, trying to probe his sense of the whole: “First—let me ask: Is life better outside the movie business?”

  “Is life better outside the movie business?” Semel said slowly. He seemed slightly puzzled for a moment—surprised by the notion that there might be life outside the movie business, or by having to recognize that he was outside it. Indeed, he seemed to regard his move to Yahoo in 2001 as not his real life. “I love the movie business, I totally enjoyed everything I did for 20 or 25 years, but I wanted another challenge….” It is perhaps no surprise that men who have spent their lives hiring people end up talking like they are in a perpetual job interview.

  “So—your decision to go to Yahoo was because you had great faith in the Internet business, because you had great faith in ad-driven media, or because you saw Yahoo as a deal vehicle, a synergymobile?”

  Obviously, the true answer was the last one.

  “No, no, I didn’t see it as a deal vehicle,” he said, confirming my point.

  “Two years from now Yahoo is independent or not?”

  “Independent,” he said, wanly, meaning, everyone understood, not independent (he hoped).

  “Jeff”—I turned to Bewkes—“you’ve recently moved from HBO, a great company, a terrifically successful company, to managing a vast part of AOL Time Warner, a very troubled company; it doesn’t seem to me necessarily intuitive why you would have wanted to do that.”

  I wonder if Bewkes, who was clearly self-styled as a media executive—that is, a manager of media companies, the larger the better—ever really considered staying put? Or was that just not part of the career matrix? He wasn’t a pay-television executive after all—that wasn’t how he would have described himself. And, I wonder if it’s really a choice. In any organization if you’re called to step up you step up, or, in some way, you step out.

  The effect of this, this ambition and this fungibility, is that nobody really does their thing—or that nobody has a thing to do.

  The great dream of upward mobility—and a mogul, after all, is just some pathological example of moving ever upward, amassing ever more—means that everything you leave behind is a little devalued. And that, in the end, nobody knows what they are doing.

  And nobody ever runs his own shop.

  Bewkes started to enumerate the great virtues of AOL Time Warner—of the advantages of having all these companies together, of one being able to augment the other, of the marvelous condition of the distribution side of the company having access to the content side of the company.

  “But that’s synergy,” I said, using the discredited word.

  But he disagreed, or at least made the argument against the word. “It isn’t synergy. What is synergy?”

  I nodded: “That’s why we’re in this mess—no one knows.”

  Still he insisted: “Distribution is very important, and linking content to distribution is a very important thing.”

  I said: “I return to the gentlemen whose names we will no longer mention. This is their argument. They could have said exactly the same thing—I’ve heard Jerry Levin and Jean-Marie Messier say exactly this.”

  “Well I’m not exactly sure if they said the same thing,” Bewkes replied with just a hit of petulance.

  He went on: “There’s scale and leverage, et cetera, and horizontal market share and position—what’s less clear is vertical. There’s a lot of things that can be said to work in vertical distribution.”

  Semel jumped in to defend the idea of big horizontal and vertical companies and why some work better than others: “The difference comes down to people.” That old shibboleth. “Look at sports—they all wear similar-looking uniforms, but why can one team get to the Super Bowl and the other team not win another game?”

  “Let me take that people issue and go to Peter,” I said, redirecting. “When the age of the media moguls passes, what will it mean for media companies to be run by mere media executives without a sense of possessiveness or hubris?”

  “I’m not sure I get the real point of the question,” said Chernin, suspiciously, or defensively. “Whether Rupert is a mogul or not, he has spent 40 or 50 years building a company from a small newspaper to whatever it is now, and I’m not sure that’s a function of hubris or anything else—but it is a function of understanding the media business.”

  “So,” I went on, “do you think it’s reasonable to argue that there is a difference between Murdoch and Redstone and maybe Steve Ross and everyone else?”

  “Probably about five billion dollars,” said Chernin. Slight titter from the crowd. “Rupert grew up knowing if you put a good headline on a good story the paper is going to leave the newsstand on Sunday morning and if you don’t it’s just going to sit there. Same thing with Sumner knowing somewhere deep inside that if you put a good movie in those theaters you fill the theater on Saturday and if you don’t put in a good movie you don’t.”

  Was the world of moguldom as banal as this? I wondered.

  “It comes down to management philosophy,” Semel interjected. Semel then went on to enumerate the virtues of Steve Ross’s management philosophy, with paeans to the decentralization and divisional autonomy that had let Semel become a great power running Warner Bros, studio.

  “I don’t think there’s a lot of doubt about bigness or scale or about the wisdom of scale,” said Bewkes, as though challenged at an important point of his own philosophic identity. “If you take a scale retailer, Wal-Mart, I don’t think there’s a question about it being too big to manage.”

  “But Wal-Mart and the media business—you don’t see a difference?”

  “If you take mixes of five to eight big businesses that are in a different though related media business, some in content, some in publishing, some in networks, some in distribution—I think that’s what you’re asking—and, yes, it is different from Wal-Mart and you have to have some autonomy and decentralization so that those units don’t lose the decision-making capabilities.”

  “Scale may be a question thing, but lack of scale is a pretty scary thing,” said Chernin.

  I was definitely getting the idea of how it must be to talk to Japanese bankers about what ails the Japanese banking system.

  “Let me just explore if you’re wrong about bigness and the virtues and inevitability of scale. Let’s just look at what happens if the market goes against you, if the market levies a consolidation penalty, forcing your share prices ever lower, forcing you to deconsolidate—what happens?” I was hoping for a vision of a new world.

  Indeed, this is pretty much where we stood now. Over a generation, no media conglomerate had kept pace with the S&P 500. What’s more, there wasn’t a core business that was stronger now than it was a generation ago.

  “You rethink. Do you really need to own cable?” said Bewkes.

  You redo the theory, in other words.

  “There comes a sense of prioritization,” said Chernin. “I can’t own everything.”

  They were, I realized, adaptable.

  “John Malone,” I said. “At this point in time, do we think he’s smart, or … not smart?”

  This got a big laugh from the audience—because nobody knew.

  Malone, who was the greatest player in the cable business, was, I felt sure, the one person everyone here had measured himself against. You might not measure yourself against Murdoch, because he was Murdoch, or against Redstone, because he was eccen
tric, or Mel Karmazin, because he was always going to be better at selling ads than you, or Michael Eisner, because he was so unloved, or Levin or Case or Pittman because they had been knocked out, but you would have against Malone, because he was purely about the deal.

  Out in Denver, Malone had assembled the country’s biggest cable colossus. Along the way he had inserted himself into an array of strategic positions in the larger media business, including at CNN, Time Warner, News Corp. and Comcast, and as, often, Barry Diller’s principal financial backer.

  What’s more, on top of deal-doing abilities—mainly a facility with numbers and brute stubbornness—he had the conceptual thing down. That is, he could take a set of contrarian assumptions—cable television is a powerful new force which will disrupt the broadcast paradigm, was a quixotic assumption he had in the late seventies—and project it into the future.

  Indeed, these were the elemental mogul attributes: the cleverness to imagine the future, the willingness to shape it.

  Everybody admired Malone.

  Then, in 1997, near the top of the market, he sold his cable system to AT&T, in the person of C. Michael Armstrong, one of the greater glad-handers, empty suits, and stupids of the communications business.

  It was the ultimate deal.

  He sold his crummy cable system at full value. As much as selling the lousy pipes, he had sold C. Michael Armstrong a vision of media and telecommunications and delivery and platforms and convergence. Convergence… yewooo! It was the same stuff that AOL had sold Time Warner.

  It was certainly the thing to sell. Armstrong had no more idea than Jerry Levin what this was about.

  While clever, the problem was that Malone, like Case and the AOL guys, actually, in some sense, believed it too.

  Armstrong became Malone’s tar baby.

  He was stuck. He couldn’t get out. The value of his holdings declined as AT&T dramatically declined. He had boosted himself, and overthought himself into what at that time was the biggest mess in the history of the media and telecommunications business.

  Since then, as he was stuck in this ongoing and frustrating and hapless winding down and breaking up at AT&T (the cable properties were just going to Comcast), Malone had been making efforts to repeat his strategy with cable in the U.S. in Europe. Now, possibly this was once more brilliant, and he would do it all over again, and even trade up to some future AT&T—but there was also the sense of rather hopeless recidivism. That the guy just knows one trick. And there should be some kind of benevolent intervention.

  “Given that he owns 20 percent of our company he’s very smart,” said Chernin.

  “You’d have to say very very smart. Brilliant track record. On the cutting edge, a pioneer, and financially a brilliant person,” Semel said, and didn’t stop. “One of the reasons I wanted to do what I did is that I always envied people who are pioneers. Being a pioneer to me is being a little patient. We can’t expect all of these things to take over the world in a day or two.”

  “Smart,” said Bewkes and then turned to Semel and said, “You’re a mogul.”

  Among moguls, it occurred to me, you couldn’t really use the word “mogul.” It was either an outsider’s, slightly despairing word, or it was something that only the over-the-top and immodest could claim to be.

  “I’m a retired mogul,” said Semel.

  “Fifteen seconds,” I said. “Rupert is waiting to join us by satellite.”

  “The story of my life,” said Chernin.

  “Have you guys read any good books lately?” I asked as the clock ran down.

  Semel (after a beat): “The Tipping Point.”

  Bewkes: “Biography of Ben Franklin.”

  Chernin: “Lovely Bones.”

  14

  THE MAN

  UP THERE

  We followed directly into the Murdoch interview.

  There was a quick shuffling and the easy chairs were removed from the stage, and I was given a stool, which made me feel just slightly like I was the host of a mid-seventies variety show.

  Up above on the movie-size big screen, there was for just a second a hold-your-breath Houston-we-have-contact moment before Rupert came into view.

  He was caught unaware—he was not seeing us. At his remote location, he would just be looking into a dark camera lens. Again, I had that sense of looking at an especially unexpected and revealing and affecting face.

  It was the face in a way of a writer or intellectual (in addition to being the face of my grandfather). It was the face you get because you’ve concentrated. Because you have stayed in one position for long periods of time focusing inward. It was all about working through the puzzle. There was nothing social, or gregarious, or posed about his face.

  It was true, as Gary Ginsberg had feared, that Rupert seemed somewhat godlike, beamed in from somewhere above.

  “Hello, Rupert,” I said, not really wanting to disturb him.

  Pause. Was his earpiece working?

  “Rupert?”

  I could hear the satellite echo of my own voice.

  Pause. The satellite delay.

  “Hello, Michael,” Rupert finally said. “I enjoyed listening to that conversation.”

  I was thinking as I gazed up at him about my thesis that he had held power in this country longer than anybody else in the modern era, and, adding to that, that he was possibly more powerful now than ever before, and, possibly, more powerful than anyone else.

  Indeed, it was the Wednesday after the first Tuesday in November and the Republicans had just had one of the most astounding midterm victories on record. This was, arguably, a Fox victory.

  Murdoch, through Roger Ailes, was, if not in control of the Republican Party and the conservative movement, giving it its voice. Its confidence. Its moxie.

  And then there was the DirecTV deal. He had come to have a dominant role in politics in the U.S. and was now on the verge of controlling the satellite leg of the duopolistic cable-cable U.S. television distribution system.

  “How is London?” I asked, convivially. “Do you have jet lag? Do moguls get jet lag?”

  “They sure do.” He did in fact look tired.

  I jumped in, aware of the expensive satellite time (which Rupert was donating): “An easy question for you: If you were the CEO of AOL Time Warner, what would you do?”

  As I asked the question, I immediately wondered why, given the vast number of mistakes that Murdoch had made in the formation of News Corp., he wasn’t a joke too.

  His company had come to the edge of bankruptcy and dissolution in 1991—a shockingly disordered and overextended enterprise. Murdoch had made great and painful and historic Internet blunders; at various points in the age of the Internet, Murdoch had lost more money on digital dreams than anyone else. And now, of course, he was on the verge of the DirecTV deal, which, he must late at night consider, could be his undoing also.

  But he responded without equivocation or modesty. Immediately he began to contradict the point of view of the last panel—Semel and Bewkes’s view of a decentralized media conglomerate.

  “You need forceful leadership in knitting together all these units which have been run as a sort of federation of empires with tremendous independence. I don’t see the point of having these things together if they don’t speak to each other—if you can have a company with a major subsidiary, Warner Bros, studio, who can ban from the premises for five years the head of the music company”—which, if I was not mistaken, was a direct slap at Semel, who had been the head of the studio who banned the head of the music company.

  “So are you saying that if Time Warner goes back to the way it has historically been run, which is as a set of fiefdoms, they might as well just sell it off?”

  “Yes.”

  “Good.” Done with that, I thought. “Start placing your bids,” I said to an audience that seemed uncertain about the Murdoch certainty.

  “Now, as long as I have you here in this forum, Rupert, I want to get your advice. Let’s assume th
ere’s a new boy on the block—somebody with heart and imagination who is now getting ready to take advantage of what is obviously enormous turmoil and transition in the media business. It could be Charlie Ergen, or it could be a distribution guy, or it could be me, a content guy, or Arthur Sulzberger, a newspaper guy, or Steve Rattner, a financial guy—what would you tell him?

  I was also asking something else. I was asking how it felt not to be that boy—to have to look at the field of play and realize you would not be on it.

  Indeed, I sensed with Murdoch that it was precisely the field of play that motivated him. That part of the satisfaction was being better than the other people in the business. In fact, this becomes a kind of strategic outlook. If you can analyze and anticipate the moves of your peers, then it tells you how to move. It’s a hermetic mogul world. You do things because other moguls do them, or do things at counterpurposes to the way other moguls would do them. It’s very 19th-century Europe. You’re caught in a very fixed, and nearly zero sum, grid.

  “What’s your advice? Maybe you can begin with some cautionary words.”

  “With due respect to Steve Rattner,” he said, in a vaguely Churchillian cadence, “I wouldn’t recommend that a financial guy become a media guy. Those are two different skill-sets altogether. The media guy will pay for and use the brains of the likes of Steve Rattner”—again I felt the fast air of a swift slap—“but these are different gifts. I heard that earlier bit about moguls and so on. It depends on how you describe them,” he said, deviating from my question about advice and instead surveying the mogul landscape. “A hundred years ago you had the Hearsts and the Pulitzers and the Northclifts of the world; in time we’ve seen the Steve Rosses and Sumner Redstones and Mel Karmazins. Michael Eisner would have to qualify on this list. And others will emerge. Barry Diller is positioning himself now and with what he’s about to do he will probably be a major mogul. And just five years ago, who thought that Brian Roberts was going to control 40 percent of all the cable homes in the country? And Arthur Sulzberger is clearly reaching out to do great things with the New York Times—make it a global franchise rather than just a national one. There are new people coming all the time and others dying off or going broke.”