Murdoch's World (43 page)

ONE FACT had become clear to Rupert Murdoch: it was time to disarm the critics by changing the subject. For years investors and analysts had told News Corp's investment relations staffers that the entertainment business would be worth far more standing alone from the publishing side—the newspapers. Lachlan, Elisabeth, and others in the family had pushed a split for years. The newspapers had a constituency of one, even among Murdochs: Rupert himself. The previous summer, Murdoch had rejected the very idea of a split. “Pure and total rubbish,” he had told Bruce Orwall, the
Wall Street Journal
's London bureau chief.

But
he now agreed to sever the newspaper side from the entertainment side of News Corp. The move carried enormous implications. The entertainment side would be flush with profit engines, especially Fox News and the share of BSkyB, but also cable channel FX, more than two dozen local American television stations, and Fox Sports, as well as Sky's various international channels in India, Latin America, and the Fox movie studios (previously 20th Century Fox). Operating in their own freestanding corporation would be the company's far less profitable newspapers, HarperCollins books, Joel Klein's education division, the major marketing division, and the Australian television properties. Rupert Murdoch promised to serve as chairman for both new companies, and as CEO of the entertainment wing. The division was modeled to an extent on the split of Viacom, the entertainment conglomerate, into two companies—CBS and Viacom, both run by Sumner Redstone.

The split represented a reckoning. For years, the
New York Post
had lost money hand over fist. The
Wall Street Journal
's value had dropped by half. The
Times of London
was awash in red ink. Murdoch's Australian papers, though still dominant, suffered severe circulation losses. “I think the basic
newspaper business is like an ice cube,” said investor Don Yacktman, melting fast. Yacktman is president and cofounder of Yacktman Asset Management, which holds roughly 5 percent of all News Corp voting shares.

Murdoch had fought for so many years to avoid this outcome. At his direct instigation, Jesse Angelo created the digital tablet publication
The Daily
as a $35 million experiment, as though he were operating Bell Labs, trying to figure out a profitable model publication that had no print counterpart and lived exclusively on the iPad and later the Android and similar devices. The
Journal
and Dow Jones eked out a profit, but the margins were small. The financial news services of Bloomberg and Thomson Reuters had pummeled the Dow Jones newswires nearly into submission. The
Journal
had been insulated by profits from Fox News, BSkyB, FX, Avatar, and
The Simpsons
.
Now the
Wall Street Journal
would be responsible for helping keep its sister publications afloat.

For now, the rump group of newspapers and associated companies would be called the “New News Corp”; the entertainment division, including Fox News and the Fox Business Network, would be called the “Fox Group.” Inside the
Wall Street Journal
, the companies were rechristened almost instantly:
“ShitCo” and “GoodCo.” No one had any trouble figuring out which was which.

22

“WE ARE JUDGED BY OUR ACTS”

RUPERT MURDOCH structured the split of his companies around
the geography of his holdings and the psychology of his children. ShitCo, the publishing half, included all the newspapers, the book publisher HarperCollins, and the new educational division, Amplify. It also encompassed News Corp's Australian television holdings, which were significant and growing. The company had never attained the television profile in Australia that it achieved in the UK or the US. But
it paid $2.2 billion to roughly double its stakes in FoxTel, the nation's leading private cable and satellite television provider, and in Fox Sports Australia. Together, the two pay-TV providers presented many of Australia's most popular programs. They would be included in the new News Corp to consolidate the distant country's properties and to give the papers a financial boost.

The chairman principally designed the deal, however, to appeal to Lachlan. Rupert Murdoch hoped that in this crucible of crisis he could
forge stronger ties to his elder son. Lachlan could manage the new company, hire professionals to run it, and be the king of commercial media in Australia over its most-read and most-influential publications. Rupert promised that the new publishing company would be created debt free—he would infuse it with more than $2.5 billion in cash to offer some running space and some scratch for acquiring more properties. Rupert would be the chairman, for now. Lachlan could be CEO, head of his own venture, thousands of miles away from his father and boss.

The
Sun
remained the largest circulation paper in the UK, and its new sibling
Sun on Sunday
regained much, though not all, of what was lost when
News of the World
was shuttered. Thanks to Murdoch's reversal of his plans to drop the paywall, the
Wall Street Journal
had the largest paid circulation in the US, a combination of digital and print subscribers. The papers endured as dominant titles. These, too, would fall under Lachlan. The new News Corp would still command respect and attention. Presumably Lachlan would become chairman of the new company once his father relinquished control. Presumably his father would one day actually relinquish control.

The rump company dominated a financially ailing field. News Corp's newspapers were not by and large conjuring up promising solutions on digital platforms. Murdoch had scrapped the digital-only
The Daily
, a midmarket tablet publication that had struggled to find an audience willing to pay. Murdoch's
New York Post
had been lapped online by the British
Daily Mail
, which had a livelier and more addictive website. Murdoch's
Times of London
and
Sunday Times
were gaining modest traction behind a severe paywall. The Australian papers shared the sharp drops in circulation endemic to the industry in the English-speaking world. Despite the endowment that Murdoch offered, and the hope that Klein's Amplify might someday help subsidize the new News Corp, the company might not solve the newspaper industry's seemingly existential challenges any quicker than anyone
else. Doom mongers wondered if Murdoch's new print media company was no more than News Corpse.

Rupert Murdoch also could not will his first pick to accept the CEO job. Lachlan left News Corp driven by his anger toward Roger Ailes and then-president Peter Chernin for trying to marginalize him, mixed with a feeling that his father had betrayed him. Those emotions had not abated. One friend characterized Lachlan's mind-set this way:
If you don't have that belief in me as an executive, fuck you. I'll have that belief in myself
. Seven years later, Lachlan still harbored hard feelings toward News Corp, toward the whole pit of corporate intriguers, even toward his father for failing to protect him. Lachlan's affections were for Australia, not for newspapers or corporate politicking.

Rupert Murdoch still wanted them all back in: Lachlan, Elisabeth, even James. James hoped his father would last long enough to give him time to write his next chapter. Elisabeth continued to run Shine as part of News Corp but stayed off the corporate board. Soon enough, she would distance herself from the family in a very public way.

IN THE summer of 2012, anticipation built within the British media industry as a third Murdoch would take the lectern in Edinburgh to deliver the MacTaggart Lecture. Elisabeth joked about the honor being
“a massive pain in the ass,” saying she struggled to shape what to say, especially as the first woman in seventeen years to give the talk. “The committee may be less than keen on women, but by God, you do love a Murdoch,” she said to laughter.

Elisabeth Murdoch spoke purposefully, her words chosen carefully. Her father had cited Adam Smith while her brother had relied on Charles Darwin, the two intellectual champions, respectively, of the free market (in the economy) and the survival of the fittest (in biological evolution). She took inspiration from a more recent source. “I am
firmly with Dennis Potter when he said the job of television is to make hearts pound,” she said.

The reference astounded those in the crowd who knew Potter's history. Britain's pre-eminent television script writer, Potter made his mark with dark humor and lacerating cultural criticism. He had also attacked her father from that very perch in 1993 as one of
“the nastiest people besmirching our once-fair land,” and as “a drivel-merchant, global huckster and so-to-speak media psychopath, Rupert Murdoch . . . Hannibal the Cannibal.”

“There is no one person more responsible for
the pollution of what was already a fairly polluted press,” Potter said the next year, in his final interview before he died. “The pollution of the British press is an important part of the pollution of British political life, and it's an important part of the cynicism and misperception of our own realities that is destroying so much of our own political discourse.”

Elisabeth used the MacTaggart address to reject the values attributed to her father and her brother James. Citing Potter's kindred spirit, Elisabeth said, “I was determined to jump in and start making television that changed the world.” She sketched out her career, in and out of the Murdoch stable, but argued that Shine belonged in the camp of independent British producers, defined in opposition to the major Hollywood studio market, despite its corporate siblings at Fox Studios.

She also rebutted her brother's 2009 assault on the BBC and his claim that only profit guaranteed independence. “James was right that if you remove profit, then independence is massively challenged. But I think that he left something out: the reason his statement sat so uncomfortably is that profit without purpose is a recipe for disaster.” As a society, “we have become trapped in our rhetoric,” she said, with society a stand-in for her family and her family's company. “Independence from regulation and the freedom we need to innovate and grow is only democratically viable when we accept that we have a responsibility to each other and not just to our bottom line. Profit must be our servant, not our master.”

Elisabeth was declaring herself to be a different kind of media executive—a different kind of Murdoch. Elisabeth's challenge to James was much like her grandmother Dame Elisabeth's quiet retort to Rupert. The debate was playing out in the new generation. “In the same way that we have allowed our priorities to be confused between purpose and profit,” the younger Elisabeth Murdoch said in Edinburgh, “we seem to have got the emphasis wrong between building a community and selling a commodity.” And so attendees, along with News Corp shareholders and Wall Street and British financial analysts, heard her express support for the BBC's mandatory licensing fee. She was waging peace. Sky, ITV, and BBC needed one another to thrive for a healthy British television and media landscape, she said.