The Mind of Murdoch: Dreams of World Domination

Posted by Adam Howard at 5:01 AM on June 25, 2007.

We all know the Wall Street Journal's editorial pages are often filled with more conservative tripe than six Dennis Hasterts, but the actual news and reporting in the rest of the paper has been unassaillably non partisan for years.

Enter Rupert Murdoch, who thinks unbiased news is a bore and slightly liberal news is possibly treasonous. He has offered $5 billion dollars to purchase the Wall Street Journal's parent company, Dow Jones. This morning the New York Times released quite a roundup of his greatest hits.

Like the time he coerced an initially reluctant Trent Lott to back off a plan to limit any company from owning local television stations that reached more than 35 percent of American homes (at the time Murdoch had 39) by giving him a $250,000 book deal.

Here are some other highlights:

"It is hard to imagine Rupert Murdoch publishing The New York Post in Midtown Manhattan, with all of his personal and political biases and business interests reflected every day, while publishing The Wall Street Journal in Downtown Manhattan with no interference whatsoever," James Ottaway Jr., a 5 percent shareholder and former director of Dow Jones, said recently.

Members of the Bancroft family, which controls Dow Jones, have sought elaborate assurances from Mr. Murdoch that he will preserve the independence of The Journal's news coverage. Last night, advisers to both sides said they were close to reaching an agreement on editorial control, but it was unclear whether the Bancrofts would approve a deal. When he bought The Times of London in 1981 he gave similar assurances, but some former editors say he meddled with news operations anyway.

Mr. Murdoch declined a request for an interview, but has recently said he would preserve The Journal's independence. Gary L. Ginsberg, a News Corporation executive, said it was "insulting" for anyone to suggest that Mr. Murdoch would compromise the integrity of "one of the world's great newspapers" adding, "It's not good business and it's not good politics and it's absurd on its face."

From his beginnings as a proprietor of a single Australian newspaper, Mr. Murdoch now commands a news, entertainment and Internet enterprise whose $68 billion value slightly exceeds that of the Walt Disney Company.

The American newspaper industry has never seen a publisher quite like him. Mr. Murdoch has long been a pivotal figure in England and Australia, and in the dozen years since he has moved his base of operations to this country, he has insinuated himself into the political and financial fabric of the United States. His businesses have thrived in a highly regulated environment in part because of his remarkable ability to mold the rules to fit his needs.

This became clear in the regulatory fight over media ownership, a battle critical to Mr. Murdoch's audacious creation of a fourth national television network, Fox. He has also turned his political clout on business rivals, as he did when he mounted a campaign recently against the Nielsen television rating agency.

"Rupert is sort of an 18th-century guy: the world is still forming, and he's going to do what he can to hack out a place in the wilderness and defend it," said Richard D. Parsons, the chairman of Time Warner, who both competes and socializes with Mr. Murdoch.

Mr. Murdoch's trajectory in the United States has been similar. His credentials as a purveyor of conservative journalism notwithstanding, he operates like many less visible corporate executives in not allowing his personal politics to get in the way of his bottom line.

Political Relations

Over time, Mr. Murdoch has shown an ability to adapt to changing political winds. In Britain, his newspapers had a long history of being pro-Tory and anti-Labor, and he was personally close with former Prime Minister Margaret Thatcher. But in 1997, two of Mr. Murdoch's papers endorsed Tony Blair for prime minister. Mr. Murdoch became a frequent guest at No. 10 Downing Street, "effectively a member of Blair's cabinet," said Lance Price, who was a Blair spokesman from 1998 to 2001.

Mr. Murdoch had reason to court Mr. Blair: ensuring that the new government would allow him to keep intact his British holdings, which by then included The Times of London, multiple tabloids and a stake in Sky News. Many in the Labor Party under Mr. Blair favored the enactment of media ownership limits, which could have forced Mr. Murdoch to divest some of his interests. But Mr. Blair "quietly dropped the policy," Mr. Price said.

"Blair's attitude was quite clear," Andrew Neil, the editor of The Sunday Times under Mr. Murdoch in London from 1983 to 1994, said in an interview. "If the Murdoch press gave the Blair government a fair hearing, it would be left intact."

An analysis of campaign finance records shows that since 1997, Republicans have received only a slight majority -- 56 percent -- of the $4.76 million in campaign donations from the Murdoch family and the News Corporation's political action committees and employees. Since Democrats won control of Congress in the 2006 elections, the company and its employees have given more than twice as much to Democrats as to Republicans, the records show.

"We did seek more balance," said Peggy Binzel, Mr. Murdoch's former chief in-house lobbyist. "You need to be able to tell your story to both sides to be effective. And that's what political giving is about."

Mr. Murdoch has an army of outside lobbyists, who have reported being paid more than $11 million since 1998 to address issues as diverse as trade relations, programming decency and Internet regulation.

One firm focuses almost exclusively on parts of the tax code that affect the News Corporation. By taking advantage of a provision in the law that allows expanding companies like Mr. Murdoch's to defer taxes to future years, the News Corporation paid no federal taxes in two of the last four years, and in the other two it paid only a fraction of what it otherwise would have owed. During that time, Securities and Exchange Commission records show, the News Corporation's domestic pretax profits topped $9.4 billion.

The News Corporation's outside lobbying team has been a veritable political Noah's ark. It has included Republicans like Ed Gillespie, former Republican Party chairman; former Senator Alfonse M. D'Amato of New York; and the firm headed by former Mayor Rudolph W. Giuliani of New York. But it has also included former Democratic members of Congress, as well as several high-ranking Clinton administration officials, including Jack Quinn, former White House counsel.

Mr. Murdoch's association with the Clintons is perhaps the best example of his ever-morphing relationships with the powerful, and theirs with him. For years, the former president was a favorite target of The New York Post, which seemed to delight in referring to him as "former horndog-in-chief."

In October 2002, Mr. Clinton and Mr. Murdoch had a lunch meeting at Mr. Clinton's office in Harlem. It was arranged by Mr. Ginsberg, who had worked in the White House counsel's office in the Clinton administration and is now the News Corporation's executive vice president for corporate affairs.

More recently, Mr. Murdoch donated $500,000 to the former president's Global Initiative and was one of its featured panelists at a 2005 event in New York. In 2006, The Post issued a surprising endorsement of Mrs. Clinton in her Senate re-election bid. On June 5 and 6 of this year, Mr. Ginsberg and Peter A. Chernin, president and chief operating officer of the News Corporation, were hosts of back-to-back fund-raisers for Mrs. Clinton's presidential campaign, one in New York and one in Los Angeles.

Media Ownership Rules

For more than 70 years, the federal government has regulated media ownership to protect against any entity gaining too much power over the dissemination of information. And for much of the last two decades, Mr. Murdoch has chafed against those restrictions, winning exceptions and easing regulations.

Again and again, Mr. Murdoch won crucial skirmishes with the Federal Communications Commission. In this he was helped most by his Republican allies, including former Speaker Newt Gingrich and the Bush administration, which has promoted measures to allow more consolidation.

During the Clinton administration, Mr. Murdoch was able to draw upon Republican support when the F.C.C. chairman at the time, Reed E. Hundt, opened an investigation into whether the News Corporation had violated commission rules in acquiring television stations to form the Fox Network.

According to two former F.C.C. officials, Mr. Murdoch's chief in-house lobbyist at the time, Preston Padden, confronted Mr. Hundt's chief of staff at a meeting at a coffee shop near the agency's headquarters. Mr. Hundt would not be able to "get a job as dog-catcher" if the F.C.C. took away a single News Corporation television license, Mr. Padden warned, they said.

The warning, one of the officials said, "was designed to send a harsh signal that if we continued, they would do everything in the world to make our life miserable." As Mr. Hundt later recalled in a memoir, Mr. Murdoch assailed him in an op-ed article in The Wall Street Journal, and Congressional Republicans rose up against him.

In the end, the F.C.C. found that the deal had violated the rules. But Mr. Hundt declined to strip Mr. Murdoch of his licenses, reasoning that the fault lay with the Reagan-era F.C.C. for approving the acquisitions in the first place. Mr. Padden, who has left the News Corporation, refused requests for an interview.

It was the first of many victories for Mr. Murdoch in the new political climate that swept into Washington in 1994 when the Republicans won control of Congress. It was a fortunate time for Mr. Murdoch, whose business interests and political ideology were in ascendancy.

The new Congress overhauled telecommunications laws for the first time in decades, allowing media companies like Mr. Murdoch's to expand by increasing the share of the national audience they could reach. So long as a company did not reach more than 35 percent of American households, it could buy as many stations as it wanted.

Mr. Murdoch's lobbyists were also able to get a provision in the bill requiring the F.C.C. to review the cap periodically. It was just such a review that led the Bush administration to increase the cap again in 2003. By then, Mr. Murdoch had bought additional stations that put him over the 35 percent limit, as had another company, Viacom.

The F.C.C. chairman at that time, Michael K. Powell, proposed a broad loosening of media ownership rules, including raising the cap to 45 percent. (Two of Mr. Powell's top advisers, Susan Eid and Paul Jackson, now work for Mr. Murdoch.)

Ultimately, a federal appeals court threw out the new rules. But by then, Congress and the White House had intervened, passing into law the 39 percent compromise.

Mr. Lott, an outspoken critic of media consolidation, agreed to the increase because it was still lower than what Mr. Powell had proposed, said his spokesman, Nick Simpson. Mr. Simpson added that Mr. Lott did not want to force companies to sell stations and that his book deal did not affect his view of Mr. Murdoch's legislative agenda.

Many companies publish books by public officials. But because of Mr. Murdoch's wide business interests, HarperCollins's book deals have at times drawn scrutiny. Its decision to cancel a book critical of Chinese Communist leaders by Hong Kong's last British governor was assailed as a move by Mr. Murdoch to protect his Chinese business interests, a charge he denied.

HarperCollins also provoked a firestorm when it gave Mr. Gingrich a $4.5 million book contract as Congress was preparing to redraw the media ownership rules.

Mr. Ginsberg pointed out that Mr. Murdoch later fired the Gingrich book's editor for making what he regarded as an "uneconomical and unseemly" deal. He said that in general Mr. Murdoch did not involve himself in decisions about book contracts, and added, "If these books aren't viable, they aren't published."

Mr. Lott's book sold 12,000 copies, according to Nielsen Bookscan, which tracks about 70 percent of all domestic retail and Internet sales. Senator Arlen Specter, Republican of Pennsylvania, received $24,506 from HarperCollins for his modest-selling book "Passion for Truth," according to financial disclosure forms. Senator Kay Bailey Hutchison, Republican of Texas, got $141,666 for her book "American Heroines," which has sold better. All sit on either the Commerce or Judiciary Committees that most closely oversee the media business.

HarperCollins has also given book deals to Senator Chuck Hagel, Republican of Nebraska, and a $1 million advance to Justice Clarence Thomas of the Supreme Court, both of whose books are due out next year.

A former HarperCollins executive, granted anonymity to speak candidly about the company, said Mr. Murdoch was less hands-on than people assumed. "It's not done in a direct way where he issues instructions," the executive said. "It's a bunch of people running around trying to please him."

Ms. Binzel, the former chief government strategist for the News Corporation, said Mr. Murdoch got the breaks he did in the United States based on the merits, not his political connections. He took on the major networks and created more competition in the media marketplace, something regulators had long desired, she said.

"Rupert has always been a visionary, and when you bring in a visionary, they are frequently going up against the establishment," she said. "So much of what Rupert has faced in Washington has been getting rid of rules that protect incumbents. The reason he convinced people to do that was that he was going to be providing something new."

The Dow Jones Bid

Now, Mr. Murdoch is trying to convince the Bancroft family to sell him The Journal.

Dow Jones has proposed a committee to safeguard the paper's editorial independence that includes a continuing role for some members of the Bancroft family and current Journal editors and executives.

Mr. Murdoch has said he prefers the model of committee used at The Times of London. His company bought The Times in 1981 and in order to win approval for the deal Mr. Murdoch agreed to an independent oversight committee and guidelines intended to prevent him from meddling in coverage.

According to interviews with former Times editors and affidavits filed in an unrelated 1995 libel suit, there were clashes over the publisher's involvement in the paper from the very start.

Harry Evans, who was editor at the time of Mr. Murdoch's acquisition and was forced out soon after, wrote a memoir vividly describing his constant fights with the new publisher. In his affidavit, Mr. Evans describes Mr. Murdoch's ordering the publication of a cartoon that Times editors had deemed tasteless and his complaining that too many stories had a left-wing bent. Another former editor said Mr. Murdoch once pointed to the byline of a correspondent and asserted, "That man's a Commie."

Fred Emery, another former Times editor, said Mr. Murdoch once said to him: "I give instructions to my editors all around the world; why shouldn't I in London?"

The turmoil of those first years subsided, in part, one former Times editor said, because Mr. Murdoch got rid of those who did not adhere to his politics. "He puts people in who will do his bidding," said Mr. Neil, the former editor.

The current editor of The Times, Robert Thomson, paints a different picture: "I've had absolutely no interference and a lot of investment in a loss-making newspaper, for which Rupert Murdoch gets no credit."

Under Mr. Thomson, the business pages of The Times expanded, and there are now 18 foreign reporters, compared with 8 when he came to the paper. The Times is the only British newspaper with a Baghdad bureau.

Mr. Thomson, who is expected to play an important role at The Journal if the News Corporation buys it, said Mr. Murdoch would invest in the paper and expand overseas coverage.

Over the years, as Mr. Murdoch built his empire, he has lusted after The Journal.

In the mid-1980s, he attended a black-tie press dinner in New York and found himself sitting next to Julie Salamon, then The Journal's film critic and a former New York Times reporter. She vividly recalls his fascination with the inner workings of the newspaper and said he clearly expressed his desire to own it someday.

Ms. Salamon initially dismissed Mr. Murdoch. "The idea of this tabloid guy buying The Journal, which was then at the zenith of its success, seemed preposterous," she said.

But by the end of the meal, impressed by Mr. Murdoch's canny sense of the American media landscape, Ms. Salamon said, "I went home with a funny feeling in the pit of my stomach, like this guy might actually do it."

Jo Becker and Richard Siklos reported from New York, Jane Perlez and Raymond Bonner from London. Griff Palmer contributed from New York.

Tagged as: fox news, murdoch, media bias, wall street journal

Adam Howard is the editor of PEEK.