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

by David Folkenflik

  Watson chose his phrasing carefully. The law required the TV regulator OfCom to determine whether the owner of a broadcaster was a “fit and proper” proprietor. The Murdochs did not really believe that OfCom would yank their authority to control BSkyB. But Watson and his allies on the committee had just handed the agency cover to do so if it wanted. On the other hand, the split vote allowed the corporation’s executives in the UK and the US to portray the MPs denunciation as driven by partisan politics.

  Yet the ghost of the News of the World caught a break the following week. Testifying before the Leveson Inquiry, a lawyer for the Metropolitan Police said forensic engineers could not establish that reporters for the tabloid had intentionally erased Milly Dowler’s voice mail messages or whether a software program for the cell phone provider had automatically erased them. Old editors and reporters for the News of the World defiantly emerged on Twitter and in print to throw that misstep back in the paper’s face. The scandal never would have gained steam without that part of the story, they said.

  They were wrong, of course. The dead girl sufficed. The Guardian’s Nick Davies and others believed they had reported even that element of the story accurately. But the Guardian and its fellow crusaders had to retreat on that point, and it put them temporarily on the defensive.

  ONE FACT had become clear to Rupert Murdoch: it was time to disarm the critics by changing the subject. For years investors and analysts had told News Corp’s investment relations staffers that the entertainment business would be worth far more standing alone from the publishing side—the newspapers. Lachlan, Elisabeth, and others in the family had pushed a split for years. The newspapers had a constituency of one, even among Murdochs: Rupert himself. The previous summer, Murdoch had rejected the very idea of a split. “Pure and total rubbish,” he had told Bruce Orwall, the Wall Street Journal’s London bureau chief.

  But he now agreed to sever the newspaper side from the entertainment side of News Corp. The move carried enormous implications. The entertainment side would be flush with profit engines, especially Fox News and the share of BSkyB, but also cable channel FX, more than two dozen local American television stations, and Fox Sports, as well as Sky’s various international channels in India, Latin America, and the Fox movie studios (previously 20th Century Fox). Operating in their own freestanding corporation would be the company’s far less profitable newspapers, HarperCollins books, Joel Klein’s education division, the major marketing division, and the Australian television properties. Rupert Murdoch promised to serve as chairman for both new companies, and as CEO of the entertainment wing. The division was modeled to an extent on the split of Viacom, the entertainment conglomerate, into two companies—CBS and Viacom, both run by Sumner Redstone.

  The split represented a reckoning. For years, the New York Post had lost money hand over fist. The Wall Street Journal’s value had dropped by half. The Times of London was awash in red ink. Murdoch’s Australian papers, though still dominant, suffered severe circulation losses. “I think the basic newspaper business is like an ice cube,” said investor Don Yacktman, melting fast. Yacktman is president and cofounder of Yacktman Asset Management, which holds roughly 5 percent of all News Corp voting shares.

  Murdoch had fought for so many years to avoid this outcome. At his direct instigation, Jesse Angelo created the digital tablet publication The Daily as a $35 million experiment, as though he were operating Bell Labs, trying to figure out a profitable model publication that had no print counterpart and lived exclusively on the iPad and later the Android and similar devices. The Journal and Dow Jones eked out a profit, but the margins were small. The financial news services of Bloomberg and Thomson Reuters had pummeled the Dow Jones newswires nearly into submission. The Journal had been insulated by profits from Fox News, BSkyB, FX, Avatar, and The Simpsons. Now the Wall Street Journal would be responsible for helping keep its sister publications afloat.

  For now, the rump group of newspapers and associated companies would be called the “New News Corp”; the entertainment division, including Fox News and the Fox Business Network, would be called the “Fox Group.” Inside the Wall Street Journal, the companies were rechristened almost instantly: “ShitCo” and “GoodCo.” No one had any trouble figuring out which was which.

  22

  “WE ARE JUDGED BY OUR ACTS”

  RUPERT MURDOCH structured the split of his companies around the geography of his holdings and the psychology of his children. ShitCo, the publishing half, included all the newspapers, the book publisher HarperCollins, and the new educational division, Amplify. It also encompassed News Corp’s Australian television holdings, which were significant and growing. The company had never attained the television profile in Australia that it achieved in the UK or the US. But it paid $2.2 billion to roughly double its stakes in FoxTel, the nation’s leading private cable and satellite television provider, and in Fox Sports Australia. Together, the two pay-TV providers presented many of Australia’s most popular programs. They would be included in the new News Corp to consolidate the distant country’s properties and to give the papers a financial boost.

  The chairman principally designed the deal, however, to appeal to Lachlan. Rupert Murdoch hoped that in this crucible of crisis he could forge stronger ties to his elder son. Lachlan could manage the new company, hire professionals to run it, and be the king of commercial media in Australia over its most-read and most-influential publications. Rupert promised that the new publishing company would be created debt free—he would infuse it with more than $2.5 billion in cash to offer some running space and some scratch for acquiring more properties. Rupert would be the chairman, for now. Lachlan could be CEO, head of his own venture, thousands of miles away from his father and boss.

  The Sun remained the largest circulation paper in the UK, and its new sibling Sun on Sunday regained much, though not all, of what was lost when News of the World was shuttered. Thanks to Murdoch’s reversal of his plans to drop the paywall, the Wall Street Journal had the largest paid circulation in the US, a combination of digital and print subscribers. The papers endured as dominant titles. These, too, would fall under Lachlan. The new News Corp would still command respect and attention. Presumably Lachlan would become chairman of the new company once his father relinquished control. Presumably his father would one day actually relinquish control.

  The rump company dominated a financially ailing field. News Corp’s newspapers were not by and large conjuring up promising solutions on digital platforms. Murdoch had scrapped the digital-only The Daily, a midmarket tablet publication that had struggled to find an audience willing to pay. Murdoch’s New York Post had been lapped online by the British Daily Mail, which had a livelier and more addictive website. Murdoch’s Times of London and Sunday Times were gaining modest traction behind a severe paywall. The Australian papers shared the sharp drops in circulation endemic to the industry in the English-speaking world. Despite the endowment that Murdoch offered, and the hope that Klein’s Amplify might someday help subsidize the new News Corp, the company might not solve the newspaper industry’s seemingly existential challenges any quicker than anyone else. Doom mongers wondered if Murdoch’s new print media company was no more than News Corpse.

  Rupert Murdoch also could not will his first pick to accept the CEO job. Lachlan left News Corp driven by his anger toward Roger Ailes and then-president Peter Chernin for trying to marginalize him, mixed with a feeling that his father had betrayed him. Those emotions had not abated. One friend characterized Lachlan’s mind-set this way: If you don’t have that belief in me as an executive, fuck you. I’ll have that belief in myself. Seven years later, Lachlan still harbored hard feelings toward News Corp, toward the whole pit of corporate intriguers, even toward his father for failing to protect him. Lachlan’s affections were for Australia, not for newspapers or corporate politicking.

  Rupert Murdoch still wanted them all back in: Lachlan, Elisabeth, even James. James hoped his father would last long enough to g
ive him time to write his next chapter. Elisabeth continued to run Shine as part of News Corp but stayed off the corporate board. Soon enough, she would distance herself from the family in a very public way.

  IN THE summer of 2012, anticipation built within the British media industry as a third Murdoch would take the lectern in Edinburgh to deliver the MacTaggart Lecture. Elisabeth joked about the honor being “a massive pain in the ass,” saying she struggled to shape what to say, especially as the first woman in seventeen years to give the talk. “The committee may be less than keen on women, but by God, you do love a Murdoch,” she said to laughter.

  Elisabeth Murdoch spoke purposefully, her words chosen carefully. Her father had cited Adam Smith while her brother had relied on Charles Darwin, the two intellectual champions, respectively, of the free market (in the economy) and the survival of the fittest (in biological evolution). She took inspiration from a more recent source. “I am firmly with Dennis Potter when he said the job of television is to make hearts pound,” she said.

  The reference astounded those in the crowd who knew Potter’s history. Britain’s pre-eminent television script writer, Potter made his mark with dark humor and lacerating cultural criticism. He had also attacked her father from that very perch in 1993 as one of “the nastiest people besmirching our once-fair land,” and as “a drivel-merchant, global huckster and so-to-speak media psychopath, Rupert Murdoch . . . Hannibal the Cannibal.”

  “There is no one person more responsible for the pollution of what was already a fairly polluted press,” Potter said the next year, in his final interview before he died. “The pollution of the British press is an important part of the pollution of British political life, and it’s an important part of the cynicism and misperception of our own realities that is destroying so much of our own political discourse.”

  Elisabeth used the MacTaggart address to reject the values attributed to her father and her brother James. Citing Potter’s kindred spirit, Elisabeth said, “I was determined to jump in and start making television that changed the world.” She sketched out her career, in and out of the Murdoch stable, but argued that Shine belonged in the camp of independent British producers, defined in opposition to the major Hollywood studio market, despite its corporate siblings at Fox Studios.

  She also rebutted her brother’s 2009 assault on the BBC and his claim that only profit guaranteed independence. “James was right that if you remove profit, then independence is massively challenged. But I think that he left something out: the reason his statement sat so uncomfortably is that profit without purpose is a recipe for disaster.” As a society, “we have become trapped in our rhetoric,” she said, with society a stand-in for her family and her family’s company. “Independence from regulation and the freedom we need to innovate and grow is only democratically viable when we accept that we have a responsibility to each other and not just to our bottom line. Profit must be our servant, not our master.”

  Elisabeth was declaring herself to be a different kind of media executive—a different kind of Murdoch. Elisabeth’s challenge to James was much like her grandmother Dame Elisabeth’s quiet retort to Rupert. The debate was playing out in the new generation. “In the same way that we have allowed our priorities to be confused between purpose and profit,” the younger Elisabeth Murdoch said in Edinburgh, “we seem to have got the emphasis wrong between building a community and selling a commodity.” And so attendees, along with News Corp shareholders and Wall Street and British financial analysts, heard her express support for the BBC’s mandatory licensing fee. She was waging peace. Sky, ITV, and BBC needed one another to thrive for a healthy British television and media landscape, she said.

  Elisabeth Murdoch had prepared for months, walking through the implications of her remarks with her husband, Matthew Freud. James’s camp felt Elisabeth had abandoned her brother. She repudiated the values that the present-day corporation embodied. It was an audacious audition. Elisabeth expressed her anger at what her father and her brother had done. And she hinted that she was willing to come in from the cold, but only on her own terms.

  THE BBC that Elisabeth Murdoch had praised had turned its investigative scrutiny onto News International repeatedly over the previous two years, focusing on phone hacking, satellite TV pirates, bribery, surveillance, and political intimidation. The news stories had taken on an increasingly sharp edge as the reporting of the Guardian, the New York Times, and the Independent gave the broadcaster space and confidence to pursue its leads.

  The BBC lost its nerve, however, when it came to reporting on itself. The previous year had marked the death of one of the network’s most lauded and peculiar figures, Jimmy Savile. The self-congratulatory disc jockey and children’s TV host with the startling blond hair had been celebrated in a year-end tribute that marveled at his push for pop music and the fund-raising he did for children’s charities. He drove a Rolls Royce, wore flashy jewelry and jogging suits, and adopted a zany affect, whipping kids (and off camera, some of their parents) into a frenzy.

  Following his death, the BBC’s investigative unit at the show Newsnight was preparing a story alleging that Savile had raped some of the children who appeared on his shows decades earlier. But the show’s editor killed the story. The Newsnight staff erupted into civil war. Hundreds of women surfaced to accuse the dead star of preying on them as teens. Some men said Savile violated them, too, when they were boys. ITV broadcast a documentary on Savile. The BBC reeled. Executives for the program, the news division, and the entire broadcasting corporation were shunted aside or lost their jobs. MPs hauled BBC officials and its chairman, Murdoch’s old antagonist Chris (now Lord) Patten, to testify at parliamentary hearings. The allegations against Savile implicated an era of sexual entitlement by famous figures at the BBC and elsewhere. Britain’s most esteemed institutions had turned a collective blind eye. Even the National Health Service was implicated, as Savile had been given the run of a hospital for which he had raised money; women said he raped them there when they were young.

  Bad publicity ensuing from the story could damage the New York Times, which had announced that the BBC’s former top executive, Mark Thompson, would become its CEO in November. Murdoch taunted his rivals, tweeting on October 14, “Saville [sic]-BBC story [has a] long way to run. BBC [is by] far the biggest, most powerful organization in UK.” Other tweeters suggested more powerful organizations: the Church of England, the British Navy, even News Corp.

  Not surprisingly, Murdoch’s papers covered the story vigorously. The Sun published semilurid headlines with each new allegation against Savile and his alleged fellow predators. The Times of London soberly dissected the BBC’s unconvincing explanation of its failure to respond to early accusations against its star and of its decision to shelve its documentary. Yet News International officials believed that if they pushed the matter too hard, the BBC’s defenders could claim they were trying to undermine a rival. Such calculations were themselves another consequence of the hacking scandal: they kept the papers’ thirst for blood in check.

  WHEN JUDGE Leveson came out with his final report, Fleet Street braced for the worst. Editors and executives indicated they could accept some additional restrictions on the press. Politicians met with press representatives, hacking victims, and their families. Prime Minister Cameron, for example, invited in Hugh Grant, Charlotte Church, and the former television crime-show host Jacqui Hames. Murdoch could not control himself, tweeting, “Told UK’s Cameron receiving scumbag celebrities pushing for even more privacy laws. Trust the toffs! Transparency under attack.” Cameron and Grant were upper-class Oxford graduates, elites striking deals behind closed doors. Murdoch (Worcester College, Oxford, Class of 1952) followed up with tweeted digs at Grant for his liaison with a prostitute in Los Angeles years earlier and for fathering a child out of wedlock; Murdoch apologized for wrongly claiming Grant had played no role in the child’s life. But he was otherwise unrepentant. The private lives of the famous were fair game for his tweets as much
as his newspapers.

  Leveson’s report dismantled layers of rationalizations, built over decades, for systematic abuses. Despite a system of self-regulation, he noted, the press had ignored its obligations “to respect the truth, to obey the law, and to uphold the rights and liberties of individuals.” The pursuit of the story has too often, he wrote, “caused real hardship and, on occasion, wreaked havoc with the lives of innocent people.”

  Leveson argued that the industry required a tighter form of self-regulation, infused with a touch of legal compulsion. The new structure needed to offer people who believed they had been wronged in the press the means for fair-minded arbitration of complaints. Publishers that refused to submit to the regulator would be far more likely to have to pay for legal costs, even if they prevailed in court.

  The proposed solutions created a fresh batch of problems. Would the supposedly “light touch” by lawmakers remain all that light when another press scandal flared? If editors passing judgment on their brethren seemed incestuous, would it be any better for political appointees to do so? In the US, the Federal Communications Commission had the increasingly anachronistic task of holding radio and broadcast television stations responsible for airing obscene language and sexually explicit imagery. The growth of cable, satellite, and Internet-based video services made regulation of content on purely broadcast outlets seem quaint, though such material clearly reached tens of millions of children watching old-fashioned television stations through the day. Typically such decisions had little to do with the journalism offered by those stations, however, as federal officials had long since abandoned monitoring political coverage for balance and all but given up adjudicating challenges to the veracity of programming. The remedy for poor speech was more of it, and the US was awash in opinionated fare on radio, cable news, the Internet, and, from the former members of the audience, on social media platforms. Leveson’s report acknowledged that new media landscape but focused directly on the press anyway. A blogger could base his website in the West Indies, as did Paul Staines, a British conservative libertarian whose gossipy posts caused fits for both Tory and Labour politicians, and thereby sidestep press regulations. So could, presumably, an American magazine that did not circulate print editions in the UK but sold digital subscriptions there. A lot of wrinkles had to be worked out. Leveson used government involvement as a last-ditch threat: if the press did not create a credible form of self-regulation, he would try to get OfCom designated as the official regulator for the press as well as television.