The Man Who Owns the News (25 page)

The
Wall Street Journal,
before the eighties, was a one-section paper, no bigger than forty-eight pages, with three usually well-reported and carefully written front-page features, a column of short items, and two columns of summary. Inside you had a rather mindless collection of earnings-related stories with a heavy focus on large-cap stocks, commodities, and credit markets (in the mid-forties the
WSJ
merged with the
Chicago Journal of Commerce,
pioneering the then-fanciful notion that readers who cared about equities and readers who cared about commodities might find a common interest in a newspaper). It was all a calculated business gray inside: just two types of headline, the single-column head and on occasion a two-column head. (When the stock market crashed in October 1987, editors felt it was inappropriate to use a two-column headline because the paper had used only a one-column head for the 1929 market crash that began the Great Depression.)

Its growth happened partly because it was so limited. As a thin, one-section paper it could more easily be printed at disparate locations around the country. The paper was able to grab a national audience of business readers because local papers had such weak business coverage. During the fifties and sixties, an overwhelming number of readers of the
Journal
—nearly all of them, in fact—read another newspaper as well. The
Journal
became the business addendum.

In 1982, Gannett launches
USA Today,
a national newspaper with ambitious circulation plans, promising an abundance of stock-and-option quotes and general-interest business coverage—for twenty-five cents where the
Journal
charges fifty cents. At the same time, focusing on the specialized business audience,
Investor’s Business Daily
launches. What’s more, the
New York Times
begins to roll out its national edition—and launches its own freestanding business section.

And a trend that began in the seventies—the migration of individual investors into mutual funds—is becoming the norm. If you own eight or ten different stocks, you might want to check them every day. If you give your money to an anonymous management fund, you tend to lose some of your interest in the market’s day-to-day ups and downs.

At the same time, one of the greatest advertising bull markets is under way—newspaper advertising will more than double between 1980 and 1989, from $14.8 billion to $32.4 billion—from which the
Journal,
with its paltry number of pages, is unable to benefit.

The transformation of the
Journal
—which includes going from one section to two in 1980, and then, in 1988, to three—is masterminded by the bright-young-men triumvirate of Warren Phillips, a foreign correspondent who became the chief executive in 1975 and chairman in 1978; his protégé, Peter Kann, the Pulitzer Prize–winning reporter who in his career at the
Journal
will never file a business story; and Kann’s protégé, Norm Pearlstine.

The premise is an expansion of business news beyond companies and markets: To see business as a major narrative event with dramatic characters and constant plot developments, to see business as a national pastime.

Pearlstine will later say, “I thought, we’ll have a law page every day, because sometimes it feels like there are more lawyers than people. I thought we ought to cover accounting on a regular basis, not just because of tax but because there were a lot of accountants who saw themselves as a service industry for business. The paper had terrible technology coverage. [Technology] was covered by one reporter who covered everything from Xerox to IBM to AT&T, and then they had a reporter in San Francisco who divided her time between health care and semiconductors.”

The very idea of a
Wall Street Journal
reporter changes—culture and lifestyle reporters come to business. Business, after all, is becoming the single greatest story of the decade: the deregulation and ensuing free-for-all of the Reagan years; the sea of liquidity created by a booming stock market; the rise of financial titanism; the birth and meteoric growth of the personal computer industry and the effect of personal computers on business culture (spreadsheet software arguably creates the finance culture); the ascendancy of the charismatic CEO and businessman superstar (Lee Iacocca, Donald Trump, Steve Jobs, Bill Gates, Andy Grove); the rise of Michael Milken and the pursuit of Michael Milken; and, not least of all, the development of a literature and media to celebrate business. Indeed, in many ways, the
Journal
is the preeminent source of this literature:
Barbarians at the Gate,
by Bryan Burrough, about the takeover of RJR Nabisco;
Den of Thieves,
by James B. Stewart, about the rise of Michael Milken; and
Oil and Honor
, by Thomas Petzinger, about the takeover of Penzoil, were all written by
Journal
writers, and each book began as a
Journal
story.

Murdoch enters the decade as a minor, if voluble, figure in the publishing world and will leave it as one of the era’s business superstars. He will become one of the characters the
Journal
is writing about, which, in turn, helps create this business culture he is a beneficiary of. The eighties message is that playing the game means you’re worthy of the game.

Arriving in the eighties, Murdoch is actually in a place disconcertingly similar to that of Donald Trump: He’s got ambition much larger than his asset base. And he’s faced with a similar conundrum: How do you jump-start your own standing? How do you get taken seriously?

In London’s
Sun,
he’s got a good cash-flow engine, which (again like Trump) means that he can borrow money. This is another eighties point. If you’re underleveraged in the eighties, you’re going to recede; if you’re overleveraged, you’ll advance. Over-leveraging yourself, at a time before the geometric value of debt is understood (if you buy a $10 million enterprise with only $1 million cash down and it doubles in value—and the eighties are the decade of spiraling values—then you’ve just made a 1,000 percent return on your money), requires a particular eighties kind of temperament—which Murdoch, like Trump, has. It’s a high tolerance for uncertainty, the ability to keep numerous balls in the air, and a lack of any evident ambivalence.

You’re an action figure. No nuance here.

The internal financing of Murdoch’s restless efforts to enter and stay in the deal flow comes from a fundamental contradiction in his ideological position—and another alignment of the eighties stars. He’s an anti-monarchist. Almost everything about the British royal family annoys or repels him; everything about the people who surround the royal family nauseates him. The
Sun
is as dismissive of the royal family as any mass-market British publication could ever be. And yet the internal cash flow of News Corp. becomes highly dependent on the
Sun
’s obsession with Diana, Princess of Wales. The more Diana is in the news, the more papers are sold—particularly copies of the
Sun.
If the eighties represent a convergence of publicity seekers and publicity givers, each rewarded by the market for their efforts and their symbiosis, then the relationship of Murdoch and Diana is an apogee of the era. The great, roaring bull market for newspapers in the United Kingdom during the eighties and nineties is fueled by Diana—and when she dies in 1997, the newspaper business will also start to die.

It’s cash flow combined with restlessness—a businessman’s ADD—that defines an eighties temperament. Murdoch is pulled by his sense (not so much strategic as nervous; it’s his impatience) that something is going on somewhere else. In the early eighties, he cannot yet articulate the global media vision—it doesn’t mean anything yet. What he’s pursuing is the wherewithal of money itself. If the banks will lend money, it’s a lost opportunity not to take it. It’s exactly the instrument that his father lacked—you get to take control with someone else’s money. He knows too—and it’s like a monkey on his back—that other people are also seizing this new opportunity.

The temperamental restlessness is important. He literally can’t stop moving. This too becomes an advantageous eighties trait. He’s got an iron will coupled with an iron bottom. With the move to the United Kingdom, he was merely extending his range (and jet transportation was getting better). With the move to the United States, he’s at a level of dislocation and constant global movement that may not be matched by anyone in the world. It’s so extreme that it must be having an impact not just on his metabolism (the
Chicago Tribune
and the
Independent
in Britain have both reported that he “reportedly” takes enemas before long flights) but also on his sense of both place and possibilities. Not to mention how it’s exacerbating what we might already infer about his intimacy issues. What’s more, right up until the late eighties, he’s traveling on commercial flights, not private jets.

His first eighties deal, the financially dubious acquisition of the
Times
of London and the
Sunday Times
in 1981, makes him one of the world’s most famous newspaper proprietors—arguably the most important private citizen (or, actually, noncitizen) in the United Kingdom. Presto! It’s another eighties point: The deal reinvents you.

What Murdoch gets is a business that over the next twenty-five years or so will never make him any money—and which may cost him as much as a billion dollars. While the
Sunday Times
is Britain’s leading
Sunday
“quality” paper, at about 1.5 million circulation, and returns a robust profit, the paper’s problem is that, having been acquired in 1959 by Canadian Roy Thomson, who founded the Thomson Corporation, it got itself linked to a tar baby when Thomson acquired the daily
Times
in 1967.

But the money-losing daily paper is among the world’s most famous journalistic enterprises. Over two centuries, it has been the consummate example of a paper coming to reflect the dominant values of the dominant class. Indeed, the
Times
helped to define the British idea of class. It exists for that reason more than for an economic one.

By the eighties, it has become not just a poor economic proposition but an untenable one. This is partly because of its relatively small circulation—about 200,000 in the seventies—but mostly because the print unions have largely achieved economic control of the newspaper business and are bleeding it.

Roy Thomson died in 1976 and his much less sentimental, less starstruck son, Kenneth, took over. In 1978, he announced that unless the company could get concessions from the typesetters’ union it would close the papers down. The unions went on strike anyway. The strike (or lockout) lasted a year, costing Thomson, who continued to pay the salaries of the other unions, £40 million, and in the end Thomson capitulated, rehiring the printers and getting no concessions or savings in return.

Then, in August 1980, the journalists went on strike, which was the last straw and, as Thomson saw it, the final betrayal: He put the group up for sale in October. Eager to avoid severance costs of more than £35 million associated with closing the paper, which he announced he’d do if he couldn’t find a buyer, this was officially a distress sale.

Among the potential buyers were Associated Newspapers, owners of the
Mail;
the ever-dubious Robert Maxwell; Atlantic Richfield, the American oil company, which, in a fit of odd diversification (characteristic of that corporate era), had bought the
Observer;
and separate groups led by the
Times
’ editor, William Rees-Mogg, and the
Sunday Times
editor, Harry Evans. And Murdoch.

Nobody else except Murdoch would agree
not
to close the daily
Times
.

Murdoch is beginning to practice eighties finance. The deal itself gives him access to greater deals, which, if need be, would cover the cost of this one.

There is, too, the other element, not at all eighties: his newspaper fetish. He is, in some sense, helpless not to try to buy any newspaper that might be for sale. His advance here is to couple his newspaper fetish with a greater eighties avariciousness. Every purchase, every deal, is in service to the next deal. His compulsion to buy newspapers is becoming a compulsion to buy just about anything.

And he’s started to conflate the idea of all media. Entering the eighties, separate media disciplines—newspapers, television, books, movies, music—had separate owners. Leaving the eighties, one owner will own all. This happens in part because of Murdoch’s cash-flow needs.

His thinking is less visionary or abstract than it is practical. His television station in Australia has a significantly greater profit margin than his newspapers—allowing him to buy more newspapers (in other words, owning newspapers remains the point). In the United States, newspapers not only have unimpressive cash flows (at least second-tier newspapers, which is all he owns) but also don’t reach a national audience. He needs national impact. He’s really not interested in Chicago or Boston or San Antonio (this is one reason why he’ll continue to own the
Post
—it’s in New York). He needs to hear the sound he makes.

Still, because he can, he buys the
Herald
in Boston and the
Sun-Times
in Chicago. News Corp. is suddenly, with his Australian, British, and American holdings, one of the largest publishers in the world. He’s got the two ingredients that make the business world take you seriously: the ability to get financing and the ability to command the attention of the media (not least of all because he is a buyer of the media).