BOOKS
How the Emperor Got His Clothes
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Rupert Murdoch: The Untold Story of the World's Greatest
Media Wizard |
When journalists ponder the global significance of Rupert Murdoch, the temptation, especially in America, has always been to focus on his "content." We cluck over the tabloid excesses of the New York Post, shout back at Bill O'Reilly, deplore the entire reality-TV genre, up to and including American Idol, and fret about what The Simpsons and Temptation Island will do to the children.
Those so inclined will find much fresh fuel for outrage in Rupert Murdoch: The Untold Story of the World's Greatest Media Wizard, by Neil Chenoweth. Yes, Chenoweth informs us, Murdoch really does churn out all that stuff just to make money. And no, it doesn't seem to bother him at all that snobs like us think he is pandering to the most churlish and vicious aspects of human nature. He does not live in a Masterpiece Theatre world, thank you very much.
But stoking our snobbish outrage is not Chenoweth's purpose. Forget content, he says. The fundamental Murdochian significance lies in his grip on distribution, in all the ways he has found to dump his immensely popular trash into the world culture. His dump trucks — the cable networks, the printing presses, the television studios, the movie back lots, and lately, the satellites — are the real story, folks. And a lively, hair-raising, sometimes maddeningly jumbled story it is, as told by Chenoweth, a senior writer with the Australian Financial Review, that nation's daily business newspaper.
To be honest, this is not an easy book to love. It was originally published in London last year under the far more accurate title Virtual Murdoch: Reality Wars on the Information Highway. Updated and reissued here, it is cluttered and occasionally flabby, with a herky-jerky structure that suggests it was assembled in a food processor rather than on a word processor. Just keeping all the minor characters straight is much more work than most readers want to do, and we cover a lot of ground more than once.
Moreover, its occasional melodramatic references to Murdoch's vast cosmic power seem naïve and quaint these days — a throwback to the pre-Enron era when ceos were still widely admired and were not yet routinely keeping criminal lawyers on retainer. Rupert Murdoch "is probably the most influential and powerful media figure in the world," Chenoweth writes in his introduction. "His empire triggers effects directly and indirectly across the globe far beyond the size of his company. He wields this power unfettered by other shareholders or bankers or independent directors or even by national governments." And yet, by the end of the book, Murdoch has been thwarted at least temporarily in his dearest ambition, the purchase of the DirecTV television satellite service from General Motors, done in by a bunch of cable television operators and by the dithering GM board. They just don't make superheroes like they used to.
But if some books have the flaws of their virtues, this one has the virtues of its flaws. With its breathless tap-dance through Murdoch's daily life — sailing off the Great Barrier Reef one day, courting the owner of the Los Angeles Dodgers on another, receiving the "Humanitarian of the Year" award on a third, entertaining the family at his new loft in SoHo somewhere along the way — the book delivers an adrenaline kick roughly equivalent to the thrill of rifling through Murdoch's PalmPilot and opening his mail. It's all here, every murky deal, every sworn enemy, every shocking lawsuit, every clever acquisition, every cynical rationalization, every accounting trick, every family crisis. Conspiracy theorists, beware: Chenoweth could be addictive.
Consider the aftermath of one of Murdoch's failed attempts to secure an American satellite system. One strategy, teaming up in the deal with a consortium of cable operators, was shot down in 1998 by the Justice Department, which apparently feared letting the cable companies control a technology that could put them out of business. The fallback plan, a renewed partnership with EchoStar, a smaller satellite company he had already jilted once, was appallingly expensive. "Murdoch left no doubt who he blamed for this disastrous outcome: It was the fault of the Clinton administration," Chenoweth writes. And how did Murdoch retaliate for this corporate setback? The author strongly suggests that it was more than coincidence that this was the moment when "the New York Post broke the unofficial media bar on writing about the president's family, with a front-page story about Chelsea Clinton's distraught visit to a university clinic after a failed romance."
This is hardball. Nor is it the only instance cited by Chenoweth in which Murdoch's business warfare seems to have distorted the judgment and ethics of his journalistic enterprises. When Murdoch was trying to persuade the Chinese government to support his plan for a satellite television system there, we are told, the Murdoch-owned publishing house of HarperCollins shamefully reneged on publishing a memoir by Christopher Patten, the last British governor of Hong Kong. Buying the book in the first place had required "no shortage of courage" on the part of Eddie Bell, the chairman of the publishing house's London unit, Chenoweth tells us, because "it was common knowledge that Murdoch detested Patten," who was extremely unpopular with the Chinese leadership. The top editors at HarperCollins hung tough for a while, but finally caved in to their boss's displeasure and dropped the book. The resulting furor made headlines around the world — but was barely mentioned in Murdoch's newspapers, which include the august Times of London.
"The Times media editor, Raymond Snoddy, said later that the lack of coverage was an 'unacceptable error,' but his attempts to interview Patten, Bell, and Murdoch had failed," the author continues. The paper's editor said he considered the episode a minor story but conceded "he might have 'underplayed it.'"
The exploits of Murdoch's journalists are nothing, however, compared to those of his accountants. Murdoch's flagship, the News Corp, exists "in three parallel universes," Chenoweth explains. One is the universe described in the annual reports to shareholders, based on Australian accounting practices. The second is the one described in the company's financial reports to U.S. Securities and Exchange Commission in the United States, using stricter accounting rules. And the third is presumably described in the tax returns the company files privately in Australia. Through artful tax planning that has only once been successfully challenged — in Israel in 1998, where News Corp agreed to pay a small penalty and modify the way it calculated its taxable income there — the company has been able to avoid paying taxes on fully two-thirds of its S.E.C.-reported profits. But according to Chenoweth, that's just routine compared to the sorcery that once enlivened Murdoch's financial statements.
"It began in 1987, in the company's Australian profit reports," he writes. "The profit after-tax on News Corp's operating earnings . . . came in at $364.364 million. It was a cute little entry." The odds of the same number's occurring on both sides of the decimal point were about one in 250. "But it happened in the next year. On the same profit line, this time the result was $464.464 million. The 1989 result was $496.496 million. In 1990 the figure was $282.282 million." In 1991, there were three of these "magic numbers" in the same financial statement — against odds of more than 100 million to one, we are told. "The magic numbers appeared to have become an obsession with the News Corp bean counters. They did it again in a more restrained style in 1992 (profit before abnormal items $530.530 million); thereafter News Corp abruptly began reporting profits only in millions of dollars, dropping the decimal places."
The game worked only in Australian dollars, but it is impressive nevertheless. As Chenoweth notes, "These results suggest a unique accounting culture at News Corp. The uneasy question that this cheap party trick raises is: If this accounting team is so confident that they can make the minor numbers in a profit report say anything they want, then what does this say about the big numbers the company was reporting? Why should the number technicians stop there?"
Good question — and an especially provocative one in today's scandal-obsessed environment. These accounting antics, too, seem a relic from an earlier, more carefree age. Today's regulatory puritans may find Murdoch's "magic numbers" far less amusing.
You'd have to go back to the Wild West to find a social setting that would suit the characters we meet in Chenoweth's account of the adventures of NDS (News Digital Systems), the Israel-based encryption company that acts as locksmith to the Murdoch pay-television empire. The unit was run for years by a man who was a fugitive from a United States securities fraud case; it has been plagued by accusations of illegal wiretapping and industrial espionage that were aired in a blistering court case in London but got surprisingly little publicity here. On this, Chenoweth has more questions than answers, but his questions are insightful and important. Not the least of them is "what part of News Corp.'s management culture allowed it to employ a fugitive?"
Despite the serious and sometimes shocking issues he tackles, Chenoweth, at times, is weepingly funny, especially in his educational asides. "Many Americans are confused by English tabloid newspapers, which is the thing that the New York Post most resembles," he tells us helpfully in an early chapter. "In particular they don't understand the tabloid maneuver known as the reverse ferret." Now what, you may be wondering, is the "reverse ferret"? In my personal favorite passage in the entire book, Chenoweth explains:
"Kelvin McKenzie, probably the world's greatest tabloid editor (certainly the most obnoxious), used to stalk the newsroom [of Murdoch's British paper, The Sun] urging his reporters generally to annoy the powers that be, to 'put a ferret up their trousers.' He would do this until the moment it became clear that in the course of making up stories, inventing quotes, invading people's privacy, and stepping on toes, The Sun had committed some truly hideous solecism — like running the wrong lottery numbers — when he would rush back to the newsroom shouting, 'reverse ferret!' This is the survival moment, when a tabloid changes course in a blink without any reduction in speed, volume, or moral outrage."
The author attributes this description of McKenzie's antics to Peter Chippindale and Chris Horrie, who included it in their book, Stick It up Your Punter. Indeed, his footnotes reveal the debt he owes to the media's long fascination with all things Murdochian. And a look at his bibliography raises the question whether the world really needs another book about yet another media mogul, especially the well-thumbed Murdoch. William Shawcross brought out a revised edition of his more sedate Murdoch: The Making of a Media Empire in 1997. There are six other Murdoch biographies on Chenoweth's list, and several fresher ones are on bookstore shelves right now. So don't believe Chenoweth's American subtitle — much of the story has indeed been told before. Did it need to be told again?
I think the answer is yes. The breakneck changes of the recent past, beginning roughly with the hatching of the Internet bubble and ending in the uncertain terrain of the post-9/11 world, justify this fresh look. Like those high-speed films that show the evolution of Western art in fifty seconds, Chenoweth provides a sort of fast-forward account of the revolution that has swept through Mr. Murdoch's neighborhood in those years. His subtle analysis, once you sift it from the dizzying details of the Murdoch appointment book, will prompt even the least media-savvy among us to start wondering and worrying about the possible outcome of the games the media moguls have been playing in the past decade.
Murdoch has not yet given up on his dream of acquiring the dominant satellite television system in North America and linking it to systems he already controls in Europe, Asia, and Latin America. His odds of success were recently improved when federal regulators rejected EchoStar's rival deal with General Motors, opening the door to fresh bids. Will cable television become the Betamax of the future? If so, will it be because of Murdoch's orbiting hardware or because the telephone companies will have found a way to deliver television and movies over the Internet? When we have 500 television choices, will the victory belong to the consumer? Or to whoever offers the best electronic version of TV Guide? Well, guess who has a muscular stake in the troubled company that owns TV Guide these days? That's right. Unfortunately, News Corp's opaque complexity and restless hyperactivity defy easy analysis, and unpacking Chenoweth's story is not something to tackle after the cocktail hour. But he repays his readers' efforts by delivering an essential primer that captures, in one spot and in unsettling detail, the utter ubiquity of Rupert Murdoch.
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