War at the Wall Street Journal (3 page)

"Well," Murdoch replied, "I'd love to come."

Diller never liked his waters too calm. Releasing Sulzberger and Murdoch in the same room on this particular night added an interesting undercurrent. It was a worthy dramatic effort for Diller, a for
mer Paramount chieftain whose social life seemed about as recreational as open-heart surgery. The other guests would enjoy sizing up the competitors.

In the early-evening sun, Murdoch had slipped on board quietly and made his way with his uneven gait to New York City mayor Michael Bloomberg, the succinct former businessman whom he greeted with what appeared to be genuine warmth. Practical and pragmatic, Murdoch preferred politicians to Hollywood types, and Bloomberg's business background and higher ambition made him a friend who would almost certainly be useful. Bloomberg could talk engagingly about Murdoch's true loves: media and politics. The mayor's date and longtime companion, Diana Taylor, the city's regal and unofficial first lady, chatted with Anna Wintour of
Vogue,
who had admired Taylor's style enough to feature her in a five-page spread in the magazine several years earlier.

Film director Mike Nichols and his wife, Diane Sawyer, talked nearby, pleasant fixtures when Diller held court.
Vanity Fair
editor Graydon Carter had become a Diller devotee after the mogul helped Carter establish
Vanity Fairs
legendary post-Oscars fete in Hollywood. On the yacht, Carter chatted with John Huey, editor in chief of Time Inc., and Lally Weymouth, whose family controlled the Washington Post Company. Weymouth's daughter Katharine would soon take over as publisher of the
Post.
Steve Rattner, a former
Times
reporter who had become a powerful media financier and confidant of the Sulzbergers, talked with Carter's wife, Anna.

As Murdoch moved on to greet the other guests, Sulzberger and Diller chatted with Bloomberg, whose company had not long ago completed construction on a gleaming monumental headquarters building of its own. All three men had, in fact, braved the difficulties of construction. Sulzberger had just overseen the completion of the new
Times
headquarters on Eighth Avenue, a creation of architect Renzo Piano that resembled a minimum-security prison. Critics noted that the building reflected that part of the
Times
's ethos that tried too hard to show its import. Still, that special kind of ambition had produced the paper's thirty-five bureaus around the world and its global perspective. The
Times
had always been committed to giving its readers the world beyond our shores and our Brangelinas. The creation of an American publication comparable to the
Times
or the
Journal
seemed unimaginable now. Some at the party wondered, Could Murdoch have built such an institution, or was it his role to just buy one?

On the boat, Sulzberger pulled Murdoch aside. "I don't really feel that we can have dinner together without my telling you that we have an editorial about your takeover of the
Journal
in tomorrow morning's paper. And I have read it, and I can assure you I don't feel it's faintly anti-Murdoch." Murdoch thanked Sulzberger for the heads-up. The two continued chatting, sharing their thoughts on the state of their business. Despite their differences and the tussles still to come, they were united in a special way, for there were probably no other two men on the face of the Earth more committed to the future of newspapers. Murdoch, straightforward as always, talked about what he hoped to do with the
Journal
and did not conceal his irritation at the
Times's
coverage of the Dow Jones deal. Despite the tension, their conversation was friendly, almost playful.

As the boat neared the Statue of Liberty, the guests gathered around a large rectangular table for dinner, exchanged pleasantries, and avoided the potentially awkward topic of Murdoch's latest purchase. They returned to Diller's building for a quick tour, dutifully praising the plump, cavernous structure. As the evening came to its close, the Sulzbergers walked out onto the street. All the other guests, the moguls, editors, and moviemakers, had cars and drivers waiting in expertly chosen locations to whisk them off to their splendid sheets. The Sulzbergers found themselves contemplating the near impossibility of finding a cab on the piers on the far West Side of Manhattan at that hour. Taking pity, a fellow partygoer offered them a ride in his car, which they accepted. As they clambered into the car, Arthur laughed like a kid, very much unlike the media titan he was. "Wow," he said. The star-studded evening had left its impression.

 

The next morning, Murdoch was in his office working on his next potential acquisition, swapping his once coveted but now stagnating social networking site MySpace for a stake in Yahoo!, and fuming. Under a spare headline—"Notes About Competition"—there was the editorial Sulzberger had warned him about. Far from an innocuous mention, the
Times
had, Murdoch felt, fired a shot across town to let him know the newspaper was watching him. "If we were in any other business, a risky takeover of a powerful competitor might lead to celebration," the editorial began. "Not in our business. Good journalism, which is an essential part of American democracy, thrives on competition."

The piece did some predictable tut-tutting about the cutbacks in national and foreign coverage at the
Times
's impoverished competition, "such formerly formidable competitors as
The Los Angeles Times,
" before praising the pre-Murdoch version of the
Journal.
Then, as Murdoch read on, the tone of the piece changed and he became the center of its attack: "The
Times
and the
Journal
have reported extensively about Mr. Murdoch's meddling in his media properties: How he reneged on his promise of editorial independence for the
Times
of London and how, to curry favor with China's leaders, his satellite broadcaster, Star TV, stopped carrying news from the BBC." The editorial concluded by suggesting, "The best way for Mr. Murdoch to protect his $5 billion investment is to protect the
Journal
's editorial quality and integrity." Doing so would "be good news for all Americans."

Murdoch, who prided himself on being direct, stewed at Sulzberger's false assurances the night before. Here it was again, a piece attacking him in all the most predictable ways, dredging up examples he had long tired of answering for. "If that editorial wasn't anti-Murdoch," he thought, "I'd hate to see his version of what is." Murdoch dashed off a letter, beginning a new game of jousting with his crosstown enemy.

"It was a pleasure seeing you again last night, although I don't agree with your characterization of today's editorial," he wrote. Then he stridently denied the
Times's
accusations point by point: "I don't know how many times I have to state that I did not take the BBC off Star TV for political reasons, nor have I ever given any sort of political instructions, or even guidance, to one editor of the
Times
or the
Sunday Times.
" Toward the end of the letter, he penned a sentence that played to Sulzberger's vanity—as a scrupulous owner who never interfered in coverage—but that Murdoch meant as a dig. "On a broader basis," he continued, "I promise you that I will treat you as an example in my relationship with editors." It was a fitting ambiguity, similar to Sulzberger's "don't feel it's faintly anti-Murdoch." What type of example would Sulzberger be when Murdoch spoke to his editors?

Murdoch couldn't resist a final dig. The last line of the letter stood alone in simple type.

"Let the battle begin!"

D
OW JONES SEEMED
destined for Rupert Murdoch long before the official dealing had begun. For decades, Murdoch had coveted the
Wall Street Journal.
His children couldn't remember a time when he wasn't talking about it. His most trusted colleagues called it a "preoccupation" for him (even more than the
Financial Times,
which he had tried and failed to buy, or the
New York Times,
which he also eyed). He was open about his admiration, and among Wall Street's bankers, brokering a deal between the Bancroft family and a deep-pocketed media mogul such as Murdoch was a tantalizing opportunity.

So in the summer of 2002 when James Bainbridge Lee Jr. stood in his dark-wood-paneled office on the executive eighth floor of JPMorgan Chase & Company's midtown Manhattan headquarters, he prepared carefully for his upcoming call. He was contemplating how to break into one of the most difficult-to-crack media families in the country, the Bancrofts of Dow Jones & Company and the
Journal.

As Jimmy checked the market movements and news on the five computer screens on his desk, his image stared back at him from the framed
Forbes
cover on his bookshelf. Under the headline "The New Power on Wall Street," the photo displayed a slightly younger version of the Wall Street banker in his cufflinks and suspenders, his graying hair slicked back and curling slightly below the ears. The piece invited readers to "Meet the New Michael Milken." Jimmy, as he was known on Wall Street, could have served as the model for "investment banker" if the Museum of Natural History mounted a diorama of the species, but his thoughts that day were not on his appearance.

Jimmy had made his reputation more than a decade earlier as a young banker making big loans to clients who wanted to make even bigger deals. His Rolodex was the source of his power, and he used it. He was sometimes derided as a glorified matchmaker. Every day, he started a new page on his yellow legal pad, jotting down in his all-caps scrawl a list of names to contact. By evening, after his usual frenetic day of jokes and ingratiating storytelling, the names were crossed off with his thin royal blue marker.

That midsummer day in 2002, he had already scribbled through one page and had moved on to the next when he dialed Richard F. Zannino's number. Zannino had just been named the chief operating officer at Dow Jones & Company, an elevation that put him a single step away from the spot where Jimmy wanted him for the match he had in mind. Dow Jones, while a storied media firm, seemed increasingly small and outpaced alongside entertainment conglomerates such as Viacom Inc., Time Warner Inc., and News Corp. Even pure news outlets such as Bloomberg LP and Reuters PLC now dwarfed the parent of the
Wall Street Journal,
which had been struggling since the implosion of the Internet bubble in the spring of 2000 had dried up much technology and financial advertising. The
Journal
was in the process of losing more than $300 million in advertising revenue, and the paper would spend the next three years losing money. The company's stock had peaked near $78 a share in the summer of 2000. Currently it was trading in the low $40s.

That Zannino would pick up the phone at all to chat with a banker like Jimmy represented a change at Dow Jones. Zannino's boss, Dow Jones CEO Peter Kann, would never have thought to befriend someone like Jimmy, much less talk on the phone with him on a summer afternoon. For Kann, even speaking to a rogue banker about company strategy was a step outside the bounds of Bancroft-approved isolationism. Kann, who often spoke slowly, his hand rubbing the top of his balding head, which pitched ever so slightly forward when he addressed a group, had served as the company's CEO since 1991 and was a
Wall Street Journal
journalist who had risen through the ranks. At another publication, the ascent would seem unusual. But at Dow Jones, the best journalists wound up running the company, and so it had been with Kann. He was awkward in front of crowds; his presence was unassuming until he started to write. Then his prose enchanted, something his performance as an executive had never managed to do. More than any living Bancroft, Peter Kann embodied the understated spirit of Dow Jones. He once wrote in a letter to
Journal
readers: "We believe facts are facts and that they are ascertainable through honest, open-minded and diligent reporting. We thus believe that truth is attainable by laying fact upon fact, much like the construction of a cathedral. News, in short, is not merely a matter of views. And truth is not merely in the eye of the beholder." As CEO, he had assembled a management team of polite Ivy League executives. He had also promoted his wife, Karen Elliott House, to publisher of the
Journal.
Her proud Texan twang announced her as a standout in the otherwise meek crowd. The journalists called him "Uncle Peter," sometimes affectionately, sometimes with derision.

Kann knew Dow Jones only as a Bancroft-owned institution. He had grown close to the elders in the family and often praised their support of Dow Jones and the
Journal.
He fostered the notion that Dow Jones was a "quasi-public trust"—as was once stated in the company's proxy—and that the family was a worthy defender of one of the finest journalistic institutions in the country. He believed fervently that family ownership at Dow Jones was what gave the institution the independence to pursue its stellar brand of journalism. The best papers in the country—the
Washington Post,
the
New York Times,
and the
Journal—were
all owned by old families with a legacy to protect. During his tenure, he had assiduously established the relationships he needed to keep the company independent.

Kann's tenure as CEO was marred by serious management missteps, capital misallocations, and a foundering stock price, but he waved off critiques of these problems. He had managed something far greater in his mind: the journalistic integrity of the
Wall Street Journal.
And even though he didn't think they were the brightest bunch, he had the Bancroft family to thank for that.

Zannino didn't blend in at the company, where he'd arrived from the rag trade, the son of an Italian Catholic longshoreman who took occasional work at the local bar in Everett, Massachusetts, and an Irish Catholic stay-at-home mom. Married right out of Bentley College, where sometimes it seemed he'd majored in financial aid, he started a family, worked two jobs, and slaved at night for an MBA. At forty-three, he still hadn't shaken Boston's rougher precincts from his voice. Though comfortable at Dow Jones, he had never taken on the company-wide aversion to selling the place. One of his big critiques of the
Journal,
which he kept mostly to himself, was that it lacked positive stories about successful CEOs and their companies. He was a businessman. Take it or leave it.