War at the Wall Street Journal (11 page)

Ingrassia had been talking to Crovitz about a strategy for all of Dow Jones & Company, one that included gradually merging the reporting bureaus of the
Journal
and Newswires. It was, in some ways, an obvious step. The wire had a huge reporting staff of 700; the
Journal,
250. On any given day, the two newsrooms often covered the same story, be it an earnings release from a company or the market's movements for the day. The newspaper industry was facing an increasingly demanding shareholder base. Given the mounting financial pressures on the business, it only made sense for the two units to coordinate. But such a combination was anathema to the proud staff of the
Wall Street Journal,
where many reporters saw themselves as storytellers with a powerful audience, not stenographers for the broker set. Indeed, cooperation between the two staffs had been attempted before, never with much success. Each time, after a few months of halfhearted coordination, the two staffs would re
treat to their spheres of comfort, where
Journal
reporters would file their stories on a 5:00 p.m. deadline for the paper, long after it was of much use to the Newswires staff, who had to feed investors during the stock market's open hours between 9:30 a.m. and 4:00 p.m.

Under Zannino and Crovitz, the idea was gaining new momentum yet again. Ingrassia found himself in a horserace with Brauchli, and surprisingly, at least for observers in the
Journal
newsroom, which backed Brauchli, Ingrassia had the early lead. In fact, one could say he had already won the race in early 2006. In the first few weeks after Zannino officially took over the CEO spot in February, Crovitz had been talking regularly with Ingrassia and assured him "there's no one else" for the job. It was over a year before Steiger would reach retirement age, but Zannino and Crovitz were ready to make a move. They agreed that Ingrassia, with his experience, his attention to the bottom line, and his position somewhat outside the
Journal
newsroom, was the right choice.

They made that choice without consulting Steiger, a practice that would seem perfectly acceptable in any other company, where typically a sitting executive doesn't pick his successor. But Paul Steiger had been shaping the
Wall Street Journal
and its journalism for fifteen years as managing editor, encouraging his reporters to dig out "the definitive story" on their beats and pursue stories with "moral force." He had learned to court and when necessary deflect the powerful executives who had been an almost continuous presence on the job, at cocktail parties or editorial lunches, or in an angry telephone call after an unflattering
Journal
story. The proximity to such power and his comfort with it had lent Steiger an air of gravitas. He showed the subjects of the
Journal
's stories respect and deference, but he landed careful blows when he had to. Through this measured approach, he had become one of the great newspaper editors in the country.

Under the plan Zannino and Crovitz had in mind, Ingrassia would take over for Steiger, who would, for the last year before his retirement, take on a senior editing role overseeing both Dow Jones Newswires and the
Wall Street Journal.
It amounted to a proverbial kick upstairs for Steiger. For Zannino and Crovitz, it kept Steiger's name and reputation attached to the
Journal,
helpful for this brand-new executive team. Steiger's new position atop both the
Journal
and Newswires would bless the Ingrassia-outlined revolution.

Zannino and Crovitz discussed their choice of managing editor with Dow Jones's directors. Lewis Campbell, the Textron CEO who had worked at General Motors when Ingrassia served as the
Journal
's Detroit bureau chief, had lobbied for him with fellow board members. Peter Kann personally blessed the pick. A press release was drawn up to announce the move as part of Zannino's other executive appointments. Only then did Zannino and Crovitz approach Paul Steiger with their decision. Crovitz took Steiger to lunch at City Hall restaurant, a Tribeca establishment blocks away from the
Journal
's offices, to lay out the plan. Steiger listened patiently. But he had something else in mind. He calmly explained that he felt the new scenario would give him no authority. Ingrassia would be designated heir apparent, rendering Steiger a lame duck.

"I've had this job for fifteen years, longer than anyone else," Steiger told Crovitz. "If you think I've had it too long, I'm happy to step out of the way," he added, in the same calm, soft-spoken, and halting tone that neutralized irate CEOs and staved off complaints from embittered editors and reporters. "But if you want me to stay, I want to be the managing editor of the
Wall Street Journal
."

Crovitz asked Steiger to come talk to him and Zannino together, which he did, and he repeated his arguments. A job that lacked real authority was not a job Steiger wanted. "Why make a decision before you have to?" he said. To rush the selection of managing editor, Steiger reasoned, seemed ill-advised. The editors were busy working on the planned redesign of
Journal
3.0. "Why don't you put off the decision until the redesign is complete?" he said. The launch of the new paper was still nearly a year away. When Zannino pressed Steiger, he voiced some reservations about Ingrassia, saying he had been out of the
Journal
newsroom a long time and didn't have an easy relationship with his former colleagues. But he reserved his harshest criticism for later.

Zannino and Crovitz, brand-new to their jobs, had underestimated a seasoned corporate operator like Paul Steiger. They both respected Steiger and knew they needed him. They were about to learn how little power they wielded within the company. Until Zannino, Dow Jones had been run by journalists. Now, even though there wasn't a reporter in the corner office, the newsroom maintained its sway over the company.

Zannino now had to deal with the veiled threat that if he went ahead with his existing plan, Steiger would leave. He, the non-journalist CEO, the guy who had come from Liz Claiborne, didn't want to be responsible for that. This battle between the
Journal
and the business side would go to the newsroom. Zannino and Crovitz put off the decision on the managing editor by placing Ingrassia in charge of a "news strategy" committee that would spend the next year exploring ways to get the
Journal
and Newswires to cooperate. It would give Ingrassia something to do for the year until they made a final decision.

That spring, Zannino was mounting another project as CEO: meet the other chiefs in the media business and take Dow Jones out of its isolation. During his three months in the chief executive's office, Zannino had been making the rounds with his counterparts at other, larger, more dynamic media companies. He was warming to his role. He had gone to breakfast and lunch with media players such as IAC's Barry Diller and Reuters's Tom Glocer, and after a concerted effort by Jimmy Lee, he was going to have dinner with Rupert Murdoch. Jimmy had been trying to get Zannino to attend his annual JPMorgan Leadership Conference earlier that spring in Deer Valley—where Murdoch had been—but Zannino demurred, telling Jimmy the venue was too public for such an introduction.

That Thursday evening of May 18, Jimmy Lee was the first to arrive in the Oak Room at the Links Club on East 62nd Street, where the banker often entertained JPMorgan's most favored CEOs. Tonight he believed his guests could accomplish something quite advantageous for all involved. The dark paneling and the hushed greetings at the club were the perfect atmosphere for Jimmy, though both his guests would find the surroundings staid and stuffy. This was unfortunate, as Jimmy had hoped for a casual effect that signaled ease and a not-too-aggressive approach. He didn't even plan to raise the topic—"the thing," as he often said—that was behind the occasion. To him, bringing up the deal at this point was like going on a first date and talking about when to have children—it was a turnoff.

Rupert Murdoch arrived later than Zannino, as planned. Jimmy didn't want them to be seen entering the building at the same time. The perfect host, Jimmy ushered each man, upon arrival, to the small Oak Room, where they opened a bottle of expensive Australian wine. Jimmy had been busy making the match for months, telling both men they'd really like the other. He saw them both as "guys' guys"—the same way he saw himself.

Murdoch arrived at the dinner facing myriad threats to his kingdom, but he was, as ever, moving forward. John Malone, the cable magnate, had bought up his stake in News Corp. The stake was threatening because it wasn't much smaller than the Murdoch family's own 30 percent share, and Malone was just wily enough and opportunistic enough to never be trusted. The previous summer, Murdoch's elder son, Lachlan, who had been groomed his whole life to take over from his father, had left his post as deputy chief operating officer of News Corporation. Lachlan had suffered from what some called a "corporate conspiracy to undermine him" at the hands of Roger Ailes, the programming genius behind Fox News, and Peter Chernin, the company's chief operating officer. But it was more than just a corporate defeat. The move was a "tragedy" for the family, in the words of one of the kids. The problem was that Lachlan's father had allowed it to happen. Murdoch had prepared Lachlan to be the heir apparent, but when Lachlan started to falter, Murdoch allowed him to fall. "It wasn't the most emotionally intelligent way for Dad to handle it," said Elisabeth, Lachlan's older sister. "He doesn't really have the tools to express that he's sorry."

Lachlan's defection in 2005, unthinkable until it happened, had been hastened by another threat to the old Murdoch family: Murdoch's third wife. Murdoch had long been separated from his second wife, Anna, with whom he had Lachlan, his older sister, Elisabeth, and his younger brother, James. Anna, an elegant woman, knew her husband well. She could almost have anticipated his affair with Wendi, whom Murdoch met on a trip to China in 1997. During the divorce in 1999, Anna's children watched bemusedly as she focused single-mindedly on cementing her children's control over the family trust that gave the Murdochs control of News Corporation. "I told her to stop being so paranoid," one of the children said, as Anna warned them that their father would start a new family and have more children and supplant the existing kids' total control over the trust. "He's not going to have more kids at his age," they said, shrugging off their mother's concerns, the way children often do.

Anna could have walked away with half of Murdoch's empire. The Murdochs were residents of California, and after a thirty-one-year marriage, Anna was likely due half the estate, worth nearly $8 billion at the time. But to blow apart the family, after all the work she had put into it, seemed foolish. She had gotten her children up in the morning early to see their father before he went to work. She had nurtured a feeling of Murdoch loyalty. "Growing up, we moved around a lot, and it always seemed that if everything else went wrong, we still had each other," says Elisabeth of her family. Even if Rupert Murdoch was going to throw that away, Anna wasn't going to let the divorce threaten the dynasty. She took a relatively modest $200 million in exchange for a guarantee of her children's future control of the company.

When the news came that Wendi was pregnant, Anna's wounds were salved just a bit by the knowledge that she saw this coming. When Wendi's second daughter, Chloe, was born less than two years after the first, Anna braced for the next step. It came as she predicted.

When the little girls were just babies, Murdoch strove to assure Wendi that she was truly part of the family and that all his children were equal in his eyes. Murdoch told his older children he needed to split the trust. "We'll split the family if you don't get in line," he said. For months, they haggled over the outline of the trust with their father. It fell to Elisabeth to tell her mother the children's decision to give in to their father's wish to split the trust. The four older children retained voting power but agreed that all the children—Grace and Chloe included—would receive a $150 million distribution from the trust. It was a grueling ordeal, and it seemed, for a time, that the dynasty might falter. (Lachlan left for Australia in the midst of the dispute.) But the grown children stood by their father in the end and made peace, however uneasy, with his new life, and their new siblings. By then, Anna was remarried to a man who finally would take her to the opera and spend afternoons at home. She described her recovery from the divorce as "coming out of a deep mental illness."

 

Zannino had pretended to agree to this dinner reluctantly. He knew Murdoch was interested in Dow Jones and how their meeting might appear if discovered. The early awkward moments of the meeting past, Zannino breathed a sigh of relief. Someone brought up the show
American Idol,
which aired on Murdoch's Fox network. (Murdoch's daughter Elisabeth had urged him to buy the program years earlier.) Then the talk segued into the price of newsprint. Murdoch knew how to play this part of the game and maneuvered adeptly, seeming neither too eager nor too distant. For his part, Zannino was equally adept. Just over three months into his first CEO job and there he was, already in the shark tank with one of the most determined and skilled dealmakers in media, trying to avoid the subject that brought them together while, at the same time, making an impression. They all knew the purpose of the gathering but it was never mentioned. "To get a big deal done, that's how it works," Jimmy says, recalling the evening. "You don't just invite everybody into a room and say, 'Hey, wanna sell Dow Jones for $60 a share? Yeah, sure!' You need to get to know people, to introduce them." Murdoch left the meeting feeling comfortable that Zannino was different from Kann, in a way that would certainly be advantageous.

Meanwhile, Zannino and Crovitz were trying to contain the disaster brewing in the newsroom. The "news strategy" position they had created for Ingrassia clearly wasn't working. It was an inflated title with very little real responsibility that bought them time before Ingrassia would take a permanent position. Crovitz had presented the interim job to him as a mere delay in the appointment, but the delay threatened to become indefinite. Marcus Brauchli's star was rising, and Ingrassia, with Steiger against him, seemed to retreat. Suddenly rumors coursed through the newsroom that Ingrassia would cut 20 percent of the
Journal
staff (a claim Ingrassia denied he ever made). Brauchli's allies were vicious about Ingrassia, who believed, despite the barbs, that the job was safely his.