The Man Who Owns the News (41 page)

As Fox News is rising, it is significant to point out, so is Sky News as a core part of the BSkyB operation in Britain—it is an almost comical mirror image of Fox News. In fact, if you’re used to Fox News, you watch Sky News and wait for the people on air to somehow acknowledge that they’re kidding around by playing it straight and reputable and agenda-free.

And that is exactly the worry at the
Wall Street Journal
editorial page—that Murdoch’s politics aren’t actually politics, or at least not structured, charted, formal beliefs, but some more or less picaresque adventure in which they can only look forward to becoming bit players. Indeed, he might see editorials as part of the adventure. “I’m a very, very curious person, but I couldn’t sit down and write a learned article on the Middle East—but I can write a pretty good editorial about it!” Murdoch will say in one of our interviews, staking his claim to the rhetorical flourish.

JUNE
2007

Rob Kindler, a voluble investment banker at Morgan Stanley, believes that he and Morgan Stanley should have been hired as co-advisors to the Dow Jones board with Goldman Sachs. From early on in the process he became a negative, carping, almost jeering voice about how Dow Jones’ advisors are shepherding the company to an inevitable sale to Murdoch.

He’s never known a company to be sold for its first bid, he keeps saying as no higher bids emerge to challenge Murdoch.

His none-too-veiled suggestion is that Dow Jones’ advisors—Goldman; Merrill; Wachtell, Lipton; Simpson, Thacher—are in Murdoch’s pocket, or want to be.

The four firms, for their part, perturbed but tolerant, point to the $60—that it is just off the charts—and to the family. By bringing in every Tom, Dick, and Harry, they have demonstrated that there are no other serious bidders. So what can they do?

And yet there is something to Kindler’s fulminations. A sense that ranks are closing around Murdoch. Surely, the ranks are irritated with the family—there’s an underlying sense of
Good riddance
and
This is what you deserve
.

Not only are Leslie Hill and Chris Bancroft still rushing around the country, churning up all kinds of dust—duly reported as significant developments by the reporters they’re blabbing to at the
Journal
—but they’re dragging their heels on the editorial agreement.

The Dow Jones board is starting to call Elefante every two minutes, asking where the agreement is. The way the family has set it up, the board can’t start having a substantive talk with Murdoch about a deal until they’ve come to terms on an editorial agreement, so the whole process is stalled. The eyes of the business world are on them (as are the eyes of the arbitrageurs who have bought up the stock—potentially litigious shareholders), and all the board can do is twiddle its thumbs.

The Wachtell, Lipton guys and Michael Elefante are now beginning to suspect that Hill and Bancroft are using the editorial agreement as a big stalling tactic.

Chris Bancroft has been contacted by Stuart Epstein, a banker at Morgan Stanley, who is acting as the chief advisor to Thomson in its merger with Reuters. Bancroft is flown to Toronto to meet with W. Geoffrey Beattie, the president of the investment vehicle for the Thomson family. (As a point of gentle irony, these are the same Thomsons who owned the
Times
of London and sold it to Murdoch.) What Bancroft is told is that Merrill Lynch, with its dire prognostications, is feeding the Bancroft family a lot of nonsense about how bad the Reuters-Thomson merger will be for Dow Jones. In fact, Bancroft is reassured just how good it will be. If the Bancrofts can only hold out until the Thomson-Reuters deal is closed, Thomson will be back to Dow Jones with an offer a helluva lot better than $60.

Sure.

Indeed, there’s a creeping sense of worry among the advisors and among some people on the board that if they don’t behave themselves, Murdoch will get pissed off and lose interest. The push-pull of all this has actually forced many of the people involved with the deal to clarify their feelings: They have to admit, they’re drawn to Murdoch.

For banks and law firms representing Dow Jones, as well as for the free-market dogmateers at the
Journal,
Murdoch—say what you want about him—represents the free market. He is the ultimate capitalist achievement. Everybody else, even GE, is not so ready, not so pure, not so alive. If you’re actually part of the free market (even if Rob Kindler is saying this market isn’t so free), you’re partial to Murdoch—you
get
him. His politics, the politics of success, are your politics and the
Journal
’s politics.

On June 21, Pearson and GE, receiving little encouragement from the Dow Jones and Bancroft advisors, daunted by the Murdoch offer, and without the temperament to deal with the Bancroft family’s psychological issues, end their consideration of the deal.

It’s clearly only Murdoch—take him or leave him.

ELEVEN
The Nineties—The Amazing Mr. M.

JUNE
16–24, 2007

Sometime over the weekend of June 16, a water pipe in the ceiling of the eighth floor of the News Corp. building at 1211 Sixth Avenue—housing the management nerve center of the company—will break, dumping almost a foot of water across News’ executive offices.

This is generic corporate space that reflects the News Corp.’s make-do ethos, or its patch-it-together sense, or even a bit of living above the store. (Fox News, with its fetid greenroom, is in the basement. The
New York Post
is crammed in here too. And in his mind, Murdoch is already shoehorning the
WSJ
into 1211.)

The reception area on eight has some none-too-chic furniture, a flat-screen monitor tuned always to Fox News, and a British receptionist. Murdoch’s office suite is just off the reception area (he often sweeps out to pick up visitors). You go first into a secretarial area—where seventy-something Dot Wyndoe, from Australia, who’s been his secretary since 1962, sits in a frozen-in-time hairdo with two other assistants—and then around the corner into Murdoch’s office proper. With its central desk and separate seating area, various television monitors, and computer sitting mostly unused on the sideboard, the office is entirely unremarkable. Now, media-conglomerate CEOs’ offices tend to be pharaoh-worthy monuments to self, to power, to visualizations of strength, to seizing the day. Peter Chernin, in a new executive building erected on the Fox lot in Los Angeles, has built himself a true media-lord spread. Hushed, vast, meticulously designed, off-putting for any visitors (off-putting, in fact, to many people at News Corp.), Chernin’s office implies that it’s above work, beyond function, its occupant having risen to the level where will and desire alone make things happen.

A spilled cup of coffee might cause paralysis in Chernin’s office, but at 1211 Sixth Avenue on the eighth floor, the flood—after it gets drained and more or less mopped up by the maintenance guys—won’t be the sort of mess that anybody here can’t work in. Even the mossy smell won’t interrupt business as usual.

Oddly, what happened since the May 1 news of Murdoch’s bid for Dow Jones is that the eighth floor has turned into not just a war room, but in some more or less unintended way a rump organization. Within a company the size of News Corp. the way a deal, even a big one, is normally conducted is that a project team is assembled, but it’s sort of off to the side so that the bosses can continue their stewardship of the larger affairs of the company.

But with Dow Jones, top executives at News have
become
the project team. That is, all except for Chernin, who, out in Los Angeles, has for all practical purposes become the operator of this global company, while Murdoch and his little band—DeVoe, Nallen, Jacobs, Ginsberg—fret about their junior-size deal.

Now, again, it is instructive to compare the flow of this deal at News Corp. with how it might play out at other companies. In other companies, if a deal is perceived as being likely to have a negative effect on the share price, there are few circumstances in which it gets done.

The presumed effect of News Corp.’s acquisition of Dow Jones is that the News share price will plunge. By some estimates the cost of this $5 billion acquisition could be more than $20 billion in shareholder value. DeVoe, Nallen, Jacobs, Ginsberg, and all those whose wealth depends on stock options should rationally be less than enthusiastic about such a deal—and finally be the voice of reason in not letting such a deal happen (by force of logic, foot dragging, or general negativity). In fact, only Chernin is the reasonable figure—his neutrality is the elephant in the room. While he can’t openly oppose Murdoch, he can, at least, not waste his time. In Murdoch’s view, Chernin has not been
given
an opportunity to have an opinion about the deal. And why would he? He doesn’t, as Murdoch often points out, even read newspapers.

The extrabusiness-like allegiance to Murdoch, the desire among the eighth-floor gang to please the boss even at your own expense, mirrors the extrabusiness-like characteristics of News Corp. itself. In a world in which corporations have long been conditioned to respond to shareholders’ short-term needs, News Corp. has always been more interested in expanding its power than in getting a high return on capital. It isn’t about what shareholders want; it’s about what Murdoch wants.

Indeed, the guys on the eighth floor save it for him. They could let Dow Jones go, but he wants it bad, and they want him to have it.

As the cleanup proceeds on the eighth floor, the Bancrofts’ draft of the editorial protection agreement finally arrives—eighteen days after the meeting in the Wachtell, Lipton offices.

Leslie Hill has solicited the opinions of lots of people on the
Journal
staff about editorial protections. In another of those extraordinary moments of helplessness or haplessness or suicidal optimism—quite similar to what had happened at the
Times
of London twenty-six years before—the
Journal
editors didn’t resist at all, but helped craft an idealized framework for their theoretical editorial independence. Marcus Brauchli, the new managing editor, who had officially taken the newsroom reins from Paul Steiger on May 15, was the most active participant in designing this instrument, which would, in the end, not protect him at all. Josh Cammaker, culling the family’s thinking and incorporating Brauchli’s advice, drafts the agreement that is finally sent on Friday, June 22.

When Marty Lipton delivers the agreement to Murdoch in the morning, he says, “You’re not going to like this.”

Later, after he reads it, Murdoch calls Lipton and says, “I’m not disliking it—I’m just insulted by it!”

The insult is that it actually does what they’ve been discussing—it protects the paper from Murdoch’s interference. It calls for a thirteen-member editorial board, for which the Bancrofts will appoint ten members, and what’s more, it gives this board control over not just the editor but the publisher as well.

So…

“I wrote a letter,” Murdoch will later tell me, “withdrawing the offer and telling them to fuck off.”

There’s a conclave that afternoon of the eighth-floor team—with James Murdoch calling in from London—and they get Murdoch to cool off.

While the storm and stress that Friday are genuine—there is nothing that so provokes Murdoch as someone trying to trump him—it is, nevertheless, ramped up several notches to accommodate a reporter from
Time
magazine, with whom Ginsberg has negotiated special access in return for special consideration. News Corp. is waging its campaign: Ginsberg will set up the scenes and vet the quotes in an effort to make Murdoch look like a reasonable (and, ideally, heroic) fellow trying to persevere in his dealings with the frustrating, irrational, odd Bancrofts—which is, basically, the
Time
cover story that appears the next week.

Murdoch revises the letter—there’s no “fuck off,” but it’s still harsh, laying out all the frustrations of the last two months of dealing with the Bancroft family—and gives it to his lawyers to send. But it doesn’t quite get sent. Instead, Ginsberg revises it once more. Murdoch, considering Ginsberg’s draft, calls Robert Thomson at the
Times
of London, getting him to take a stab. Thomson’s draft, reflecting Murdoch’s continued irritation, is less equivocal, outlining all the objections to the editorial agreement and setting out an ultimatum: It’s what Murdoch wants or nothing. This is on Saturday—with the
Time
reporter still sitting in Murdoch’s office. The plan is to release the letter on Sunday.

But Ginsberg once again weighs in and says he’d like to take a stab at calling Dick Beattie, his former mentor at Simpson, Thacher. Ginsberg spells out to Beattie all the nonstarters in the family’s proposed agreement. Without an immediate retreat, Ginsberg says, the deal is finished, over, kaput.

Now, this is, in many ways, the point: Some family members want to kill it—well, sort of want to kill it. The agreement is a passive-aggressive way to do just that. By calling Beattie, Ginsberg goes over the head of the family and puts it on the advisors’ plate, knowing that the advisors will raise their voices in concert—Beattie, Lipton, Cammaker, Costa at Merrill, the guys at Goldman—to say that if they don’t want to do the deal, don’t do the deal, but that it has to be a choice independent of the editorial agreement, which, written this way, does kill the deal.