Murdoch's World: The Last of the Old Media Empires

by David Folkenflik

  In fact, Lewis had decided to use the media against its owners. If he did not care about his reputation or what reporters printed or broadcast about his personal life, their proprietors could not intimidate him from pursuing his cases or giving interviews that raised embarrassing questions. So he spent several years shuttling from TV studios to courthouses to parliamentary hearings—piping up whenever he could get the chance.

  “News International was so arrogant about everything,” Lewis told me one day, as we lurched in a taxicab from a BBC studio on the banks of the Thames past Parliament to a meeting he had scheduled with the newest crop of press regulators. News International should have apologized instead of concluding he was “part of the left-wing plot to damage Rupert Murdoch and News International.”

  In April 2011, News International established a fund to settle with a small group of people including the actress Sienna Miller—the kind of people who had public stature and the wealth to pursue their grievances. The company conceded that they had been targeted for voice mail hacking. Those who knew Murdoch’s world well nudged me to keep an eye on developments. Andrew Neil, the former editor of the Sunday Times and founding chairman of BSkyB, said the newest revelations raised the questions from Watergate: “Who knew, and when did you know it?”

  He continued: “If it’s now accepted the ‘rogue reporter’ defense has bitten the dust and was smashed to smithereens, if it’s now accepted that it was going on all over the place in this newsroom, then it beggars belief that . . . they didn’t know,” Neil said. “It is frankly incredible.”

  FOR ALL THAT, on the surface, as June gave way to July 2011, things looked quite promising for the Murdochs.

  Major investors were giving Rupert Murdoch’s company their continued support, allowing him to indulge his love of newspapers. In decades past, Murdoch enjoyed sauntering through newsrooms to peer at his papers’ flats, the pages with the stories laid out by men with exacto knives before they went to press. He would look over the front page and section fronts, pointing out a headline that he felt wasn’t up to scratch, playing to a gathering crowd of editors by suggesting a catchier alternative. In more recent years the pages were displayed on giant computer monitors but the impulse was the same.

  Regardless of who held what job title, regardless of what country, he was the publisher of every paper News Corp owned, and the editor in chief too, when he wanted to be. The papers reflected Murdoch’s right-of-center populist touch, his recurring demand that the writing be concise, the issues clear-cut, the reporting timely, and the matters addressed accessible, important, or preferably both. In the tabloids the elites hated (he loved their success in significant part because the elites hated them), Murdoch found a way to connect with readers. And he appealed to the great and mighty by also owning respectable papers with a more literate and worldly flavor.

  Investors who gambled on Murdoch’s impulses knew they had to accept some of them would go awry. When they did misfire, News Corp would lose hundreds of millions or even billions of dollars in shareholder money. The company wrote down the value of the Wall Street Journal and Dow Jones by $2.8 billion—about half the cost of acquiring the paper in the first place. Its managing editor, Robert Thomson, had embarked on an effort to streamline costs by compelling the journalists inside the newsroom of the nation’s premier financial daily to work more closely with its sister wire service, Dow Jones. Not too many Journal staffers wanted to blur the distinction. Earlier in the year, Murdoch had paid $675 million for a boutique TV and film production company called Shine, founded a decade earlier by Elisabeth Murdoch. It had created some TV hits and some well-received smaller films. Analysts contended Murdoch had paid his daughter’s company two to three times its worth. Elisabeth Murdoch walked off with more than $200 million from the transaction—as well as full payment for her legal costs, worth tens of millions more.

  At the end of June 2011, News Corp sold the social media website MySpace for $35 million—about 6 percent of the cost he had paid for it in 2005. That purchase was, as Murdoch readily admitted, a debacle. Its primary competitor, Facebook, would soon be valued at $104 billion in its initial public offering.

  Some good governance groups and pension and labor fund investors in News Corp called for the Murdochs to stop running the company as a family concern. The board waved through the Shine deal without serious reservations. Directors had approved a side investment for one of their own as well. Kenneth Cowley had led News Ltd in Australia and remained on the board afterward. Rupert Murdoch wanted to invest $28 million of the company’s money in R.M. Williams, an agricultural company of which Cowley was the chairman. The idea was to convert cattle and chicken farmlands to the world’s largest “carbon farm,” enabling the company to trade credits for reducing carbon emissions through an initiative from the Australian government under Prime Minister Gillard. The corporation did not disclose the board’s approval of the 2009 investment among its list of transactions for “related parties” in documents filed with federal regulators. The carbon farm did not materialize in a meaningful way.

  But as the Murdochs controlled so much of the voting stock, and had fostered so many profitable elements for the company, those concerns were easily drowned out. The entertainment side of the ledger, especially cable and satellite television, was thick with cash.

  Murdoch had expanded across countries and continents and industries. Most of those parts of News Corp, apart from the press, were outside his creative zone; he indulged The Simpsons and watched it become the longest running franchise in television history; despite little technical expertise or inclination he ran circles around competitors with computerized card technology for his satellite TV subscribers; his daughter Elisabeth suggested Fox import a now iconic show from the UK; called American Idol in the US, it helped lead the network to one ratings coup after another; he built up newspapers and television empires based on the loyalty of sports fans who would reliably return for more without particularly caring for sports himself.

  Fox News kept on drawing in viewers, its profits standing at roughly $900 million a year. If News Corp could take over full ownership of the British TV giant BSkyB, it would gain access to all of the $1.6 billion in annual profit the company threw off. Hence News Corp’s obsessive desire to complete the purchase of the remaining 60 percent in shares it did not already own.

  FOR BRITS, the Milly Dowler story had been a sensation from nearly the moment she disappeared in 2002. She was a thirteen-year-old schoolgirl from Walton-on-Thames, a city of 25,000 about forty-five minutes outside London. She took a walk after writing despairingly in her journal article that her parents cared far more for her elder sister. She called her father to say she’d be home in about a half hour. Her bones were found six months later, a hundred miles away. It took nine years for police to track down her killer and for prosecutors to bring him to trial. On June 23, 2011, jurors took just seven hours to convict the man, who was already serving time for killing several others. He was sentenced to another life term in prison.

  On July 4, 2011, the Guardian carried a sprawling front-page headline that could not have been more damning: “News of the World Hacked Milly Dowler’s Phone During Police Hunt.”

  The Guardian’s blockbuster story alleged a series of grievous wrongs: her voice mail messages had been hacked by a private investigator working for the paper; those messages had been deleted by the same PI because her in-box had filled and he wanted others to leave juicy nuggets to mine for stories; the activity involving her messages gave her parents false hope and impeded the ability of police to track her down; the police in Surrey were aware of this hacking and did nothing.

  “It is distress heaped upon tragedy to learn that the News of the World had no humanity at such a terrible time,” said Mark Lewis, who had become the Dowlers’ private lawyer too. “The fact that they were prepared to act in such a heinous way that could have jeopardized the police investigation and give [her family] false hope is despicable.”
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br />   The nation convulsed. News of the World had plundered an innocent dead girl’s private messages from relatives and friends, some of whom were desperately seeking confirmation she was still alive, simply in pursuit of an edge on stories against their tabloid competitors.

  Labour MP Tom Watson, a frequent critic of the Murdoch press, seized the moment, calling the hacking “a despicable and evil act.”

  ON THE day Davies and his Guardian colleague Amelia Hill broke the Dowler story, Prime Minister David Cameron stood behind a lectern at the Arg, the Afghan presidential palace, in Kabul, a few feet from President Hamid Karzai. A delicate task dominated Cameron’s agenda for the trip: continuing his country’s military and diplomatic presence while scaling back the number of troops deployed there. But the death of a young Brit had cast a shadow over the visit. The soldier had wandered, inexplicably, off the military base and was soon abducted, apparently by Taliban sympathizers. His recovered body had been mutilated, and reports claimed it had been paraded in front of insurgents as a trophy.

  The two leaders spoke of their shared commitment to stability for Afghans amid the continued threat of Taliban violence. They spoke soberly of the family of the eighteen-year-old infantryman, a member of a Scottish regiment. Then they took questions.

  First up, a British reporter asked whether the UK should offer more civilian aid to Afghanistan and then added: “And, Prime Minister, if I could ask you a specific question: What is your reaction to the allegations that a News of the World investigator hacked into the phone of the missing girl, Milly Dowler? And in light of those allegations, do you think that the owners of the News of the World are a fit and proper company to take over BSkyB?”

  The reporter had distilled a blockbuster story into a vexing and overarching question for both News Corp and the British government. No longer could the Guardian reporting be credibly dismissed as the hyperventilating of a competitor.

  Former home secretary Alan Johnson, an MP for the Labour Party, stood to speak in the House of Commons. “The public mood, the mood in Parliament, the mood elsewhere, was this was an obsession of one newspaper,” Johnson told his fellow lawmakers. “Let’s praise the Guardian for doggedly staying on this case.”

  Revelations about victims of violence who had been hacked poured forth in the coming days: those killed and wounded in the July 7, 2005, bus and subway bombings in London and their families; British soldiers killed in Afghanistan and Iraq; the families of other victims of high-profile murders.

  Even personal ties to the Murdochs or their associates offered little protection from the electronic sweep of the private eyes and their newsroom clients. Nor did political pull. Among those worthies whose mobile phones were believed to have been targeted for hacking:

  •The daughter-in-law of a prime minister whom Murdoch and his papers initially supported (Emma Noble, daughter-in-law of John Major)

  •The deputy to a prime minister Murdoch’s papers supported for election three times (John Prescott)

  •The wife of a prime minister Murdoch’s papers supported at elections three times; the wife of the godfather of Murdoch’s young daughter Grace (both Cherie Blair)

  •The mayor of London, who did not pursue a claim against the company (Boris Johnson)

  •The pop star who sang at Rupert Murdoch’s third wedding without charge (Charlotte Church)

  •The priest of the pop star who sang at Murdoch’s third wedding (Father Richard Reardon of Cardiff)

  •The former star of a Fox broadcast network prime-time show in the US (Sienna Miller)

  •The former star of a Fox Studios movie (Hugh Grant)

  •The brightest star of British soccer leagues, to which Murdoch’s BSkyB held broadcasting rights worth billions of pounds (Wayne Rooney of Manchester United and the English national team)

  •The grieving mother of a slain schoolgirl who had been given the mobile phone in question by Rebekah Brooks (Sarah Payne)

  In an Escherian touch, among the hacking targets were at least two former Murdoch news executives. Tony Blair remained close to the Murdochs, even after the revelations. Cherie Blair sued News International. The logic held: everyone is fair game. The comedian Steve Coogan understood. “Strangely, I don’t think it was a malicious personal vendetta against me. My feeling is that it was a dispassionate sociopathic act by those who operate in an amoral universe where they are never accountable. It has become a mind-set of those who work in tabloids, as a result of the environment and working culture that has been created.”

  In 2005—six years before the summer of scandal—Coogan learned from his cell phone provider that his messages had been compromised. News International would later pay approximately $66,000 to settle the case out of court. (Judgments in British courts are typically far lower than they would be if brought in the US.) Infuriated that his privacy had been invaded, Coogan testified against the Murdochs, but in commerce he accepted the rules. Coogan appeared in five movies produced by Fox-owned studios after discovering that his phone had been hacked. His comedic hit TV shows featuring him in the role of Alan Partridge ran on a Sky cable channel in the UK. And his book, I, Partridge: We Need to Talk About Alan was published in the UK, Canada, and Australia by Murdoch’s HarperCollins publishing house. Its British publication date was in September 2011, less than three months after the Dowler revelation. It was hard to do business without the Murdochs.

  12

  SKY’S THE LIMIT

  IN ENGLAND, RUPERT MURDOCH HAD been seeking to achieve in television the kind of inescapable presence that he had earlier attained in newspapers. To do that, he sought to compete against the BBC on what he considered to be a more equal footing. He had always resented the government subsidy it received.

  The BBC had been the dominant UK broadcaster since its first radio transmission in 1922 from Marconi House in the Strand, at the center of London, just blocks from the seat of government and Piccadilly’s theater district. The first words: “This is 2-L-O, the London station of the British Broadcasting Company calling. 2-L-O calling.” Fifty-odd years later, the satellite television industry had evolved to the point where it envisaged dishes that were affordable enough and small enough for individual consumers to mount on their roofs. The Brits received five satellite channels. British officials allocated two satellite channels to the BBC and invited private broadcasters to submit plans to control and program the other three. Murdoch’s News International joined a consortium to bid.

  One catch: the plans required launching a satellite. A rival alliance of investors that proposed the British Satellite Broadcasting system won the channels. The investors included Richard Branson’s Virgin and Pearson, the owner of the Financial Times and Penguin Books.

  Murdoch had been shut out, but he already had a modest Sky channel in Europe. So he set up his British TV business in Luxembourg, outside the reach of UK regulators, though he kept studios in an industrial suburb of London. He contracted to broadcast a multi-channel service from a midsize satellite called Astra based in the tiny European principality. Thanks to those small dishes, the television programs could be beamed into British homes with no meaningful intervention by the British government. Murdoch had taken a buccaneer’s path—circumvention as innovation.

  The BBC had set the industry standard in so many ways, first in radio, then television. It created a superstore of television and radio programming, offering news, soap operas, serious theater and music, and children’s and educational shows. The BBC was home to the world’s leading news service, soccer coverage, Monty Python, Brides-head Revisited and more. But it had run for years without serious competition. Murdoch considered it sclerotic.

  Murdoch’s Sky TV made its debut in 1989, but dish sales and revenues lagged badly behind projections. Yet British Satellite Broadcasting struggled too, launching its actual service more than a year after Murdoch’s Sky TV. Sky was counting on lower costs—no need to launch its own satellite and no spending on the pricier movies and sporting events.
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  “He basically stole a march on them, the way that Murdoch has often operated,” said David Gordon, the former CEO of the independent television news service ITN and of the Economist Newspaper Ltd. “Entrepreneurially, courageously, breaking the rules and just plugging along.”

  But both sides were losing millions of pounds a week. Increasing debt loomed with little likelihood of relief.

  Sky and British Satellite Broadcasting merged just seven months after the latter’s debut in late 1990. Renamed BSkyB, the satellite TV service achieved financial stability after a few shaky years, making strategic investments in sports, premium TV shows, and movies. Sky (as the blended company became known) served as the driving force behind the creation of the English Premier League in 1992, broadcasting the games of the nation’s leading soccer teams. Murdoch had to issue and publicly trade shares in BSkyB to pay off debt accrued for the costs of satellites and everything else—hence his share dropped to just under 40 percent. But he operated as though it was his own.

  Newspapers remained Rupert Murdoch’s joy. But as the first decade of the 2000s came to a close, the people leading the British part of News Corp—from Rupert to James to Rebekah Brooks on down—focused on one priority above all: to swallow Sky whole.

  Rupert Murdoch likes to portray himself as a creative corporate force who seizes opportunities where others cannot perceive them, and in the case of Sky that is certainly true. But his most recent effort to build on that record at Sky proves both the drive to succeed under Murdoch and the important role government officials play in aiding or frustrating his ambitions. In this case, the cabinet minister ultimately assigned to assess the merits of News Corp’s drive to acquire Sky was the same person who most avidly lobbied inside the government for its success.