Books
How the
Emperor Got His Clothes
RUPERT
MURDOCH: THE UNTOLD STORY OF THE WORLD'S GREATEST MEDIA WIZARD
BY
NEIL CHENOWETH
CROWN BUSINESS 416 PP. $27.50
REVIEWED BY DIANA B. HENRIQUES
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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Diana B.
Henriques is a financial writer at The New York Times.
