Jack Shafer

The publication today of Parliament’s 121-page report (pdf) on phone hacking has the British press all but publishing obituaries for Rupert Murdoch. The report damns him for turning “a blind eye” to the scandal of phone hacking at his companies, News Corporation and News International.

Murdoch is not “a fit person to exercise the stewardship of a major international company,” the report concludes, leveling a hammer to the media baron’s head. As the Telegraph interprets this finding, BSkyB, the UK satellite broadcaster that Murdoch owns 39.1 percent of, is “vulnerable” to a challenge from the regulators at Ofcom. If the regulators applied their “fit and proper” test to BSkyB, they could cancel its broadcasting license, order News Corp. to reduce its holdings in the broadcaster and oust Rupert’s son James Murdoch from its board of directors. The BBC seconded the Telegraph‘s take, and the Telegraph and the Guardian speculate that the report will echo in the United States, triggering criminal prosecutions and unending damage to Murdoch’s corporate reputation here.

Murdoch’s corporate counterattack today states that News Corp. has “already confronted and … acted on the failings documented in the Report,” insisting that the company has righted all the wrongs. In a memo to his 50,000 employees, Murdoch remained defiant, minimizing corporate wrongdoing and maximizing the corrective measures his company has taken.

Even more bad news for Murdoch will arrive when the Leveson Inquiry concludes its investigation and issues recommendations for future press regulation.

And yet, Murdoch performs best when his back is against the wall. He won his war against the printers at Wapping in 1986, he survived his bankers’ foreclosure notices in 1990, and has triumphed over other scandals and calamities in past years by remaining cool. Here’s the path his escape route may take.

Blame the politicians. Murdoch has plenty of fodder to portray himself a victim of feuding politicians. His corporate minions are already denouncing Parliament’s report as “highly partisan” and “divided … along party lines.” Indeed, the six Labour and Liberal Democrat members voted in support of the report, and four Tories voted against. Conservative MP Louise Mensch, who served on the report committee, carried the torch for Team Murdoch in her comments to the press: “It will be correctly seen as a partisan report, and will have lost a very great deal of its credibility, which is an enormous shame.”

But this partisan explanation is too simple. Murdoch doesn’t really have any politics – unless expediency qualifies as politics. He supported the Conservatives when Margaret Thatcher was around, shifted to Labour when Tony Blair rose, and cut back to rejoin the Tories again to catch the David Cameron surge. He’s not partisan, he’s for Rupert Murdoch! If he can convince enough people that Labour is fighting the Conservatives and using him as the proxy, he’ll gain footing.

Rally the faithful. I know what you’re thinking. Rally what faithful? Who in the UK has faith in Murdoch? The only Murdoch rally that will attract crowds will be his funeral. But if Rupert Murdoch is such an unmitigated monster, if he has no constituency at all, then why hasn’t the British reading public turned on him?

Murdoch has a sixth sense of how far he can push the public. They might have dragged him through the streets and hanged him last summer after the Guardian broke the Milly Dowler phone-hacking scandal had he not outwitted them by driving a stake into the chest of News of the World, his offending (and very popular) tabloid. As a Guardian editorial wistfully noted last month, UK readers have continued to support Murdoch’s surviving newspapers, the Times, circulation 390,000; the Sunday Times, circulation 1 million; and the Sun tabloid, circulation 2.6 million.

“There is a market,” the Guardian editorialists wrote, “for the output of phone-hacking, media harassment and other unethical practices.” Although the millions who read Murdoch’s papers aren’t dittoheads, they can be moved to side with Murdoch if he doesn’t overdo his appeal to them. He can rightly say that he folded his offending newspaper and fired its entire staff – both those guilty and those innocent of phone hacking – in a personal, and corporate, act of contrition worth $91 million.

Murdoch could reshape the new report and the forthcoming Leveson findings as attacks on his readers, as attempts of Labour politicians to drive his people-pleasing journalism out of the country. He could accuse competing UK newspapers – including the Guardian, the Independent, the Daily Mail, the Telegraph, the Mirror – of cowardly silence for standing by while the government dismantled his holdings. Although the Sun is profitable, the Sunday Times and Times aren’t, with Rupert subsidizing them for the benefit of readers (and himself, of course). “Rupert Murdoch: Free Speech Martyr” may not be much of a bumper sticker, but desperate times call for desperate measures. If Murdoch’s newspapers really have the power to control public opinion, as his critics say, or move it in a direction that favors him, now is the time to start propagandizing.

The Doomsday option. Murdoch critics have long deplored his dominance of the UK newspaper market. His titles account for a third of daily newspaper circulation and 40 percent of Sunday circulation, usually with a side comment that Murdoch’s market dominance argues against letting him acquire the 60.9 percent he desires. What if Murdoch let it be known that a price would be paid if the Ofcom regulators booted him out of BSkyB – that is, that he would depart the UK media market completely and salt the earth behind him? He wouldn’t sell the Times, the Sunday Times and the Sun; he’d just fold them as he did News of the World, putting thousands of journalists, printers, salespeople and others out of work. I can hear Murdoch’s John Galtian speech now: “If I am not fit to own part of BSkyB, then I’m not fit to own UK newspapers, either.”

Nothing would make the Labour Party and Murdoch’s competitors happier. And UK newspaper profits aren’t important to News Corp.’s bottom line, so the self-inflicted wound would not be grievous. Would Labour wake up and realize that Murdoch is a political asset – the perfect Satan to blame for all their ills? That if he didn’t exist, they’d have to invent him? Do they really want to be blamed – even in part – for the loss of so many newspaper jobs in such a short interval? Murdoch has already proved he’ll bow in the short term to survive the long term. Could he bluff his way past the regulators and the politicians?

All of these schemes are outrageous, low-percentage gambles. But that’s the sort of character Rupert Murdoch is. Whatever goes down, he won’t give up. They’ll never take him alive.

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PHOTO: A reporter picks up a copy of the report by the Department of Culture, Media and Sport into News International and phone hacking before a news conference at Portcullis House in London, May 1, 2012. REUTERS/Olivia Harris

Pummel Rupert Murdoch and his minions all you want for News Corp.’s phone-hacking of celebrities and crime victims, its computer-hacking, its blagging, its bribing of police, its payments of hush money, its obstruction of justice, and its operation of what former British Prime Minister Gordon Brown once called a “criminal-media nexus.”

But spare me the feigned outrage excited by this week’s interrogations of Murdoch and his son James Murdoch by the Leveson Inquiry into press ethics and practices. The Guardian, the Telegraph and the New York Times, among others, appear to be appalled by news that the media baron lobbied the UK government aggressively so that he could expand his holdings in the tightly regulated satellite broadcaster BSkyB from 39.1 percent to 100 percent. The Times cites subpoenaed News Corp. emails released by Leveson to show a Murdoch lobbyist working “hand-in-glove” with the office of a government regulator.

Isn’t climbing into the skins of regulators the very definition of lobbying? That’s how I understand it. Hate Murdoch all you want, but if you’re invested in highly regulated businesses like BSkyB and you need government approval to invest deeper in the regulated business, then working “hand-in-glove” with the regulators is exactly what the situation calls for. Should the Murdochs have ignored the regulators as they attempted to increase their holdings in BSkyB? Of course not.

Likewise, I fail to detect the scandal in James Murdoch meeting repeatedly with David Cameron while Cameron was still the leader of the opposition, as James confessed in Tuesday’s Leveson grilling (pdf), or of James’s admission of having raised the topic of News Corp.’s bid for BSkyB in a “tiny, side conversation” with Cameron at a social event in December 2010. If political judgments are being made over who can own and operate businesses, the Murdochs would be remiss if they hadn’t approached politicians for their support. For example, today’s Wall Street Journal reports that NetJets, the private-jet company owned by Warren Buffett’s Berkshire Hathaway has spent in excess of $1 million over the last three years to lobby Congress to reduce user fees charged to his wealthy customers. This is the same Warren Buffett behind the so-called Buffett Rule to soak the rich.

If the issue is that Rupert Murdoch is not a fit owner of BSkyB under the law because he buys and sells politicians, that his newspapers contrive investigations to punish politicians who stand in the way of his conquests and that his enterprises corrupt police forces, then let’s have that debate. But that’s not the accusation against Murdoch at the Leveson Inquiry this particular news cycle.

Remember, the UK media establishment has long felt threatened by Murdoch’s daring ways in the marketplace and has routinely urged regulators to save them from his predations. In October 2010, executives from the Daily Telegraph, the Daily Mail, the Guardian, the Daily Mirror, the BBC, Channel 4 and the BT Group signed a letter to government regulators protesting Murdoch’s proposed BSkyB takeover. The Financial Times, another Murdoch competitor, editorialized against the acquisition because Murdoch might use his newly expanded BSkyB power to subsidize and popularize his UK newspapers, including his money-losing Times and Sunday Times. Oh, and they made obligatory noises about how Murdoch’s purchase would damage democracy.

“We believe that the proposed takeover could have serious and far-reaching consequences for media plurality,” the 2010 letter from the executives lamented. As I observed at the time, this fretting about “media plurality” was a little rich coming from a consortium of bellyachers that included the BBC, a global enterprise that was then reaping $7.7 billion annually in revenues compared with BSkyB’s $9.4 billion. The BBC benefits from an arrangement in which all households that watch or record TV must purchase a compulsory $235 “license” (go ahead and call it a tax if you wish, because you’ll be fined up to $1,600 if you don’t pay) that funds the BBC. It takes some gall for the BBC, which automatically collects money from TV households, to protest what might happen if Murdoch gains greater control over a competing business that people voluntarily pay for.

My previously mentioned 2010 piece reviewed the historical heavy-handedness of UK media regulators. In 1920, when only three radio stations aired programming in the UK, the government declined applications for new licenses, claiming that “the ether is already full.” As Eli M. Noam reported in his 1991 book, Broadcasting in Europe, UK newspaper publishers encouraged the development of the “public” BBC so that no new commercial enterprise could take root, as happened in the United States, and attack their advertising base. UK regulators suppressed commercial TV and radio for decades and protected the BBC from the onslaught of cable TV. Parliament even regulated the VCR.

The campaign against Murdoch’s total ownership of BSkyB is only more of the same. UK protectionism and the state sanctioning of the BBC make Rupert Murdoch, a villain many times over in other arenas, an unlikely hero. Reading the latest Leveson transcripts, I have yet to find evidence of him seeking direct favors from the government (subsidies, bailouts, etc.), although I am made suspicious by his insistence today that, “I have never asked a prime minister for anything.”

As best as I can judge, he seems to be seeking the liberty to invest his billions the way he sees fit to compete against the established interests. Don’t damn Murdoch for learning the rules of the regulatory game and then playing them as aggressively as he can.

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In the old days, I tried to work into every Murdoch column a reference to his 2007 denial that he was a “genocidal tyrant.” I tried and failed in this column. Upbraid me via email, Shafer.Reuters@gmail.com, or unfollow my Twitter feed. Sign up for email notifications of new Shafer columns (and other occasional announcements). Subscribe to this RSS feed for new Shafer columns, and subscribe to this hand-built RSS feed for corrections to my column.

PHOTO: A combination of still images from broadcast footage shows News Corporation Chief Executive and Chairman Rupert Murdoch speaking at the Leveson Inquiry into the culture, practices and ethics of the media, at the High Court in London April 25, 2012. REUTERS/POOL via Reuters TV

New York Times reporter Jeremy W. Peters invests 2,400 words today in a Page One story delineating the “rift” between News Corp. CEO Rupert Murdoch and his son and heir apparent, News Corp. Chief Operating Officer James Murdoch.

If News Corp. were a normal company and Rupert Murdoch a normal father, readers might glean from this report that a real power struggle is going on for the future of the company. But News Corp. is not your normal company, Rupert is not your normal dad, and there really is no struggle going on for the future of the company, only a replay of the previous “rifts” that have opened between Rupert Murdoch and his two other children by his second wife Anna—Elisabeth and Lachlan. You see, Rupert sets his adult children up to smack them down.

The first of Rupert’s heirs apparent to suffer the public humiliation of a rift was Elisabeth. In 2000, when she was 31, she escaped the family business. A Guardian story from 2000 about her departure says she was “once tipped as a business successor to her father.” What rattled her was her father’s designation of Lachlan as the new heir apparent. The Guardian continues:

Ms Murdoch is understood to have been frustrated by the promotion of her younger brother, Lachlan, 28, within the corporation. Last year he was rewarded with a place on the six-strong board at News Corp—which has a 37.5% stake in BSkyB—becoming the only one of the young Murdoch clan to make it that far.

In an interview with the magazine Newsweek last year, Rupert Murdoch had indicated that Lachlan would eventually succeed him at the head of News Corp. Last month Mr Murdoch was diagnosed as suffering from “low grade” prostate cancer.

At Sky, Ms Murdoch is understood to have had turbulent relations with successive chief executives, Sam Chisholm and Mark Booth. The appointment of Mr Ball to the chief executive’s chair last year reportedly prompted Ms Murdoch to reconsider her future there.

In 2005, Lachlan likewise abandoned the heir-apparent track for daddy reasons and because, as Tom Scocca puts it in this 2005 New York Observer article, other News Corp. executives pushed him around. Scocca writes:

Reports of anger toward his father’s sometimes tyrannical rule were rife, and the elder Mr. Murdoch’s terse declaration that he was “particularly saddened” by his firstborn son’s decision to quit didn’t quiet them. …

Lachlan Murdoch reportedly chafed under the competitive power sphere of Peter Chernin, the News Corp. chief operating officer, to whom he had to report—a surrogate older brother to go with his real father.

Next into the scorpion bottle that is the Murdoch executive-training academy came James, who is 38. Rupert has groomed James for the News Corp. crown, as he had Elisabeth and Lachlan. But once again, something is going wrong with the ascension. The little prince(ss) is perceived as a little too grabby, a little too pushy, a little too grating, and is getting on the nerves of others in the company who push back by leaking anonymously to the press.

Reuters reporter Peter Lauria was onto the Rupert-and-James rift story two months ago, relying, as does the Times, on anonymous sources inside News Corp. to chart the crack-up of the latest heir-apparent. Give a listen:

News Corp’s senior management is starting to think about what the company might do if James Murdoch stepped aside, sources inside and close to the global media empire said. …

A third source close to the Murdoch family added, “There needs to be some kind of separation for James from this issue before he can run the company more broadly.” …

Three sources pointed to that comment as evidence that News Corp was at least considering life without James. …

… [T]he first News Corp insider characterized the move to New York as an attempt by the company to remove him from the line of fire in the UK, not as a logical step in his ascension. …

King Rupert could, of course, end the corporate gossiping about James with a few phone calls. He’s probably powerful enough to stop the former company officials from blasting their icky snark on James, as well. But the reason Rupert doesn’t stop the chatter is that he considers his qualified heirs to be expendable—just as long as he has enough of them around.

He happens to have them in abundance. News Corp. just bought Shine, Elisabeth’s production company, and she remains untainted by the phone-hacking scandal, which has swamped James. The Times quotes “a person who has known [Elisabeth] for years, speaking on the condition of anonymity to protect their relationship” saying, “She very elegantly or ruthlessly created a definitive separation for herself.” Lachlan is similarly clean, rested, and ready.

You’d think that James Murdoch would have figured this all out by now—that the king dreams for a continuation of the royal family but can’t commit to an heir because to do so would mark the end of his reign. Perhaps all the interfamily squabbling disturbs the adult Murdoch children, but the old man relies on their triple loyalties to the Murdoch family unit, their father, and the family company to keep them destabilized. There is no power struggle in the house of Murdoch. There is only Rupert Murdoch.

Tom Scocca figured out all of this in 2005, writing, “the only heir Rupert Murdoch has ever kept is Rupert Murdoch.”

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I’m not obsessed with Rupert Murdoch, just interested. See this previous Reuters commentary about the Wall Street Journal Europe scandal and several years’ worth of Slate pieces. Let me know what you think of King Rupert via email: Shafer.Reuters@gmail.com. Monitor my Twitter for fair and balanced tweets. (This RSS feed rings every time a new Shafer column goes live. This hand-built one rings every time a correction is filed.)

PHOTO: News Corp Chief Executive Rupert Murdoch (L) talks to his son James Murdoch at Cheltenham Festival horse racing meet in Gloucestershire, western England March 18, 2010.   REUTERS/ Eddie Keogh

By Jack Shafer
The views expressed are his own.

What were the London police thinking when they invoked the Official Secrets Act last week to compel Guardian reporters Amelia Hill and Nick Davies to disclose the confidential source for their July 4 Milly Dowler phone-hacking story? Did they think the Guardian would roll over when they arrived in court on Friday to contest the order? That Hill and Davies would submit? That free-speech advocates, members of Parliament, and journalists around the world would pay no mind to the prosecutorial over-reach?

Whatever the Metropolitan Police thought, they’ve rethought it today, announcing that they’re dropping for the time-being their request for a court order that the Guardian give up its sources.

With the perfect vision that comes with hindsight, it now appears that the court order was a bluff. As the Guardian reported yesterday, the Met did not consult the director of public prosecutions before wielding the Official Secrets Act, as the 1989 law requires. He was only consulted on Monday. In other words, the London police went rogue. If that’s the case, perhaps the goal of the cops was to give the Guardian and its journalists a fright and deter other reporters from investigating the pile-up of journalistic malfeasance, crimes by private detectives, corporate malfeasance at Rupert Murdoch’s News Corps., and, of course, bribe-taking by the Metropolitan Police.

But as all game theory enthusiasts know, a bluff—even an empty bluff such as the Met’s—can disturb the existing equilibrium and leave one’s opponent unsettled. The police may have calculated that the psychological damage done to journalists by requesting a court order would be worth the black eye the police might suffer for making it. But that’s giving the police too much credit for thinking ahead. If they had the skill to think ahead they would have prosecuted the phone-hacking cases back in 2007 when the evidence was fresh.

The Metropolitan police’s targeting of the press—like Rupert Murdoch’s decision to pay out $4.7 million in News Corp. guilt money to Dowler’s family and charity—indicates a frantic turn in the phone-hacking story. The police are now conceding they don’t really understand the law. And Murdoch is conceding that his now-dead newspaper, News of the World, committed the very crimes at the center of the scandal.

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