The Man Who Owns the News (45 page)

“The companies said they will create a worldwide joint venture that they will own equally, leveraging the best broadcast, satellite, programming and publishing resources of News Corp.; and the marketing prowess, customer base and intelligent networks of MCI and its global partner BT [British Telecom].”

Murdoch himself adds: “Until today, no one has put together the right building blocks—programming, network intelligence, distribution, and merchandising—to offer new media services on a global scale.”

In other words, reading the MCI and Murdoch statements more clearly, nobody here has the faintest idea of what, practically speaking, they are going to do.

Now, this is bad, and it will end unhappily. Indeed, the only real material development of this partnership is something called iGuide, which opens fabulous offices on West 17th Street in Manhattan, instantly becomes the leading technology company in New York, meant to compete with AOL and Prodigy (its true competitor will be the barely imagined Yahoo!—that is, News Corp. is inventing the search engine, though it has no idea this is what it is doing), and closes within a month.

This much-vaunted MCI–News Corp. joint venture never actually comes into existence; the people who are involved with it all work for one or the other of the companies; no new company takes charge. What MCI suspects is that Murdoch is continuing to search for a better way to build his satellite empire. Hence, MCI pulls out of the deal.

Murdoch, stuck with all this serious and costly satellite spectrum, and dubious financial wherewithal to use it, now turns to EchoStar, the U.S. satellite company, started by former CPA and card counter (before he’s banned from Vegas) Charlie Ergen ten years before. The reasonable supposition is that Murdoch
really
doesn’t want to be in business with Ergen, and even that he’s gotten cold feet about the satellite business in the United States. He’s getting lots of conflicting information at this point, not least of all from his son, James, an implacable advocate of whatever he’s advocating—it’s the Internet.

Also, Murdoch has the serious China bug—forget the U.S. market, he’s seen China. Murdoch lets the new proposed joint venture with Ergen—also heralded by major and dramatic press drum-rolls—stumble on whose encryption technology to use: EchoStar’s or the technology Murdoch’s gotten from the bunch of crooks and hackers he’s funded in Israel. On that point the prospective joint venture with Ergen collapses. Ergen sues for $5 billion—prompting a settlement in which Ergen gets the satellite spectrum and Murdoch gets some 8 percent of EchoStar.

Meanwhile, having failed to persuade John Malone to help him make a run at CNN and having watched CNN get bought by Time Warner, he’s got a bug up his ass. He gets that cable news is remaking the news business and is unhappy about not being in it—and understands that it’s his own fault for doubting cable. And he gets that you can’t be a major media player if you don’t have major cable assets. That having major cable assets is the only way to bully your way into the evolving media business. Indeed, at this juncture—where the obsession is on how to get carriage (i.e., distribution) on monopoly-controlled cable systems—it’s all about bullying tactics, which he is good at.

And then, the birth of Fox News. As with so many News Corp. projects, nothing is initially intuitive about the Fox News success. He tries to hire Roger Ailes, the former political operative, who helped start NBC’s cable stations. Ailes won’t run Fox News unless Murdoch can provide carriage (Murdoch at this point is desperate to get Ailes, so Ailes has unusual leverage). The only way to get carriage is to buy it—which has never been done before. But Murdoch does it and, in so doing, runs up against Time Warner and the enmity of CNN’s Ted Turner, who tries to keep Fox off the air, which creates the kind of us/them ruckus that makes Murdoch Murdoch, and launches Fox News with more attention and identity than it deserves.

Indeed, like so many Murdoch products, it is launched on the cheap (except for the investment in buying distribution), and looks it. This is an economic necessity, but Ailes, an old-time broadcasting pro, understands a television virtue: Cheese sells. It’s as much the trashiness—the exaggeration, the vaudevillian nature, the broad joke—as the politics that works here. And beyond the politics and the tabloid appeal, it is also the distribution—they muscle in.

Murdoch gets the premise: Success in television, cable or network, is not about the programs, it’s about the homes. If you are in the homes, something will work. If you’re not in the homes, nothing will work.

The guys at the networks have forgotten this lesson and come to believe it’s about programming, even about quality, or some such nonsense—more Hollywood baloney—rather than about monopoly. They’re the modern marketers, trying to convince and seduce, while Murdoch is the old-fashioned street vendor trying to control the neighborhood.

Just as Murdoch, in his efforts to escape a stultifying Hollywood, is rushing into the slipstream of technological grandiosity, and distribution paradigm shifts, and charlatans of all varieties, Dow Jones too is entertaining possibilities of a change in its nature.

It does this, however, in a wary, stern, skeptical, altogether conservative frame of mind—all values central to its identity. It does not, as Murdoch is doing willy-nilly, speculate. In the mid-eighties, it passes on an offer to acquire 25 percent of Apple. When index options come into vogue—you can buy securities pegged to where the S&P 500 will be at some future date—Dow Jones, after considered thought, decides that it will not create a similar product referring to the Dow Jones Industrial Average. The conclusion is:
That’s gambling, and we don’t want to be involved in gambling.

Nor does it want to deviate from, or be loosey-goosey about, its central purpose. Matt Winkler, a rising star at the
Journal,
tells Norm Pearlstine in 1989 that he is quitting the
Journal
“because there’s this guy Mike Bloomberg down at Solomon Brothers who has decided to start this new trading service and on his terminals he wants to have news and I’m going to be his editor.” And if the loss of Winkler is a sign, to be compounded again and again in the coming years, that Bloomberg is a vast new business in Dow Jones’ traditional space, the feeling remains that what the
Journal
does is news and what Bloomberg does is, somehow, mere statistics and quotes—
not of our class
.

Along with other media companies late to the game, Dow Jones, during the late eighties, begins tentatively to invest in cable systems. In an uncharacteristic moment of ambition, it gets into a negotiation about buying Comcast, already a significant cable provider (it will become the largest in the United States), but still a much smaller company than Dow Jones. And while it gets cold feet about the acquisition, it ends up with 25 percent of Comcast—which, however, it stays nervous about and sells within a few years.

And there is CNBC. Pearlstine proposes a deal that would have Dow Jones supplying eighteen hours a week of programming with an option to buy, at start-up cost, 49 percent of the news business channel—which is worth now more than $5 billion. But senior management turns this down, and Dow Jones ends up supplying content on a fee basis and without an equity stake.

Dow Jones, through the late eighties—when CEO Warren Phillips is posing for his annual report photograph in front of a typewriter—and through the nineties, is seeing as many opportunities for technological transformation as Murdoch. It responds in the best business-like fashion—with seriousness and restraint. The truth is, it doesn’t want to be transformed. Or it is so respectful of the power of transformation that it proceeds with the kind of caution that precludes transformation. In the end, it is so temperamentally unsuited and resistant to the ad hoc, impromptu, make-it-up-as-you-go-along, adventurous, crafty, and flimflam aspects of transformation that when it decides, ever so tortuously, to take the plunge, it screws itself in its bet on Telerate.

TWELVE
Rupert in Love

JUNE 22, 2007

Not a bad indicator of which way the deal will go is that John Lippman writes his last piece for the
Wall Street Journal
on June 22 and will shortly head for the
Los Angeles Times
. The point here is that if Murdoch is going to clinch the deal, Lippman can’t very well hope to continue writing for the
WSJ
. While News Corp. has its share of greater and lesser enemies upon whom it would, given the opportunity, take its revenge, a special place on that list is reserved for John Lippman.

It may be that the worst thing that can happen to a journalist is about to happen to Lippman. His long-term paper is being pursued by a man whom he has written about in derisive, cruel, scathing, innuendo-laden terms. Even worse: He has written about the man’s
wife
in derisive, cruel, scathing, innuendo-laden terms.

In all the bad press coverage of Rupert Murdoch over so many decades, nothing has hurt him so much as the piece by Lippman and two colleagues that appeared on the front page of the
Journal
on November 1, 2000. Charting Wendi Deng’s path to Rupert Murdoch, it was an extraordinary piece of journalism about ambition, guile, and the special abilities of predatory women—specifically, predatory Chinese women. In Lippman’s telling, Wendi Deng
was
the yellow peril.

What’s more, it is believed by some at News Corp. that Lippman holds a stash of compromising (as they say) pictures of nineteen-year-old Wendi taken by her fifty-year-old, soon-to-be first husband.

Lippman knows if Murdoch is going to be the new boss he better be as far from the
Wall Street Journal
as possible.

RUPERT AND WENDI

Of all the office affairs in history, Murdoch’s may be the biggest cliché, both silly and sweet. This monster, this control freak, this cold bastard, is as blissfully helpless in the face of a determined woman of lowly rank as any lonely, erotically deprived, death-fearing man would be.

To the business world in 1996, his marriage to Anna has long appeared elemental to his success and identity. Anna, who seemed to change her outfit six times a day, gets the Aussie bloke who so often looks like an unmade bed to act at least a
little
like royalty—although never quite enough (to her taste, anyway).

Barry Diller, who saw them frequently in Los Angeles during the eighties and early nineties, will say, “Rupert and Anna are a modern love story…
were
a modern love story.”

By the mid-nineties, however, Rupert and Anna are barely speaking. News Corp. executives start to notice that they live in separate parts of the big Beverly Hills house. “They passed like shadows in the night,” one former News Corp. executive will say, adding that he believes that, in the seven or eight months before Rupert met Wendi, “he never spoke a word” to Anna.

It’s a portrait of a solitary existence: He gets up at four or five in the morning and has a bowl of porridge—“A horse,” he says, “has to have its chaff”—and then after a shower and shave drives down the hill to work. He works all morning, and then goes to lunch at the Fox commissary, where every day he intently scans the menu and then every day has the same damn thing: grilled chicken, vegetables, and a Diet Coke. It’s practically a Monty Python sketch. Then he goes home at about seven and stays on the phone until bedtime at eleven.

If he’s not following this routine, he’s traveling.

China has become a sort of liberation. There’s both a messianic sense to this adventure—that he can use modern media to somehow transform China while at the same time making billions—and too the typical News Corp. ragtag, throw-it-against-the-wall-and-see-if-it-sticks business plan. It’s just a bunch of wild Aussies trying to make a killing (and make Rupert happy). Although, as it happens, the Aussies have so far lost several billion dollars on Rupert’s Chinese dream.

It’s one reason Wendi’s arrival at the Star TV offices in Hong Kong in 1996 is so memorable: She’s actually Chinese.

In John Lippman’s account in the
Wall Street Journal,
Wendi Deng is an amoral Chinese girl, without prospects, who uses sex and various manipulative skills to seize convenient opportunities—opportunities that she jettisons as soon as better opportunities become available. By dint of coldness and calculation she navigates up the social trajectory of both the United States and China to marry the world’s richest and most powerful media magnate and, by promptly producing two children, ensures herself a central position in all future dynastic developments.

There is great poetic justice in this tale, because of course the media magnate brought low by the amoral Chinese girl’s coldness and calculation and preternatural manipulative talents is himself one of the world’s most famous cold, calculated, and preternaturally manipulative sons of bitches. This daughter of a manager at a machinery factory in Guangzhou insinuates herself, in the
Journal
version of the story, predator-like, into the family of Jake and Joyce Cherry. Jake Cherry is, in 1987, a fifty-year-old engineer working in China. His wife, having met eighteen-year-old Wendi through their interpreter, starts helping the young girl with her English studies. Joyce Cherry returns to Los Angeles to enroll her two young children in school. Wendi and Jake, left to their own devices in Guangzhou, are shortly, according to the
Journal,
intertwined. Joyce will tell the
Journal
she eventually finds a cache of “coquettish” (in the
Journal
’s words) pictures of Wendi taken by her husband (these are the pictures that News Corp. officially denies exist). But before Joyce finds the smoking gun, Jake convinces Joyce that they ought to help Wendi get a student visa to the United States and, also, to invite her to stay with them in Los Angeles.