By Biodun Iginla and Tamara Kachelmeier, Media Analysts for the BBC and The Economist
Rupert Murdoch and News Corporation
Rupert Murdoch is the last member of a dying breed. Time for him to step back
Jul 21st 2011 | from the print edition
IT HARDLY seemed possible that the man had held sway over politics and media for so long. Appearing before a parliamentary committee on July 19th to explain how phone-hacking had flourished in his British newspapers; why his company is alleged to have paid £100,000 ($160,000) in bribes to policemen; why two people in his pay have been jailed and several arrested; Rupert Murdoch paused alarmingly and fumbled his answers. Yet, as the halting performance of News Corporation’s boss was beamed round the world, the firm’s stock rose.
Weakness in a boss does not normally make a firm seem stronger. But News Corporation is not a normal firm. It is a family-run public company, controlled by means of super-voting shares. The 80-year-old Mr Murdoch, who is both chief executive and chairman, seems minded to run it until he can hand the reins to one or more of his children. Yet the interests of the family and those of the firm are diverging.
Politicians and the public see Mr Murdoch differently from investors. To the first group he is the wily builder of a global media empire, the maker and breaker of political careers. To the second he is, increasingly, a liability: an impediment to the smooth running of News Corporation. The closer he seems to retirement, the stronger the company appears; for the media business has changed in a way that makes Mr Murdoch seem like a man out of time. He is the last media mogul.
The media industry used to be full of powerful families. London had the Rothermeres; Los Angeles had the Chandlers. The Hollywood studios began as family outfits. But a combination of regulation and technology has broken media monopolies. Beginning in 1948 America’s courts smashed the old, vertically integrated studios. The internet is undermining the dominance of mass media and handing power to start-ups, bloggers and companies like Google and Yahoo! for whom news is a peripheral business, not a consuming passion.
Most of the families have sold up or stepped back from day-to-day management. At first some gave way to big characters who treated their businesses as fiefs. But these days the suits are firmly in control. Michael Eisner was pushed out of Disney in 2005, to be replaced by the quieter Bob Iger. Time Warner is run by Jeff Bewkes, a kind of anti-mogul who has streamlined the company. Viacom is controlled by the rarely seen Sumner Redstone, but run by a former corporate lawyer. Silvio Berlusconi is ailing politically and his media empire is under attack—by Sky Italia, a News Corporation outfit.
Mr Murdoch inherited a newspaper business and boldly turned it into a multi-media empire. Arriving in Britain in the 1960s, he invented the modern tabloid newspaper—a stew of sexual titillation, moral outrage and political aggression. In America he broke the stranglehold of the three major broadcast TV networks. His Fox News Channel has enraged liberals—and piled up profits.
The coups continue, but the judgment looks increasingly faulty. Mr Murdoch grabbed Myspace in a typically bold deal, then watched helplessly as it was bulldozed by Facebook. In 2007 he brilliantly exploited weaknesses in the Bancroft family to seize Dow Jones and the Wall Street Journal, but apparently failed to notice that the newspaper business was collapsing. Dow Jones’s value was later written down by half.
The scandal engulfing the firm’s British newspaper division has not just enraged the country but also hobbled the company. News Corporation has been forced to end its pursuit of BSkyB, a satellite broadcaster that Mr Murdoch helped build. Lawsuits and, probably, prosecutions await (see article). British politicians, who feel liberated from the Murdoch yoke, may tighten regulation and make it harder to make money from media businesses.
The scandal also reveals the hazards of running a company as a family concern. James Murdoch, the chief’s son, is a competent man who ran BSkyB well. With a different surname, he could have a glittering career at another media firm. Newspapers have weakened him. Sent to learn the family’s traditional trade, he never seemed as comfortable with print. A messy triumvirate of the two Murdochs and Rebekah Brooks, who resigned as boss of News International on July 15th, helps explain (though it hardly excuses) the firm’s pathetic failure to investigate quickly phone-hacking and bribery. Putting his son in charge of newspapers was the action of an old-style proprietor, not a chief executive. It was based on two dated assumptions: that a young scion should be lined up for the top job, and that News Corporation’s future lies in newspapers.
Neither the board nor angry shareholders can get rid of the Murdochs. But the company would be better off with less feudal management. The jobs of chairman and chief executive should be divided—a good idea in any firm—and the elder Mr Murdoch should step down from day-to-day running of the company. He could stay on as chairman: it is a good role for a founder, especially one who has had (with a few notable exceptions) a record of appointing smart lieutenants.
The end of history and the last man
The media industry needs a strong, well-managed News Corporation. When it is not distracted by the pursuit of exciting deals, the firm has fought shrewdly to prevent newspaper articles, television programmes and films from turning into digital flotsam. News Corporation has been the loudest advocate for newspaper paywalls, which may help that business survive, although they do not solve its problems. Mr Murdoch’s feisty character has helped his company become bold. But feistiness is ingrained in News Corporation: it will not disappear if the chairman-boss becomes a mere chairman.
Mr Murdoch will not be the last builder of a media empire. Michael Bloomberg has created a powerful firm and a political career as mayor of New York, although he has wisely kept the two separate. Proto-moguls like Mexico’s Emilio Azcárraga are appearing in the emerging world. But the era of the global mogul is over. Mr Murdoch would do his shareholders and his family a service if he recognised that, and stepped back.
from the print edition | Leaders
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