The Fox Trot

I’ve got a little problem. I’ve been wondering how to address this conflict I have as a media writer. One of the principal subjects of the media beat, the big kahuna himself, Rupert Murdoch is paying me a great deal of money, through his company HarperCollins, to write a book about the end of media moguldom as we know it.

Obviously, this could be touchy. There exists for every HarperCollins author the specter of the last governor of Hong Kong, Chris Patton, whose book Murdoch canceled because it got in the way of his plans to control China. Of course, that was China.

Now, in general I believe – knowing something about how massive media companies are run – that one hand doesn’t have much of an idea about the other. The fact that Murdoch’s people are paying me good money to write about the end of Murdoch may actually reflect my basic point that a mogul kingdom – AOL Time Warner, Vivendi, Viacom, Disney, and NewsCorp – is a temporary notion. It’s quite possible that only in periods of upset and transition do the people who work for a mogul realize that they’re part of his grand scheme. Mostly they’re able to ignore or passive-aggressively defy their mogul master. So the HarperCollins people might reasonably be assuming that the time between signing up a book and the book’s actually coming out is long enough that they can figure on big management changes (book companies especially are in a state of great flux – who wants them except the Germans?) before they’ll have to contend with the conflict.

But in my more paranoid moments, I’ve wondered if I haven’t become a hapless pawn of Murdoch’s (after all, through the New York Post, he already controls lots of the reporting that goes on about the media), doing what he wants me to do, which is making the case that he’s a lot less powerful than he obviously is.

Indeed, Murdoch, claiming that his influence is greatly exaggerated (“We’re minnows,” he recently said), is now engaged in an effort to get the Feds to waive the rules about cross-media ownership. That would allow him to continue to own the New York Post when he completes the buyout of Chris-Craft, which will give him yet another television station in New York. (He already owns Channel 5, and now he’ll be getting Channel 9.)

When I met Murdoch, I suddenly, helplessly, had a surge of fond feeling for him. Of course, it was possibly on account of the money he was paying me.

And this is nothing compared with the outcry we’ll hear from all sorts of television people and fairness worrywarts when, imminently, Murdoch attempts to break through the last glass ceiling in the media-merger game. If he pulls off his four-year negotiation to buy DirecTV – GM’s satellite-television arm – he’ll be the first mogul to control both a major network and a monster distribution system, the fastest-growing one and, with 10 million subscribers, the third-largest behind AOL Time Warner’s and AT&T’s cable groups. (Echostar, a smaller satellite system, is also in the bidding for DirecTV.)

It’s the ultimate anti-competitive, content-distribution stranglehold media play. He’ll have the power to make a hermetic NewsCorp content world. He’ll be able to black out, or downgrade, or otherwise screw with NBC and CNBC and MSNBC or, for that matter, CBS-MTV, ABC-ESPN, and any other offshoot of any content producer that doesn’t have a distribution system that can threaten massive retaliation.

In fact, this isn’t just a Murdochian thing; it’s everybody’s vision – if you control distribution, you control everything. The DirecTV deal, everyone is figuring, will precipitate the next cataclysmic combinations. NBC will get bought (by AOL Time Warner, I’d guess), and the AT&T cable system will combine with a content gorilla (Viacom would be my bet).

Except, I don’t really believe it. I don’t even actually think Murdoch is buying DirecTV. I have another theory entirely about what’s going on here.

I was weighing my conflicts, along with my theory about the DirecTV deal, when recently, for the first time, I met the man. I ran into him in a hotel lobby at a media conference. Suddenly, helplessly, I had a surge of fond feeling for him. Of course, it was possibly on account of the money he was paying me (when I thanked him for his generosity, his eyes narrowed, and he asked, “How generous was I?”). But upon consideration, I’d argue that my sentiment, even if influenced by the cash, reflected the greater Murdoch human predicament (which is, I believe, the key issue in the DirecTV deal).

He’s old. His age jumps out at you. The lines in his face are deep and expressive (he obviously hasn’t been worked on). He doesn’t seem to be fighting it, or denying it, either (true, his new wife, the 34-year-old Wendi Deng, is pregnant with their first child). He appears contemplative. Wistful. Almost emotional. All of a sudden he was telling me – and to him, I’m a perfect stranger – about his then imminent 70th birthday. Later, when he addressed a group of media people, it was in a reflective, rueful, almost confessional mode. As for his remaining years, he said he hoped he wouldn’t spend them all negotiating with GM.

This is a lion in winter.

When you un-demonize Murdoch, when you separate him from his right-wing politics and predatory disposition, you can easily find yourself thinking what fun it must be to have been him.

This is relevant to my theory: The fun he’s had is why I don’t think he’s doing what everyone thinks he is doing. We admire (secretly admire, anyway) Murdoch because he’s created an enterprise that only he would have created. NewsCorp is an eccentric, nonrational, highly personal company. You’re not going to find another manager who could, or would ever try to, convince Wall Street that the parts of NewsCorp – the Australian and English stuff, the American networks, the satellite systems, and a major book company, not to mention the continued existence of the New York Post – make sense.

It is true that virtually every other media conglomerate has created itself in the Murdoch image, and to some extent those companies are as screwball. But not quite as screwball. And while they, too, I believe, will inevitably deconstruct, they at least have the trappings of modern-corporate-management structures.

At NewsCorp it has always just been Murdoch – purely Murdoch. He’s surrounded himself not even with perennial No. 2’s but with perpetual No. 3’s. So you have a 70-year-old man who has had prostate cancer, who is now openly reflecting on his mortality, who runs one of the most complexly organized companies on Earth (how many people who can create a tabloid front page have great financial skills?), and who mustn’t have much of a reasonable expectation that his company can be run without him.

Of course, Murdoch has encouraged the wildly illogical notion that one or another of his young and inexperienced children will have the talent to run the company, and that he has the power to make that selection (John Malone is the second-biggest shareholder in NewsCorp after Murdoch and his family, so fat chance). This notion has further taken on the force of a fait accompli because the children – Lachlan, 29, now based in Australia, and James, 28, now based in Hong Kong (their sister, Elisabeth, 32, once ascendant, has been sidelined) – have actively courted the international gossip press, much of which, conveniently, their father controls. It is not that his sons are uniquely unqualified (although Lachlan, along with James Packer, the son of Murdoch’s fellow Australian magnate Kerry Packer, recently lost $468 million when auditors of One.Tel, an Australian telecommunications company they backed, unexpectedly declared it insolvent). It is that no one is qualified to run NewsCorp.

But back to the satellite systems.

He now owns two: BSkyB in the Euro market and StarTV in the Asian market (which is why he canceled Patton’s book – he wants his satellites to be beaming into a billion Chinese homes). The satellite strategy has been his technology-vision thing, and also allowed NewsCorp to maintain that it is the only truly global media concern. But it’s also a business that has failed to achieve predicted levels of market penetration, tied up an enormous amount of cash, and seen other technologies supersede it (like the whole digital revolution). What to do with this business has long been the Murdoch conundrum. And as that conundrum has been debated, the other great mogulopolises have grown far faster than NewsCorp.

“Buying” DirecTV is the apparent solution. That is, he would roll his satellite assets into a gargantuan and profitable distribution entity, one – at a prospective market cap of $80 billion – that is vastly larger than NewsCorp itself.

But let’s try a more obvious, less tortured explanation of the structure of the deal – which is generally said to be a 30-70 split in favor of the other investors. Murdoch isn’t buying DirecTV; he’s selling his satellite businesses.

It is true that NewsCorp, with its minority interest, will in theory control the new entity. But control is a complex and variable condition – especially when you’re the minnow in an enterprise full of really big-fish investors (including Bill Gates and John Malone). It’s a company that will, inevitably, mutate beyond the Murdoch interests.

This is a vast departure from the way Murdoch has lived his life and built his business. It’s a corporate rather than a mogul approach. It’s a constrained and humbled Rupert.

So what’s he got up his sleeve? Over the course of 25 years, Murdoch has outplayed everybody. His moves are always the most prescient and audacious. Might this not be the last stage of his vision? Après moi …?

Now, he could be as blind as any parent. He might really think Lachlan or James are thoroughly created in his image and can truly run his creation. But as likely, he is also as clear-sighted as any parent, with a loving understanding of his children’s limitations.

Bear with me. There’s a kind of poetry here. Any megamedia conglomerate is really, as everyone who has worked in one knows, a confederation of more or less noncooperative parts. So eventually someone will arrive at the brilliant strategy of letting the parts go. Pushing them off. Untangling the ties. It makes perfect sense that, just at the apogee of consolidation – as AOL Time Warner goes on about worldwide convergence – Murdoch, who always sees things first, would, of course, begin to deconsolidate.

The DirecTV deal hints at the model (indeed, Murdoch has already done a “carve out” with the Fox group – the studio, network, and stations – creating a separate public entity). It’s reverse-engineering the corporation. It’s breaking the unwieldy nation into city states. It’s a plan for a more or less sensible network of loosely affiliated enterprises, over which Lachlan and James might ceremonially, and unpowerfully, preside.

But is this – as he possibly mounts the vastest, most frightening media consolidation yet – what he wants me to say?

Or, by doubting his ambitions and dismissing his children and seeing the devolution of the empire as feudal drama (complete with morganatic wife) as much as corporate strategy, am I fearlessly risking the China treatment? Or is that, in a reverse conflict, to my benefit? It could well be in my interest – I’m not sure you can really lose by making the Murdochs mad – to provoke a tiff (once, after I questioned his strategies for conquering the Internet, James Murdoch called me, in print, to my 9-year-old son’s undying appreciation, an “obnoxious dickhead”).

Just so you know the conflicts.


The Fox Trot