The Man Who Owns the News (26 page)

It’s a story—the Murdoch progression from wannabe to serious player—told most particularly by the
Wall Street Journal.

After Murdoch’s takeover of the
New York Post
and
New York
magazine, the
Journal,
itself in the earliest stage of trying to find a way to write about business as more than just share price or quarterly results, sent a young David McClintick to profile Murdoch. McClintick will later write one of the seminal eighties books,
Indecent Exposure
, about the greed, foolishness, and naked power struggle that nearly destroyed Columbia Pictures. But in 1977, McClintick and the
Journal
were still groping toward a style. The profile highlighted not just Murdoch’s newcomer status but the newcomer status of this form of writing in the
Journal
itself. The front-page piece opened with a description of a painting of two dead sheep being shorn in a drought, by Australian artist Clifton Pugh, which was propped against a wall in Murdoch’s new office at the
Post.
“Few if any
New York Post
editors or writers have seen the painting. Nor has anyone from
New York
and
New West
magazines and the
Village Voice…
But the starkly elemental yet ambiguous work serves as a rough symbol of the hopes, doubts and fears of the publications’ employees as they contemplate the prospect of working for Rupert Murdoch. Is he, as well as the field hand in the picture, interested in essentially making something good out of a bad situation? Or are they cynical opportunists, bent only on stripping a carcass of its profitable remains?” (This is the kind of narrative prose that will make Murdoch scowl the most when he later sees it in the
Journal
.)

Although Murdoch is frustrated by the U.S. newspaper market, he continues to pursue it obsessively. He considers buying the afternoon Hearst paper in Baltimore, the
News American,
with the idea of making it a Washington, D.C., paper too. The
Los Angeles Herald Examiner
is also on his list. Neither purchase happens. He focuses, briefly, on making a bid for
Newsweek,
the newsmagazine owned by the
Washington Post,
but is talked out of it by Ed Kosner, his
New York
magazine editor, who spent much of his career at
Newsweek
. He’s envious of Gannett’s launch in 1982 of
USA Today
—and will offer to buy it.

He’s entering what, in business terms, can only be seen as a manic phase.

News Corp. has a surge in growth not only because of acquisitions but because of the dramatic upswing in advertising. (In 1984 the company’s revenues will top $2 billion; Time, Inc.’s revenues in 1984 will be $2.8 billion.) The
Sun
alone, fueled by the Princess of Wales, is throwing off $50 million a year in free cash flow—meaning it can finance upward of $500 million in new acquisitions.

At the same time, he’s pushing the limit. The company’s debt at times exceeds its assets. One way to lower this ratio, counterintuitively, is to buy more: Get more cash flow by assuming more debt.

The problem is that there just aren’t that many newspapers to buy.

The idea of cross-platform ownership, although it is not yet called this, of a horizontally integrated media company is about to be born. It is born not out of a farsighted, sophisticated, abstract business construct, but out of the need to spend money, to do deals.

Equally, Murdoch, whose real and in some ways singular intention is to buy newspapers, has come to understand that other kinds of cash flow might help him in this regard. He is, in effect, trying to rationally finance the sometimes irrational.

Then there’s another element fueling the mania. Here too he’s demonstrating an eighties sensibility: He sees business as a competition among individuals. For him this goes back to the Fairfaxes and Packers, and, more recently, in London, to Robert Maxwell. In the United States, players are beginning to emerge. “The
Wall Street Journal
library,” the
Journal
says, “maintains books of clippings of stories about ‘personalities,’ the people who dominate the pages of this and other newspapers. In the past few years few individuals have accounted for more clips than Carl Icahn, Irwin Jacobs, Carl Lindner, David Murdock, Victor Posner and the late Charles Bluhdorn.” The
Journal
’s profiles of such individuals will come to define the era; a piece the
Journal
runs on Carl Icahn highlights the paper’s soon-to-be-classic use of anecdote, recounting the New York financier’s shouting match with C. E. Meyer Jr., the president of TWA, in a “half deserted bar at the Waldorf-Astoria hotel.”

By the mid-eighties the cast of characters is set, with the
Journal
providing something like fanzine coverage: Drexel Burnham’s enigmatic financier, Michael Milken; the arbitrager Ivan Boesky; the British corporate raider Sir James Goldsmith; the Texas oilman-turned-raider T. Boone Pickens; Murdoch’s Australian nemesis (and sometime partner) Robert Holmes à Court; the upstart Ronald Perelman (with his surprise bid for Pantry Pride, the supermarket chain), and, of course, their bankers (e.g., Bruce Wasserstein) and lawyers (e.g., Marty Lipton).

Murdoch is taken with the outsiderness of these guys—they all come as if from nowhere and are making king-size trouble. They’re playing his game, taking his role.

There isn’t such a state of play in the newspaper business in the United States—it’s hard to make a splash. Murdoch is surprised to find the U.S. newspaper market a fairly tame and boring place. There are no personalities. There is little competition.

Even in the greater media business—dominated by aging, entrenched players—he arguably has only one peer. Steve Ross built Warner Communications into a mini media and entertainment conglomerate. He started with funeral homes (owned by his father-in-law) and traded up to parking lots. Then, starstruck, he bought a talent agency and acquired the name and remnants of Warner Brothers to reconstitute the movie studio. From there he went into music and, presciently and disastrously, into video games.

Murdoch’s view of Ross in a sense presages his view of the other media barons who will shortly begin to populate the territory. Assessing his competitors is the one place where Murdoch is systematically analytical rather than reflexive and instinctive. He loves to analyze other people’s weaknesses. He collects information about them—as they do about him.

Ross’s Warner was until 1983 the country’s most high-flying media company. Then, with a radical drop in revenues at Atari, the video game company it acquired in 1976 (this might be the first instance of a traditional media company acquiring a new media company with catastrophic consequences), its shares collapse. Murdoch begins borrowing money to buy Warner’s shares.

By the end of 1983, he has spent nearly $100 million to acquire 6.7 percent of the company. Not only is he now Warner’s largest shareholder, but since he’s exceeded 5 percent, he’s obliged to disclose his position—which, with its clearly threatening implications, makes him a presumed takeover player. With companies and industries becoming, in the eighties, like sets of dominos (once one goes…), Murdoch’s move can be seen as putting the whole media business in play.

As it happens, Murdoch is not that good at the game (yet)—he doesn’t end up taking over Warner. Still, because the Warner guys are themselves thought of as such tough players (thugs, relatively speaking), the fact that Murdoch has gone head to head with them—and, at that, forced Warner into serious lockdown mode—means that Murdoch emerges from this as a man who’s made his takeover bones.

Indeed, the Warner guys react to Murdoch in such a way as to suggest that he is more capable than he really is. After all, it is far from certain that he could have put together the financing to take over Warner. But Ross, vulnerable in the wake of the Atari fiasco, freaks. He dives into a deal that will bedevil Warner for years to come, and of which, sixteen years later, Murdoch will be the ultimate beneficiary. Chris-Craft Industries, another mini-conglomerate with media-related assets, agrees to take a 19 percent stake in Warner in exchange for a 42.5 percent stake in a Chris-Craft subsidiary that owns independent (non-network-affiliated) television stations around the country—a company Murdoch will acquire in 2000.

Because foreign nationals are not allowed to own more than 20 percent of any U.S. television station, the Chris-Craft deal makes it impossible for Murdoch to take control of Warner.

Murdoch sues, not least of all because if he gives up the fight for Warner, its shares, including the ones Murdoch owns, will take a precipitous drop. Although News Corp. accuses Warner of “a pattern of racketeering”—echoing fraud charges then pending against Warner executives in connection with a shady investment in a theater in Westchester County, New York—Warner nevertheless manages to effectively paint Murdoch as the predator, the unsavory element. For Steve Ross, the former parking lot and funeral home king, long rumored to have mob ties, to successfully portray Murdoch as the unscrupulous one is a good indication of both Murdoch’s sudden credibility as a wheeler-dealer and of the fast-growing Murdoch backlash. Indeed, Harry Evans, the London
Times
editor whom Murdoch pushed out of his job, publishes his memoir,
Good Times, Bad Times
in 1983, with its devastating portrait of an amoral, duplicitous, and ruthless Murdoch—and is then promptly recruited by Steve Ross to help in the Warner anti-Murdoch campaign.

For his part, Murdoch has reporters from the
New York Post
—including his favorite, Steve Dunleavy—investigate Ross and Warner. Dunleavy goes as far as to call Ross’s old headmaster at Columbia Grammar and Preparatory School to ask about his grades.

Finally, in 1984, Warner pays Murdoch to go away, buying his stock back for significantly more than it is worth and giving him a quick profit of $40 million—effectively making him a green-mailer, that species of financial bottom feeder already becoming part of eighties mythology.

Murdoch, not surprisingly, likes the game. Both the conflict and the profits suit him, not to mention the publicity. He’s elevated himself from mere publisher to international financier—a player, a man to fear. And, perhaps most important, a man whom capital seeks out.

So he does it again two months later. Backed by a consortium of banks, he goes after the St. Regis Corporation, a paper company. A decade before, Time, Inc., in what turned out to be a disastrous combination, acquired a forest and paper company. But Murdoch, quite likely, does not really want St. Regis. He’s suddenly in a further business—beyond publishing, paper, or even media. It’s the barracuda business. And, with the quick $37 million he makes on his St. Regis stock when the company sells itself to Champion International Corporation to avoid Murdoch, he’s now making a lot more money in the barracuda business than he is in the actual media business.

He’s getting good at it. The takeover business—the financial bully business—requires somebody with the balls for conflict, the appetite for risk, and the ability to make quick decisions. And you can’t bother about being hated. Indeed, in that department, his two greenmail episodes in the mid-eighties further color his character: Long after the greenmail has been forgotten, the scent of bully-boy financial skulduggery will cling to him. But, unlike the other financial bully boys the
Journal
is covering during this time with great devotion—Icahn, Pickens, Goldsmith, Perelman, Asher Edelman, and others even less scrupulous—Murdoch feels guilty.

For Murdoch, it’s about owning stuff. As much as the quick cash and the heat of battle appeal to him, he’s a proprietor. His father did not own, and he wants to own. He’s old-fashioned. He’s a man not of capital but of assets. He wants to be able to walk through what he owns. Jet in and be part of it, however briefly. He wants to be able to explain it to his mother, who demands explanations. It is hard to explain greenmailing. What’s more, honestly, he’s not all that interested in just having more money. Between money used for personal cosseting and pleasure and status symbols and money used to buy another newspaper, there’s no contest.

Yet he is like those people—Icahn, Pickens, Edelman, Goldsmith, et alia—too. He understands, just as they understand, that the moment to act is
now
(“We don’t have a grand 10-year strategy,” he tells the
Journal
after the Warner battle. “We’ve gone where opportunity has led us.”) and that the action itself is self-sustaining. Plus he seems, as they seem, to have a temperamental advantage over other businessmen. It’s a lack of worry about the future. And, too, the willingness to do things alone.

At the end of 1984, thirty-one years since he took over the
Adelaide News,
ten since he moved to New York, he does the biggest deal of his career. He spends $350 million for a group of…hmmm…trade magazines. The tabloid publisher is now the world’s leading publisher of magazines for people in the aviation industry and for travel agents. If you want to price a six-year-old Boeing 767 coming off its first lease or get a discount on a block of rooms in Atlantic City in midsummer, go ask Rupert, proprietor of, among other titles,
Aviation Daily
and
Hotel and Travel Index
.

This unlikely acquisition actually has several vision points. This seemingly boring trade magazine deal has unexpectedly attracted a lot of attention. It’s one of the biggest sales ever of publishing properties. Bill Ziff, who, like Murdoch, took over some fledgling titles from his father thirty years before, has built a significant magazine empire, which has helped redefine the nature of advertising. His titles are all niche, special-interest, targeted publications. Along with his trade journals, there are his consumer titles:
Modern Bride, Popular Photography, Yachting, Car & Driver.
His decision to sell almost everything he owns is so unusual in the media business that he has to come up with an excuse: He’s dying.