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The Rise and Fall of the Murdoch Empire

John Blake Publishing Ltd

CAUGHT

New York, Friday, 11 March 2011. Rupert Murdoch's 80th birthday. Breaking news carried reports of a major disaster. Japan's most powerful earthquake ever recorded had struck the country's north-east coast, triggering a massive tsunami destroying everything in its path. More than 20,000 people were dead or missing and the Fukushima Daiichi nuclear power plant was in meltdown.

A cataclysmic event of this magnitude was a heady reminder to take stock of one's own situation. For Murdoch, it was an unwelcome portent of dangerous times ahead, just as he was planning a multi-billion takeover in Britain and putting finishing touches to dynastic strategies for the Murdoch family. The last thing he needed was a tsunami affecting his own empire.

News Corporation dominated the world, as the largest and most successful multimedia organisation. It owns the most prestigious newspapers and magazines on three continents. Its TV stations and satellite broadcasters reach nearly every nation on Earth. Among its subsidiaries are film companies, movie studios and book publishers. Its tentacles are legion. Rupert Murdoch, a visionary and business genius, had laid the foundations of his empire in Adelaide, Australia, more than 50 years ago and is now one of the most powerful men on the planet. He is widely admired as a corporate giant, yet has many detractors who have condemned his tabloid newspapers and the influence he wields among politicians worldwide. Left-of-centre politicians have been particularly scathing of his modus operandi and neo-conservative leanings.

Murdoch created a unique culture within News Corporation and its international subsidiaries. The prime objective for his executives has been to embrace the corporation's ambitious drive for success. Murdoch's DNA is shared by a large number of executives among his 52,000-strong global work force. To succeed, they have to follow the corporation's aim of beating the competition at all costs. Colleagues must be part of the cult of the 'Mini-Me', a cloned version of Rupert Murdoch. For their dedication, staff receive generous salaries but the corporation's political philosophies and morality have always been dictated by need. And the major needs have been growth and capital. Bedtime reading for the boss is the bottom line of the company's income statement.

In the UK, News International is the most powerful media group bar none. It is the largest single shareholder in British Sky Broadcasting and its subsidiaries include the Times, the Sunday Times, the Sun, and until its dramatic closure in July 2011, the News of the World. The Sun on Sunday has now replaced its toxic predecessor to take up the slack that left News International presses idle for more than seven months. Annual profits from BSkyB alone have topped £1 billion and it wasn't until the phone hacking scandal broke big in the summer of 2011 that Murdoch dropped his bid for all of its shares. The family had wanted full control of this satellite goldmine. With all six of his children by three different wives already on their way to becoming billionaires, adding BSkyB to their portfolio would have assured their fabulous status quo in perpetuity.

But the cracks in the Murdoch empire had begun to show as early as 2000. Eventually they would open wide enough to form a devastating condemnation of News International and threaten the foundations of its far-reaching empire. Murdoch's own tsunami was dangerously imminent.

When Murdoch won his battle for the News of the World in 1968, few people were aware of the true nature of the man. To many, the young Australian millionaire appeared to be a rank outsider. A gambler looked upon as unsophisticated and brash, showing little respect for the establishment or British royalty and without pretensions or social aspirations. But social climbing was hardly an issue. Murdoch had been born into privilege. He stood to inherit wealth, influence, and a first class pedigree among the Australian elite. When Murdoch eventually appeared before parliament at Westminster in July 2011, he stated that his father was not a wealthy man. By comparison to his own wealth, now counted in billions, there was some truth in that. But his father was far from average either in terms of wealth, social standing or political influence.

Sir Keith Murdoch had been head of the Melbourne Herald Group of newspapers and owned the Adelaide News(inherited by Rupert on his father's death) and the Brisbane Courier-Mail. Murdoch's mother Elisabeth was a Dame, having been honoured by the Queen for her charity work. The family lived in the wealthy Melbourne suburb of Toorak and owned a country estate, Cruden, and famous works of art. Sir Keith had himself been able to wield considerable political influence with Australian politicians, including prime ministers who had provided introductions to political leaders and newspaper magnates in England and America.

Young Rupert was sent to Geelong Grammar, an independent school whose alumni included Prince Charles, the King of Malaysia and John Gorton, a former Australian prime minister. He completed his education at Oxford. But the steely resolve Murdoch possessed was inspired by an admirable quality possessed by many down to earth Aussies – an egalitarian and courageous spirit which refused to be held back by social convention or conservatism. Murdoch was born with bags of this spirit. Despite his background, or perhaps because of it, he cared little about the class system in Britain and even less for the royal family. But that lack of interest in itself would be a contradiction. The royal family in Britain is one of the most successful dynasties ever created and the hereditary principle is one that Murdoch has perpetuated with his own family.

How ironic then that the British newspaper which had bankrolled his global buying spree and the royal family would both figure so highly in the first visible cracks of his empire. The royals had been an important source of revenue for his newspapers. Readers showed interest in every aspect of their lives and royal reporters were among the most highly paid journalists in Fleet Street. Competition for exclusive stories involving even minor royalty has been fierce, no matter how mundane the member and while their expense accounts were enviable, royal reporters were under continual pressure to produce the goods.

Clive Goodman had been the News of the World's royal reporter for some years when he was asked to write the newspaper's Blackadder column, previously edited by former royal spin doctor Mark Bolland. Goodman had broken a host of exclusives but could not afford to rest on his laurels. It is axiomatic among newspapers that a journalist is only as good as his or her last story and Andy Coulson, then editor of the NoW, was singularly unimpressed with past glories.

In 2005, Goodman wrote two totally bland stories about Britain's Crown Prince William. On 6 November he reported the prince pulling a tendon in his knee and seeing his doctor. The second, published a week later, was even more trivial. It was about Prince William borrowing a television station's editing suite from a journalist friend, Tom Bradby, who would help him edit some home movies. This was small beer for Goodman but it would prove fatal for the newspaper.

Prince William and Tom Bradby concluded that information used by the NoW was obtained through illegal means, probably by someone accessing their voicemails – the practice that in the ensuing scandals became popularly known as 'phone hacking' – rather than from leaks by royal courtiers. This set in train a high-powered Scotland Yard investigation conducted by an assistant deputy commissioner in counter terrorism who reported to assistant commissioner Andy Hayman, head of the specialist operations directorate responsible for royalty protection. News of the World offices at Wapping were searched during the inquiry and on 8 August 2006, Clive Goodman and private detective Glenn Mulcaire, a former Wimbledon footballer, were arrested under the Regulation of Investigatory Powers Act 2000. The following day, the two men were charged under the Act for intercepting telephones and also under the Criminal Law Act 1977 for conspiring to commit the offence.

The royal family was determined to put an end to journalists snooping on them and hoped the law would make an example of the reporter. It was no coincidence that Goodman and Mulcaire were brought before the Central Criminal Court, better known as the Old Bailey. It was the ideal venue for attracting maximum attention. Normally the Old Bailey tries major criminal cases. Hacking phones would in comparison be considered a minor offence, had royals not been victims.

Now Goodman appeared before the illustrious court, on 29 November 2006, for what may have seemed to him and some of his Fleet Street colleagues to have been a rather trivial misdemeanour. He and Mulcaire pleaded guilty to intercepting telephones belonging to three members of the royal household, assistants to Princes William and Harry. Mulcaire also pleaded guilty to accessing the voicemail of other people between 16 February and 16 June 2006. They included: Simon Hughes, Liberal Democrat MP; Gordon Taylor, chairman of the Professional Footballers' Association; Max Clifford, the publicist; Australian model and actress Elle Macpherson and Andrew Skylet, a football agent also known as Sky Andrew.

The method used to hack phones had been quite simple. Goodman would ring the mobile phone of a royal aide and if the answer message came into play he would punch in a security code which came as standard for most mobile phones. This would normally consist of a series of four repetitive digits. Provided that the owner of the mobile had either forgotten or not bothered to change their security code (this was quite common), it would allow him to access the messages left on the phone. Goodman, the court was told, made 487 calls and Mulcaire 122. The reporter's response was that he was driven to break the law because of pressures to perform. On 26 January 2007, Goodman was jailed for four months and Mulcaire for six months.

Mr Justice Gross told Goodman the case was not about press freedom. 'This was low conduct, reprehensible in the extreme. It is about grave, inexcusable and illegal invasion of privacy.' To Mulcaire, who had a contract with NoW for the considerable sum of £104,988 and who had received a further £12,300 paid in cash by Goodman, the judge said: 'This was serious criminal conduct to which we must not become numbed. It is to my mind [of] the very first importance to the fabric of our public life that such intrusive, sustained criminal conduct should be marked by immediate loss of liberty ... neither journalist or private security consultant are above the law. What you did was plainly on the wrong side of the line.'

But of greater import than the judge's contempt for their actions was his observation made during his summing up that the hacking might not be limited to the two men he was about to jail. He said to Mulcaire: 'As to Counts 16 to 20 [relating to the phone hacking of Max Clifford, Simon Hughes MP, Andrew Skylett, Elle Macpherson and Gordon Taylor], you had not dealt with Goodman but with others at News International.'

Lawyers' fees for representing Goodman and Mulcaire were paid by the newspaper and Andy Coulson, accepting responsibility as editor of the NoW while denying any knowledge of what had taken place, resigned from the newspaper. Some months earlier, the editor had declared: 'Clive Goodman's actions were entirely wrong and I have put in place measures to ensure that they will not be repeated by any member of staff.'

With Coulson's departure from the NoW Murdoch may have lost one of his best editors but he had not, at that time, lost one of his best men. Coulson was highly regarded among friends and foe alike and he was still very much in the Murdoch camp as a good friend of the Sun's editor Rebekah Brooks, who held enormous sway with Murdoch. Brooks was Coulson's predecessor at the NoW and at 32 had been the youngest editor of a national newspaper when appointed by Murdoch in 2000. Within four months Coulson would be working as an aide to the leader of the Conservative party, David Cameron MP. Brooks and Cameron had already forged a strong connection.

Brooks herself was more highly regarded for her skills as a supreme charmer and networker rather than as a journalist. She was a striking redhead with pre-Raphaelite looks and impressed Murdoch to the extent that glass ceilings were removed to ease her passage up the corporate ladder. After editing the Sun she was made chief executive of News International, a role previously entrusted only to longserving, tried and tested employees such as Murdoch's right-hand man, Les Hinton.

Both Brooks and Coulson exuded an aura of power and influence after the fashion of their guru and boss. They were young, motivated, successful and attractive and, above all, they had Murdoch's ear and the future Conservative prime minister's admiration. Staff at News International were either in awe or feared making a blunder. Very little mercy would be shown to those who failed to produce. Jobs were becoming scarce in Fleet Street and well-paid journalists were expected to be on call and prepared to do everything asked of them, even if it meant dressing up in silly costumes to satisfy an editor's whim. An epigram written by Humbert Wolfe in the 1920s rings as true for them today as for many Fleet Street reporters: 'You cannot hope to bribe or twist/Thank God! The British journalist/But seeing what the man will do/unbribed, there's no occasion to.'

Following Goodman's and Mulcaire's imprisonment, News International bosses hoped they could draw a line under the hacking and that it would soon be forgotten. Scotland Yard and the Press Complaints Commission (PCC) were also satisfied that the incident was a one-off, committed by a rogue reporter and his private investigator. If others had been involved, there was insufficient evidence to pursue them further. Police had seized a large number of documents from Mulcaire but apparently had not considered them actionable. The PCC's own investigation conducted in 2007 concluded that 'No evidence has emerged ... of a conspiracy at the newspaper going beyond Messrs Goodman and Mulcaire to subvert the law or the PCC's Code of Practice ... and that no one else at the News of the World knew that Messrs Goodman and Mulcaire were tapping phone messages for stories.'

To a News International optimist, it would appear that the newspaper was now in the clear. But that would have been wide of the mark. The tsunami was slowly gathering strength and one of the main protagonists, the Guardian, was like a terrier refusing to let go of its bone. Unfortunately for News International, some of its activities had left it highly vulnerable and sufficiently open to criticism and attack.

Normally, one can take stock of possible threats to a company but it would virtually be impossible to predict precisely what damage could be done to a super-rich multinational with an astute visionary like Murdoch at its head. On inheriting the Adelaide News some 60 years earlier, Murdoch had steadily expanded the company by careful plotting, planning, and risk-taking. His greatest enemy was government or state regulation against which he continually battled to avoid restrictions. His constant business goal has been laissez-faire and his British newspapers have consistently campaigned against European control and the Euro. Battling against the odds and winning is what Murdoch has always done best.

In the early 1990s his conglomerate was on the brink of bankruptcy but with determination, some luck and brilliant tactics he avoided disaster. A cut-throat business like media demands constant change, innovation and incisive leadership and there is nobody better equipped than Rupert Murdoch. His own testament to this was reinforced when making a guest appearance on The Simpsons. He parodied himself to millions of viewers as that 'Billionaire tyrant Rupert Murdoch'.

In 2007 it was thought that Murdoch had achieved his ultimate ambition with the successful takeover of the Wall Street Journal (WSJ). It was the jewel in his crown and he had fought hard against his detractors to win. Once again, as with his battle for the UK Times, there were those who loudly voiced opposition, declaring that he was unfit to run such a prestigious and influential newspaper and that he was bound to take it downmarket. Dow Jones and its WSJ subsidiary are the largest and most influential financial information provider and newspaper in America. It is the supreme powerbase from which to assert influence with the country's elite. Murdoch's aggressive battle to achieve victory came at a high price. He paid more than $5 billion for the privilege but while that may have satisfied him it did not please all of his shareholders. There was considerable rumbling among a large number of News Corporation investors who considered Murdoch had paid well over the odds for a trophy at a time when the print industry was being overshadowed by digital media.

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Excerpted from The Rise and Fall of the Murdoch Empire by John Lisners. Copyright © 2013 John Lisners. Excerpted by permission of John Blake Publishing Ltd.
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