The Man Who Owns the News: Inside the Secret World of Rupert Murdoch

by Michael Wolff

  His father, being a more clearly primitive business creature, is perhaps most mystified by James’ self-conscious MBAisms—even more mystified because James does not have an MBA. He is so effortlessly programmatic, reductive, and process-oriented. And he’s a marketer—the one thing his father has never been.

  Counterintuitively, James’ diffidence or contrariness, his relative shunning of the family business, is what seems to have paid off. At fifteen, while working for the Daily Mirror in Sydney, he was famously snapped sleeping during a press conference, and the photo appeared in the rival Sydney Morning Herald the next day. A bleached-blond hipster, with various piercings, he drops out of Harvard in his junior year, after spending time in Rome, vaguely thinking about a career as an archaeologist. Instead he decides to make the hip-hop label he’s started in college, Rawkus Records, his full-time career. He swaps out the bleached-blond hair and earrings for a rugged beard and eyebrow stud.

  Rawkus is a critical if not quite financial success, with Mos Def and, early in his career, Eminem on the label. His father agrees to buy Rawkus in 1996, and James goes to work in News Corp.’s music and tech division.

  In 1997, he’s made the head of News America Digital Publishing, a job he will later describe as “doing triage” as he attempts to fix the old empire’s missteps into digital media (though he does not particularly fix anything). His wardrobe changes to sharp suits and thick black glasses in his new persona as the young entrepreneur.

  When the Internet bubble bursts, James is shipped out to Hong Kong to run the ailing Star TV business, where he becomes, echoing his father, an apologist for the Chinese government. Among the Murdochs, not a famously verbal bunch, he develops a reputation as the family polemicist. In 2000, he delivers the Alternative MacTaggart, the formal contrarian address, at the Edinburgh Television Festival, and excoriates both English-language centricity and Hong Kong’s democracy movement. The next year, with his father sitting in the audience, he delivers a speech at the Milken Institute in Los Angeles accusing Western media of being unfair to the Chinese government and describing Falun Gong as a “dangerous” and “apocalyptic cult.” (Tunku Varadarajan, in the Wall Street Journal, characterizes James as a college dropout involved in the “craft of craven submission to the communist regime in China.”) Sky Asia turns its first profit in his third year of running it. His father promptly moves him to Britain to run BSkyB.

  Around this time, inside News Corp., James becomes “the real thing.” Among the reasons James has come to be described in this language (usually when phrases are repeated at News Corp. it means that Rupert has said them first) is that he is not his brother. The consensus that has formed around James as the better successor comes, at least in part, from the fact that he was farther from the company and from the top job. So the more James was praised, the more that took from Lachlan’s inevitability. The more James was praised, the more his father had an alternative. This reinforces the idea that staying away from the epicenter of News Corp. is the better strategy—one now being followed by Lachlan.

  James gets up early, works out at the gym, arrives in the office before anyone else, and leaves in time to put his kids to bed. He has a black belt in karate. Unlike his brother and sister, he stays out of the gossip columns. He tells his PR advisor, “You will be a success in this job when the press starts referring to me as the reclusive James Murdoch.” Unlike his father, he has refused to comment on his political views (with the exception of his China coddling) and doesn’t court politicians.

  He’s introduced to his wife, Kathryn Hufschmid, an Oregon-born model, by Lachlan’s future wife, Sarah O’Hare, at a yacht party in Sydney in 1997. The couple get married just outside Old Saybrook in Connecticut in 2000, not long before James is shipped out to Asia to head up Star.

  The private wedding, a year after Lachlan’s Australian royal-styled affair, was something of a reunion for the family. Wendi and Rupert attended, as did Anna and her new husband, William Mann. Dame Elisabeth made the trip from Australia. James read a poem by Pablo Neruda to his bride, and Kathryn responded by quoting James Joyce.

  While in Hong Kong, both Kathryn and James sat for a handful of magazine profiles and made occasional statements to the press, but as soon as they arrive in London, she disappears from the media spotlight, her name only briefly appearing in reports as James’ wife.

  The couple have two children, Anneka, born in 2003, and Walter, born in 2006.

  GRACE

  Grace, born in New York in 2001, is fluent in Mandarin. As Rupert Murdoch begins to plot to get the Wall Street Journal, he’s also worrying about getting Grace into private school in New York. He wants her to go to Brearley, where Elisabeth went. He recruits Gary Ginsberg, who knows the Kennedys, to help him get Caroline Kennedy, a Brearley alumna and board member, to write a letter on Grace’s behalf.

  CHLOE

  Chloe, born in 2003, is fluent in Mandarin too.

  Murdoch talks about his children, and their relative potential, with the same openness and tactical nuance that he talks about anything else that might affect the company. He seems to assume that everybody else has a stake in his kids—that they are figures in the body politic, corporate assets, historic personages.

  Murdoch’s projection about his children manages to be both compellingly normal and obviously creepy at the same time. This normalcy and creepiness are reflected in the way the company treats them. Except at the highest possible levels of the company, the Murdoch children are accorded not just deference or standing but a kind of love. They represent something—him. Even at the highest levels, the price for pushing Lachlan out was to then declare an alternative Murdoch child, James, “the real thing,” the real Murdoch.

  There are now few families living this blood story, this blood imperative. Generally, any effort at this kind of dynastic construct is met with easy ridicule. It’s an extremely difficult modern conceit. It may be an impossible one. The press scrutiny alone for young people upon whom has been bestowed too much money and too many expectations is deadly. But in this, obviously, the Murdoch children are spared considerable pain—a significant part of the media protects them. And so they have been able to coalesce into dynastic shape.

  They’re certainly like the Bushes in their level of advantage, connections, resources, and focus on family entitlement. But they may be more Kennedy-like. The insularity is powerful; there is a sense, especially among Anna’s children—Elisabeth, Lachlan, and James—of being part of a rarefied order, of being judged against it, of there being no escape from it. They are trapped in the Murdoch bubble, in its exceptionalness.

  The insularity can seem to take the form of an almost puppy-love closeness. It’s one of Wendi’s first impressions of the family, that they’re always kissing each other and saying “I love you.” They can’t have a telephone conversation—and they’re always on the phone with each other—without many protestations of love. Wendi, from a carefully unemotional Chinese family, is a bit weirded out.

  And yet there’s an ordinariness to it. Rupert Murdoch is a man obviously burdened by family issues; equally, his children are burdened by a complicated and demanding father. The Murdochs are as fraught as any family, and as connected as the closest of families—there are seldom days he doesn’t speak to each of his children. He’s not just weighing their futures but plotting their futures with them. He’s not just the patriarch but the mentor and strategist. And if he’s often been the remote father—full of murmured regrets—he is also the long-suffering one, stoically standing by as his children fail to heed him.

  So it’s a sort of yuppie professional family, everybody in love with everybody else’s success—and everybody just a little too competitive about it and oppressed by the demands.

  In the spring of 2006, as he’s getting Andy Steginsky’s reports about the dysfunctional Bancrofts, he decides to finally resolve his family’s filial and financial dilemma. But he does it on television.

  This is both because he does s
ee it as historic and, in its way, necessarily public, but also because it’s easier than doing it in person. Also, it makes it a fait accompli. Decision made. Done. Dealt with.

  He’s been standing between Wendi and their two children, on one hand, and his adult children, on the other—he has to cast the deciding vote. Which he does on Charlie Rose.

  With the birth of Grace and Chloe, the family’s financial situation becomes untenable, as his and Wendi’s children, by the terms of his divorce agreement with Anna, are barred from the Murdoch trust and fortune. Wendi’s position is clear: Rupert, fix it.

  In this issue of great moment, nearly a matter of state, over the trust, a complex, almost historic agreement—proscribing control over the News empire—Wendi is, to say the least, a discordant note. First of all, she talks constantly, without guile or niceties, boiling it down, reducing, stripping away all conceits, formality, pretense. Indeed, if that has been the essence of Murdoch-style journalism, he must have been shocked to be so outdone.

  His older children resist. They’re furious. In projecting their royalness, it seems to them a terrible breach of etiquette for Wendi—Wendi of all people—to want to interfere with their historic birthright. It is, however, not just Wendi. If she’s prodding—really prodding—Rupert is himself not about to forgo this further shot at immortality, given two more children, and half-Chinese children, no less.

  It’s a long negotiation that begins before Lachlan’s departure from the company and that takes place primarily on the phone with children and their advisors mostly in different countries.

  And then, Charlie Rose. His show is a forum that business leaders, especially those in the media, often use to stroke their reputations, or to make valedictory pronouncements, or to smooth over PR problems. Rose is a deferential and often treacly host (many of the media figures he hosts in turn help underwrite his show). His hourlong conversation with Murdoch, which airs on July 20, 2006, is a meandering hodgepodge that seems to mostly focus on Britain in the 1980s. But then it turns to the message it seems he’s there to impart—it’s a muddled, almost coded message, which makes sense to only his family and to those people advising the family on the sticky trust issue. And virtually all of those people are caught off guard. He has either told Charlie Rose more than he intended to or, keeping his own counsel, gone off script to make the private public and therefore definitive.

  Rose: While you have said that you would like to have a member of the family succeed you—

  Murdoch: Yes, I think that’s a natural desire.

  Rose: You’ve said. Either sons or daughters, you’d like to have—

  Murdoch: They’ve got to prove themselves too.

  Rose: Where does that stand today? Succession. Lachlan—

  Murdoch: It’s really up to them.

  Rose: But, to great pain, when Lachlan left it was painful for you.

  Murdoch: If I go under a bus tomorrow, um, it’ll be the four of them will have to decide which of the ones should lead them.

  Rose: Your four children?

  Murdoch: Yeah, well, and my, uhh, the two little girls are too young to consider this at the moment.

  Rose: Now do you consider them? You’ve said they are all my children.

  Murdoch: They’ll all be treated equally—financially, absolutely.

  Rose: You ran into some buzzsaw within the family because of that decision?

  Murdoch: No, just on a question of power. Would their trustees have votes and these things at the moment, you know? We’ve resolved everything very happily.

  Rose: It’s your personal business. So, if something happens to you, if you get run over by a bus when you leave this studio, the four kids have to decide who among them ought to be the heir apparent.

  Murdoch: In terms of power, yes, in terms of leadership. They’ll all get treated equally financially.

  What this means—and the various advisors all note that they would not have liked to be Rupert Murdoch watching Charlie Rose with Wendi Murdoch when it aired that evening—is that he has acceded to his older children’s settlement proposal to admit their young half siblings into the trust economically but to exclude them politically. They will benefit from the company but have no say in how it is run.

  Among other elements, this guarantees that Wendi will not be able to act as the regent (with two votes) for her minor children.

  Rupert Murdoch’s ambitious, largely functional family is, in a certain sense, what he believes he’s offering the Wall Street Journal. The Bancrofts, he further believes, given their lack of ambition, deserve to lose their business. Similarly—and this is another aspect of the class subtext—he doesn’t believe that management of the company should have the right to control because, well, it isn’t their money.

  Which is, in a way, the point of his intersection with Richard Zannino.

  Zannino, as a conventional manager—even if his MBA is from a night school—understands that capital controls. That it’s only in a strangely anomalous and inverted world that it does not. That, actually, at Dow Jones, it’s crippling that capital doesn’t control—the cost of keeping capital out of the hair of the business managers is that they have to turn over all the money the company makes. Capital, if it were running the company, would understand that the company needs to reinvest profits to thrive and grow. Indeed, given the weakness in the newspaper business, there is periodic talk about selling the Ottaway chain of newspapers, which Dow Jones acquired in 1970. But the company knows that if it does sell Ottaway, the money will likely be immediately distributed to the Bancrofts.

  Shortly after Zannino is made CEO, he gives his presentation on the state of the company and his plans for renewal to the Dow Jones board. Even in his optimistic scenario, he only feels comfortable projecting, in five years’ time, a rise in the share price from mid-thirties to $45. He understands, even with his night-school MBA, that this means that he, like Peter Kann, will have to placate the Bancrofts. That he will have to, in some sense, fool the owners of the company—providing them with the money the company needs in order for them to remain quiescent enough not to sell the company or, worse yet, think they could run the company themselves. (His own appointment is evidence that this could happen—that these know-nothings could assume greater control.)

  He understands that he has risen to a CEO job that really can’t be done. He can only fail at it.

  Hence, when Jimmy Lee, his neighbor from Greenwich, Connecticut, and fellow hockey dad, calls him about scheduling a get-together with Murdoch—now that Rich is actually the CEO—he goes for it, without any hesitation. Indeed, he neglects to tell anybody at Dow Jones—not chairman Peter Kann, not anybody else on the board, not the company’s lawyer, nor any representatives for the Bancrofts—that he is meeting with Murdoch and an investment banker.

  Lee is a semi-legend on Wall Street. “Semi” because he is partly a punch line too. He’s a caricature of an investment banker, eighties-style—white collar on his striped shirt, slicked-back hair, Martha Stewart–worthy wife and children, and a regular table at the Four Seasons. In April 2000, he was famously plastered on the cover of Forbes in floral suspenders and touted as the greatest financier since Mike Milken (earning him the nickname “Suspenders”). But a bona fide legend, too, because he has been in the game, at the top of the game, for as long as anyone, a player in a long list of famous deals. Jimmy has banked Rupert since the late nineties.

  Lee first gets a taste of Murdoch business at the Sun Valley conference for media moguls hosted by Allen and Company each year. At a conference in the late nineties, Lee runs into “the boys”—Lachlan and James—who are talking workouts. And so, at five o’clock the next morning, Jimmy is up and chasing the three Murdoch men to the gym. (Murdoch himself, in his oversize sneakers, has long been a stoic exerciser—not so much a fitness buff, but a man determined to keep going.) This convivial conversation in the Sun Valley gym leads to another, more businesslike one, which leads to JPMorgan Chase getting a role in News Co
rp.’s efforts in 2000 to go after DirecTV.

  After that, now in the constellation of News Corp.’s bankers, Lee keeps trying to move a deal—any deal—to the front burner. Because everybody knows the Wall Street Journal gets Murdoch’s attention, Lee keeps bringing it up—telling Murdoch about how tight he is with Rich Zannino because of the hockey-dad thing, how key Rich is to what’s going on at Dow Jones, and what a mess it is down there and how something’s got to give.

  Actually, it’s by no means clear who, in the end, will pay Jimmy’s fee. JPMorgan Chase has had a relationship with Dow Jones—if there is a deal, Jimmy would definitely be interested in banking Dow Jones. But Murdoch would be the better play—except if Dow Jones gives Murdoch the cold shoulder and gets interested in somebody else. But first things first.

  Jimmy tells Rupert—who’s partly inclined to believe the company will give a new CEO at least a few years to see if he can work a turnaround—that Rich is hot to trot. To Rich, Jimmy renews his offer of an important rite of passage for any media business honcho: an introduction to Murdoch. And now, because Rich is the CEO, he doesn’t have to clear the meeting with anyone.

  Of course, Zannino knows that Lee is shopping him. At the same time, he regards his de facto openness to being shopped—why else go out to dinner with an investment banker and someone who has made no secret of wanting to buy your company?—as a white-lie pretext to meet Murdoch. Who in his position wouldn’t want to meet Murdoch? The truer point, though, is that Zannino wouldn’t necessarily know which is the real pretext for what—is he pretending to be a seller in order to meet Murdoch, or pretending he wants to meet Murdoch in the hopes of selling to him?

  The get-together happens at the Links Club on 62nd Street on the Upper East Side of Manhattan. It’s a place at which neither Zannino nor Murdoch is particularly comfortable. It’s Jimmy Lee’s place. He’s putting his imprimatur on the meeting. It’s a WASPy, stuffy, rather ridiculous old-fart place. (The Wall Street guys have taken over all the venerable establishments.)