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Rupert Murdoch

Rupert Murdoch
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If you want to understand how modern media has changed the world, this is the one book you must read.

Rupert Murdoch is the man everyone talks about but no one knows. He’s everywhere, a larger-than-life media titan who has spent a lifetime building his company, News Corporation, from a small, struggling newspaper business in Australia into an international media powerhouse. Rupert Murdoch charts the real story behind the rise of News Corp and the Fox network: the secret debt crises and family deals, the huge cash flows through the offshore archipelagos, the New York party that saved his empire, the covert government inquiries, the tax investigations, and the bewildering duels with Bill Gates, Ted Turner, Gerry Levin, Ron Perelman, Newt Gingrich, cable king John Malone, Michael Eisner, Tony Blair, and televangelist-turned-diamond-miner Pat Robertson.

Murdoch’s story, however, is more than just how one man built a global business. Rupert Murdoch is both a biography of Murdoch the man (including the divorce from his wife, Anna; his remarriage to a woman young enough to be his granddaughter; and the struggle between his two sons for eventual control of the family holdings) and a “follow the money” investigation that reveals how he has managed to have such a huge impact on the communications revolution that promises to utterly transform life in the twenty-first century.

The investigation concentrates on Murdoch’s three great campaigns: in the 1980s, when his determination to launch an American television network overturned the media industries of three countries; in 1997, when Murdoch took on every broadcasting group in America; and the process of reinventing himself since then, culminating in his bid to win DirecTV from General Motors.

This is the saga of the man who has stalked, infuriated, cajoled, threatened, and spooked the media industry for three decades, whose titanic gambles have shaped and reshaped the media landscape. Win or lose, Murdoch is the man who has changed everything. And Neil Chenoweth is the right person to tell the story: In 1990 he wrote a magazine article that prompted a secret Australian government inquiry into Rupert Murdoch’s family companies, and he’s been on the Murdoch case since then. Chenoweth reveals what no person ever has about the man (and the company) who is probably the most significant media player of them all.


From the Hardcover edition.
Crown Publishing Group; November 2002
417 pages; ISBN 9781400046881
Download in secure PDF format
Excerpt
A Business of Ferrets

Avenue of the Americas

When the storm broke in the newsroom of the New York Post in midtown, the staff broke into the defensive huddles that mark a newspaper where the editor has just proven mortal. There had been no warning of what was coming. On Monday, April 23, 2001, just before five p.m., as the paper was gearing up for the serious business of getting an edition out for the next day, the publisher, Ken Chandler, called the staff around him. Xana Antunes, their Scottish-Portuguese editor, was with him, sucking the pink lollipop that was her trademark since she quit smoking. It came out whenever she was under stress. Two days later the Post would announce a 10 percent rise in its circulation. A cut in the cover price had given the paper the biggest sales hike in its history. But it wasn’t enough to save Antunes’s job. Chandler announced briefly that Antunes was stepping down immediately to pursue personal interests. She said she had a book project. The new editor was an unknown Australian, Col Allan, currently the editor of Rupert Murdoch’s Daily Telegraph in Sydney. In the stunned silence that Chandler’s announcement produced, the Post staff struggled to understand what this news meant. Any power realignment in the Murdoch firmament raised a thousand imponderables. But in the hour of crisis, the most immediate question was: Where would they go to talk about it?

Only journalists can love old newspaper buildings. They have an anachronistic charm that may be detected only by the very nostalgic and people on prescription medication. Newspaper offices absorb part of the histories that flow through them. With the accretions of the years, the atmosphere in their newsrooms comes to reflect the individual styles and practices of the paper. They become comfortable, familiar, down-at-heel, redolent with tradition. They smell. A newspaper has its own odor. This is due not so much to the natural aroma associated with large numbers of journalists in a confined space as to the nocturnal manufacturing process, the muscular, messy business of applying ink to several acres of newsprint each night, then cutting the end product up into little bits and putting it into large trucks.

A blind man could navigate his way around Rupert Murdoch’s newspapers by his nose. The New York Post’s old pressroom on the waterfront on South Street mixed the residues of truck fumes, newsprint, and decades of grime with other, more exotic traces. The fanciful could imagine a whiff of the drug deals that at various times in its august history went down in the paper’s loading bays, alongside the rats in the parking lot. Murdoch’s Fleet Street newspaper offices in London are a shadow of their old selves, based now in an anonymous industrial plant in Wapping. In Australia the pervasive aroma at Queensland Newspapers, the Brisbane chain that became the Murdoch family’s lost birthright, is a product of industrial-strength disinfectants, the soap factory next door, and the cattle stalls in the showgrounds nearby. When News Corporation’s Australian editors met for a conference in the building in early 1999, toilet seats had to be replaced and the more aromatic sections sealed off, to make the effect less overpowering. Before Lachlan Murdoch’s renovations, News Corp’s headquarters in Sydney had a distinctive bouquet of old beer and perspiration, an unhappy combination that in large quantities acquires the aroma of urine. Advertiser Newspapers in Adelaide hosts a more pungent smell when waste trucks pump raw sewage from the building’s septic tank.

There is something about the newspaper business that is never far from the down-at-heel and scruffy. Grunge is a part of newspaper ethos. This is one measure of how lethal the march of technology has been for traditional newspapers—because the first by-product of the information revolution is hygiene. It’s an insidious thing. Almost every office has endured its own little technological revolution in the last two decades, a modest mirror of the wider changes buffeting the culture. There is no such thing as introducing a little technology. What you’re really buying is an ecosystem. Computers are no good without the network: the laser printers, scanners, and servers, the graphics workstations. That means new furniture to stick them on, no question. Why be coy about it? It’s a new office architecture. And the ducting. You have to have a new floor for the ducted Category 5 UTP cabling that is obligatory everywhere for the networks. Add in a new ceiling for the no-glare lighting. You’ve already beefed up the air conditioning to protect the servers. Total climate control is a phrase that rolls around your mouth. Firewalls. Offsite backups. And then senior management works out how much all this has cost, with so little to show the board of directors, and it all hits the fan. That’s when you get the new paint job. Just like that, you’ve got a squeaky-clean, hermetic environment. There goes the neighborhood.

Newspaper offices have been no more immune than other businesses to the revolution in the workplace. Renovations have changed their floor plans, social interactions, and management structure. Often the whole newspaper has moved. In the mid-1990s the New York Post’s newsroom weighed anchor and shifted from its longtime moorings in South Street in lower Manhattan, to settle on the tenth floor of News Corp’s headquarters at 1211 Sixth Avenue. The result of all this technohygiene has been a strange dislocation in traditional newspapers. The craft of journalism itself is caught halfway through an uneasy transition from the reporter’s traditional role as cynical ambulance chaser to the new role as cynical media savant. Such dislocation is most apparent when the world goes wrong. For the shocked Post veterans on April 23, their emotional home was still back in the paper’s old haunts downtown on South Street, where all their history lay. The information revolution had left them stranded in midtown, fifty blocks north of their comfort zone. Where were they going to go? Under pressure, the fourth estate headed for the closest friendly harbor. Which turned out to be around the corner and down West Forty-seventh Street at Langan’s Bar and Restaurant.

Rupert Murdoch has always had something special going with the New York Post. When asked what he thinks about the world, he tells the questioner to read the Post’s op-ed pages. Now that he was back in New York, the Post was back to being a star in his heaven. The Post is America’s oldest newspaper, with a his- tory of continuous publication since 1801, when it was founded by Alexander Hamilton. The paper is part of the fabric of the city, albeit a rather jaded and grubby part of that fabric. Since Rupert Murdoch bought the Post in 1977, it has been best known for headlines like “Headless Body in Topless Bar,” “Teen Gulps Gas, Explodes,” and “Pulitzer Sex Trial Shocker: I Slept with a Trumpet.” And for its vehement support of any incumbent politician favored by Murdoch.

“Outsiders, even some insiders, don’t understand the differences between the New York Post and the New York Daily News,” says Murdoch. “They have absolutely different audiences. New York is a strange tribal city.”2

New York Times columnist Andrew Sullivan drew the distinctions a little differently: “Australian and British journalism is based on far lower principles than American journalism; it is an opinionated, coarse and alcohol-driven exercise, rather than a selfless and objective pursuit of the public good. But even here, Americans can take solace from the fact that the central attempt to import it wholesale—The New York Post—was a commercial failure.” Sullivan, it goes without saying, is British.

After Chandler’s announcement on April 23, the Post journalists observed a decent interval of quiet sympathy for their fallen leader. Two minutes later they raided the office of the Daily Telegraph’s New York bureau several floors away, to grab back copies of the Sydney paper. They wanted a look at their new editor’s handiwork. Then they hit the phones and the Internet. They hit paydirt with an Australian website, Crikey.com.au, where a former Daily Telegraph chief of staff, Stephen Mayne, had compiled an extensive dossier on the man he called Col Pot. Col Allan was the man whom Australian politicians feared most, a hard-drinking, pugnacious editor of the old school. He could take a three-line wire story about a rise in births outside of marriage and create a front-page screamer, “Nation of Bastards.” He had a photographer shadow the Sydney mayor around until he caught him jaywalking. Allan ran the picture on page one under the headline “Lord Muck.” Allan once called the paper’s New York correspondent at four a.m. to tell him to fly to Washington, obtain a sheep, and tie it to the White House fence, to protest U.S. lamb import quotas. When Allan worked in New York in the 1980s, his nickname had been Canvas Back, a comment on his performance in barroom brawls. But the story that everyone came back to was Col’s Closet.

In Sydney Allan had a washbasin in a closet in his office. As a shock tactic with new staff, he would urinate in it during their first news conference, without a break in his conversation. The Post had its share of wild boys, but Antunes, a former business editor, had maneuvered the Post upmarket with sophisticated media and business coverage while retaining much of its raucousness. Allan sounded like a return to the bad old days of the late 1970s. What was Rupert Murdoch thinking, the bemused Post journalists asked from their field headquarters at Langan’s. In fact, where was Murdoch?

They went home with no answers. There was another story involving Murdoch that day, but it was covered by the business desk of the New York papers. It was another megadeal. The axing at the Post ran in the Metro sections. Not until much later did anyone suggest the two stories were connected. The following Monday an elegant pedestal washbasin wrapped in a red ribbon was on the editor’s desk when a still jet-lagged Allan made his appearance at the Post. He wasn’t overly amused, and no one admitted to the prank. New York meanwhile settled down to watch Allan fall on his face.

Many Americans are confused by English tabloid newspapers, which is the thing that the New York Post most resembles. In particular they don’t understand the tabloid maneuver known as the reverse ferret. English tabloids are news-driven creatures, built upon a hard core of self-righteous cruelty and inexhaustible moral indignation, which may be leavened to a greater or lesser extent by an audacious sense of humor. When the humor works, the tabloid can be very funny, or at least roguish. The newspaper—and this is important—is never wrong. Kelvin McKenzie, probably the world’s greatest tabloid editor (certainly the most obnoxious), used to stalk the newsroom urging his reporters generally to annoy the powers that be, to “put a ferret up their trousers.” He would do this until the moment it became clear that in the course of making up stories, inventing quotes, invading people’s privacy, and stepping on toes, the Sun had committed some truly hideous solecism—like running the wrong lottery numbers—when he would rush back to the newsroom shouting, “Reverse ferret!”4 This is the survival moment, when a tabloid changes course in a blink without any reduction in speed, volume, or moral outrage. In the midst of a disaster of its own making, it pulls a ferret out of a hat and sails on. It’s an equal combination of miraculous escape, misdirection, and a new start. It’s no accident that McKenzie perfected this at the Sun, because Rupert Murdoch’s entire business style may be characterized as a reverse ferret. Time and again when his plans have gone awry and he has found himself facing calamity, his superb survival skills have saved him. Just before he hits the wall, he does a little dummy, he feints this way and that, and then he sets off with undiminished speed in a new direction. This is Murdoch’s genius: not that he gets into a jam, but that he is able to walk away afterward, an implausible winner.

So there was Col Allan in May 2001, under pressure to perform, deciding his only hope was to do something ferretlike. And it was just coincidence that the person on whom he would perform this maneuver was, in real life, New York City’s number-one ferret-hater. One of the more spirited battles of Rudolph Giuliani’s term as mayor had been over his insistence on banning ferrets and iguanas from the city. Giuliani hated them; he couldn’t understand what pet owners saw in them. “This excessive concern for little weasels is a sickness,” Giuliani told one radio caller.

Allan’s biggest problem when he arrived in New York was that the Post had become too close to Mayor Giuliani, whom it had supported slavishly for years. “The Post [is] so locked into Giuliani that they could call it the City Hall Post,” Charles Rangel, Democratic congressman from Harlem, told the New York Observer. In return Giuliani had been just as valiant on behalf of Rupert Murdoch’s interests, most notably through tax concessions and his support for Fox News in its fight with Time Warner in 1996. The gossip-hungry Post had been unusually reticent when it came to stories about Giuliani’s love life. Early one morning the previous year a Post photographer had caught Giuliani coming out of the house of his mistress, Judith Nathan, but had sat on the photos for weeks until the Daily News broke the story. By May 2001 Giuliani was in the last months of his tenure as mayor, recovering from aggressive radiation therapy for prostate cancer, when his wife, Donna Hanover, sought a court order to bar Nathan from Gracie Mansion. Even by New York standards, what followed was a spectacularly spiteful public slanging match. But the Post’s editorial line on Giuliani was set in concrete. The mayor was right, no matter what. Allan was boxed in. How was the Post going to cover the story?

New Yorkers woke up to the answer on May 13. Purely because the Post was the mayor’s greatest friend, the Post was forced to share details about Rudy Giuliani’s sperm count. In a page-one story titled “Judy Stands By Her Ailing Man,” Andrea Peyser painted Judith Nathan as a hero tending to the mayor’s woes after the radiation treatment. This was in contrast to the lack of support from the mayor’s heartless wife, whom Allan would later banner as “Cruella deHanover.” Under the guise of sympathy and support, the Post was free to nuke Giuliani as no one ever had, quoting affidavits from the “hilariously titled” court case. The mayor, poor fellow, was impotent. Not just impotent, he was vomiting up to eight times a night. Even when he wasn’t hunched over the pedestal, the poor lug couldn’t sleep because he would be awakened by his wife’s exercise equipment. The macho mayor was a testosterone-free zone, the Post zestfully reported. In fact he didn’t have a trace of male hormone in his entire body.

A newspaper less wholly committed to the mayor’s cause might have regarded some of this as too much detail. It was no trouble for the Post. The mayor didn’t have any comment about Col Allan, his new best friend, or about the Post’s adroit change of course. He was spending his time at City Hall, where, as fortune would have it, he was busy using the mayoral veto that very day on yet another real-life attempt by lesser legislators and pet owners to re-legalize the little weasels. It was only after September 11 that the Post realized the magnitude of its error. It thought it had been having some fun at the expense of a desperately ill politician at the end of his political career. Instead it had trashed a man who was about to become a national icon. Not that it would admit this, of course. The Post would deftly change course again and sail on as if its support for the mayor had never wavered. Even before the mayor’s display of staunch heroism after the attacks on the World Trade Center, the Post’s coverage of him and his wife was clearly mean, self-serving, and vindictive. But then, tabloid journalism usually is.

New York was awash with irony that summer. Not the least of it was that these merry japes were unfolding at the Post, a grubby tabloid that represented the oldest of old media, just at a time when the new-media businesses that had trumpeted themselves as the face of the future were themselves becoming history. The tech bust continued like a lethal landslide in slow motion, grinding stock prices remorselessly lower. As grand visions of Internet dominance faded, old-media companies had gone back to their knitting. Consumers did not really want to surf the Net all day, they concluded. The thing that American households did best was watch television. Any technological progress would be based upon the television, and it would be incremental—beginning with interactive television and video on demand. The future belonged to the pay-television operators: to cable companies and satellite broadcasters. And there would be fewer of them. Within three years it was likely that the American media would be dominated by three pay-television groups: AOL Time Warner, the AT&T Broadband business, and General Motors’ satellite broadcaster, DirecTV. The last two were up for sale. As each of these three groups headed toward 20 million subscribers, the balance of power would shift dramatically from the media groups that provided programming and content toward those that controlled distribution.

This was where Rupert Murdoch came up against a second piece of irony that summer, because after half a century of battling media rivals on all continents, Murdoch’s future would be determined by a car company. For a year as the market had continued to spiral down, Murdoch had been negotiating with GM chairman Jack Smith to merge Murdoch’s satellite group, Sky Global Networks, with GM’s Hughes Electronics. In twelve years Murdoch had built a worldwide satellite empire that began with BSkyB in Britain, stretched across Germany and Italy through the Middle East, India, Southeast Asia, Japan, covertly in China, down through Australia and New Zealand, through South America, and up to Mexico. North America was the only hole in the network, which was where Hughes Electronics, with its DirecTV satellite operation, came in. Winning DirecTV would give Murdoch an unbroken world highway that could reach three-quarters of the world’s population. And he would control what ran on that highway, with a global voice and power that no one in history had ever had.

“We’re just minnows,” Murdoch said to critics like Senator John McCain, who worried about the power that this deal would give him. But News Corp is a company that is larger on the inside than it is on the outside. Its stock was worth $40 billion, which put it only in the third rank of major media players. But in media the important measure is not size but power. Murdoch’s global highway was based on a string of companies in which News Corp held management control, though only a minority shareholding. If you added in these companies, Murdoch controlled a $70 billion conglomerate. With the Hughes deal Murdoch would head a $100 billion media empire. It would be the second-largest media group in the world, and AOL Time Warner’s only serious rival for global media dominance.

This was the prize that Murdoch had been inching toward all of his life. After five decades of striving, it was finally within reach. In a matter of weeks—even days—it could be his. But first Murdoch had to convince General Motors to commit to this deal. If there is a modern vision of purgatory, it must be spending eternity negotiating a media deal with an American carmaker. When Murdoch turned seventy on March 11, he told journalists that he had another seventy thousand hours of working life left in him: “I hope not too many of them will be spent negotiating with General Motors.” The final hurdles had seemed to be resolved in February, when the GM board gave the green light to begin due diligence talks with News Corp to finalize the deal. But the talks broke down again two weeks later. By April the process had been going on for thirteen months. The market was still in free fall, and it had become clear to Murdoch that he was facing a brutal choice. This brought him to the other, more personal crisis facing him that summer.

After decades as the perfect family man, Rupert Murdoch’s personal life almost overnight had come to resemble the soap operas that his newspapers and tele- vision programmers so enjoyed exposing. On Thursday, May 10, a News Corp spokesman confirmed newspaper reports that Rupert Murdoch and his new wife, Wendi Deng, thirty-seven years his junior, were expecting a baby. Murdoch, who had had radiation therapy for his own prostate cancer at the same time as Mayor Giuliani, gallantly declined to inflict his own personal details on the populace of New York when the Post nuked Giuliani on May 13. This was just as well, because medical opinion was that this was probably an in vitro conception, achieved within days of Murdoch’s seventieth birthday, using sperm stored before the cancer treatments began in May 2000.7

In 1989 Doris Lessing wrote a novel called The Fifth Child, which explored how a happy, well-adjusted family with four children disintegrates under the pressure of another birth. Wendi Deng’s baby, with the uncertainties it created for succession in the Murdoch empire, carried similar disruptive potential. Within two weeks of the public announcement of the pregnancy, Murdoch’s estranged daughter, Elisabeth, had reconciled with her former lover, English public relations consultant Matthew Freud, the great-grandson of Sigmund Freud and a man whom Rupert Murdoch loathed. While the announcement of the engagement had nothing to do with Wendi’s pregnancy, Freud promptly arranged a profile for himself in Vanity Fair in which he was able to get a few things off his chest about his prospective father-in-law, in particular his chauvinism against daughters. Meanwhile Anna Murdoch, Rupert’s second wife and Elisabeth’s mother, was arranging her first interview since the acrimonious divorce. Anna told Australian journalist David Leser that, despite her former husband’s claims to the contrary, their marriage had ended because Rupert refused to end his affair with Deng.

Murdoch had a daughter from his first marriage, Patricia Booker, but while her husband worked for News Corp, she herself had no role. For a man as focused on family as Murdoch, who has tended to see family as a natural extension of business, his sons were two of the only bright spots on his horizon: James running Star TV in China, and Lachlan, the elder son whom Murdoch had been grooming for years to succeed him, in New York. This was the heart of the brutal choice that now faced Murdoch. If he did this deal, the Murdochs would still control News Corp, but the engine room of the empire, the satellite platforms, would be in Sky Global. General Motors, Bill Gates at Microsoft, and the wily John Malone of Liberty Media would be shareholders in the new company. Under the deal that Murdoch had negotiated with GM in February, News would end up with 35 percent of Sky Global, and Murdoch would control it. But the deal had broken down, and Murdoch knew that to get the talks restarted, he would have to make concessions. The biggest concession that Jack Smith at General Motors was demanding was that Murdoch cut his stake to 30 percent. This was a critical change for Murdoch, because although he would still control Sky Global, it wasn’t a big enough stake to ensure that he could pass control to his children, to a young and untried Lachlan. The personal cost to Murdoch of winning DirecTV was that he would probably have to jettison the succession—to accept that his children would inherit the wealth without the power.

“Lachlan is in a very difficult situation,” said a former News director in March 2001. “Rupert is going to go on working forever. Lachlan could find himself forty-five years of age, then suddenly miss the opportunity to run News.”

The children would still be fabulously wealthy, influential and connected, but running News Corp would amount to little more than overseeing a media investment holding company, with a few newspapers on the side. The engine rooms of the empire, Sky Global and Fox Entertainment, would be in other hands. The General Motors subcommittee handling the sale of Hughes had called a final meeting for April 23. It was time to put up or shut up. That was why the New York Post journalists could not find Murdoch when they went looking. That evening when Ken Chandler announced that Xana Antunes was stepping down, when the Post staff regrouped across the street at Langan’s, Murdoch was in Detroit, facing a choice between dynasty and destiny. Should he walk away from this deal, limiting his prospects for the sake of his children, or should he seize the day? Of course, Murdoch had already made his choice. He wouldn’t have been in Detroit otherwise.

That was where the real irony about the sad little scene at the Post that day lay. The previous December Rupert had appointed Lachlan deputy chief operating officer of News Corp. The move was aimed at quashing widespread speculation in the market that John Malone, who had just taken what would become an 18 percent nonvoting stake in News Corp, was the most likely successor to Murdoch at the head of News. The appointment put Lachlan third in line in the News hierarchy, behind his father and the chief operating officer, Peter Chernin. But Lachlan, who had been elevated to New York in late 1999 after five years in the Australian operations, in practice controlled only a tiny part of the empire. His biggest move had been a $280 million investment in an Australian and British telephone company called One.Tel where he sat on the four-man board. (In April 2001 Lachlan had no idea that One.Tel was days away from going into liquidation. He was too focused on events in New York.)

In America Lachlan ran the U.S. publishing interests, the coupon inserts business, and odd bits and pieces. His most high-profile responsibility was the Post. What was obvious to anyone who knew Lachlan’s history was that the only person who could have chosen Col Allan to replace Antunes was Lachlan. He had worked with him for years. Just six months before, Lachlan had appointed Allan’s close friend and amiable drinking companion John Hartigan as chief executive for News in Australia. By appointing Allan to the Post, Lachlan was asserting his authority and independence: He was making a big call in the small part of the empire that he controlled. This little gesture of autonomy came on the very day that his father was in Detroit offering a deal that would limit the aspirations of his heirs.

The cruelest thing was that no one would believe that the Post decision was Lachlan’s. Story after story would note Lachlan’s growing involvement with the paper and his regular attendance at Post meetings with and without his father; but any decision at News Corp had only ever been seen to be Rupert’s. And the Post was one of the things closest to his heart.

Some fathers throw their sons the car keys. Others can offer larger toys. In the turmoil that Antunes’s sacking triggered that summer, with the string of journalists that left the Post or were fired in her wake, in the trail of tabloid victims that marked the Post under Allan, the paper would be called many things. It was everything from a “triple espresso” to start the day, as columnist Steve Dunleavy put it, to “like being battered in a boxing match,” as Governor Mario Cuomo once described its political coverage. For the nearly half a million people who bought it every day, it was just part of life. In two hundred years of publication, what no one had ever called the Post was a consolation prize.


From the Hardcover edition.