News Corp.’s Rupert Murdoch

He is greatly admired by many, disliked by others, but considered an exceptional, savvy, risk-taking entrepreneur by all. In building News Corporation into a leading global media company, Rupert Murdoch has often dared to go where others would never have gone, following his vision no matter what the obstacles. In the process, he has built a multimedia company whose businesses reach nearly every area of the globe. In the U.S., where the majority of News Corp.’s revenues are generated, there is the Hollywood studio Twentieth Century Fox; the FOX Broadcasting Company; DIRECTV; a portfolio of channels that includes FOX News, Fox Sports and FX; The New York Post; and magazine and book publishing. In the U.K., there is BSkyB, the satellite platform that has become the model for successful pay television; The Times; The Sunday Times; and several popular tabloid newspapers. In Continental Europe, there is SKY Italia; in Asia, STAR; and in Latin America, Sky Brasil and Sky Mexico. And finally, there’s Australia, which is home to the pay-TV platform FOXTEL as well as publishing.

News Corp. has been built according to Murdoch’s strategy of creating assets that are global (with operations across five continents); diversified, encompassing businesses that create content as well as others that distribute it; and balanced between companies whose revenues are dependent on advertising and those that are subscription based. As a result, News Corp.’s divisionsFilmed Entertainment, Television, Cable Network Programming, Direct Broadcast Satellite Television, Magazines and Inserts, Newspapers, and Book Publishinggenerated revenues of $22 billion in 2004.

Murdoch has not accomplished all this over the past three decades without ruffling a few feathers. He turned the British television market on its head and challenged the BBC’s supremacy by successfully launching BSkyB. He and his son James, who now heads up BSkyB and previously was the chairman and CEO of STAR, traveled countless times to China to negotiate landing rights. In the process, BBC World, whose reporting led it to be considered channel non grata by the Chinese, was bumped off the satellite. More recently, FOX News has been embraced by America’s right-wing conservatives as their most trusted news source.

But Murdoch adamantly disassociates himself from any political inclination or backing. He claims to be a moderate who is simply trying to offer consumers choice. And rather than take the high-brow route with the majority of News Corp.’s movies, TV programs, newspapers and books, Murdoch has preferred that its content be close to the tastes of the majority of the people. That, in fact, is his business mantra: offer choice, offer ways to better the lives of all readers and viewers, and the rest will come.

Well, the rest has come, and continues to come, as Murdoch looks toward to the future, and seeks opportunities in the marketthe global market.

Murdoch met with World Screen’s editorial board in his office in midtown Manhattan. The man who may well be the most powerful media executive in the world was soft-spoken, accessible and extremely passionate about his company.

WS: What did you learn from your father about the media business?
MURDOCH: It carries special responsibilities, unlike other businesses. You are responsible for the information that people get. And that carries responsibilities. And it also has consequencesit was difficult to have a lot of very close friends because the people you come into contact with regularly in business may be people your papers may be writing things about the next day that they don’t like. You have to be somewhat aloof from those relationships.

WS: After you started in the newspaper business, at what point did you start thinking of television, or was that always part of the plan?
MURDOCH: I can remember thinking vaguely [about television]. I think everybody in this country [the U.S.], in Australia and in other countries at first thought it would be a threat to their traditional advertising revenues, and it was necessary to be part of it. Of course, later everyone started thinking of it as a very major medium on its own. Everybody’s first instincts in the local television business was basically defensive. I’m going back now 40 to 45 years.

WS: When you had your eye focused on the U.S., was the strategy to first secure content and buy the studio, then thinking of getting the stations, or did it happen together?
MURDOCH: It happened that way, but [it all started during the] very earliest days of television when we had a television license in the fourth city in Australia but there wasn’t much choice in programming.You couldn’t afford to make too much yourself.We made a lot of news and late-night talk. Real prime-time television, you certainly couldn’t afford to make it yourself.Then networks were formed, and in those days the Australian networks tried to tie themselves up to Hollywood studios. In the early days, the great majority of the programming was American.That led to frustrations because the studios made you take everything they made whether it was good or bad, or uninteresting in the Australian market’s context.

It was a long time before I could take control of an Australian television network. I never thought of Hollywoodthat was a generation away.

When we came to the U.S. we were still relatively small.We had established in one sense a large presence in Britain, with newspapers, but we were a company that came here in the ’70s as a fraction of what we are today. I had been here 11 years before I had the opportunity to acquire the first half of Twentieth Century Fox. My partner and I were offered a small bunch of important independent stations. I was keen to buy and he was not, and our chief executive, Barry Diller, was insistent that we buy. To cut a long story short, we bought the whole of Twentieth Century Fox. Fox turned out to be extraordinarily cheap, the last of the sensibly priced studios.

And of course the stations were expensive and so was starting a network.We started it very modestly, first one night, then two nights, then three nights, and made little impact for quite a while. And although we were still operating on very limited resources, in today’s terms it was not a heavy investment. Now we take much bigger gambles: NFC Football and sports contracts.The cost of everything has skyrocketed.

WS: Especially sports?
MURDOCH: I don’t know whether that’s true, [pause] yes, football has gone up 150 percent, whereas in that period programming has probably gone up, I’m guessing now, 40 or 50 percent. What has gone up tremendously in television is the price of successful shows.You plough money into them, you lose money on them, you keep them there, you believe in them, and when they click, then everybody wants double the price.

WS: News Corp. is considered to be the most international of all the media companies. Is it because you were in Australia and then went to the U.K. and then came to America?
MURDOCH: A long time ago, the British always thought in terms of their empire and were pretty patronizing toward us Australians, pat you on your head and say, ‘You’ll do well,’ and when you do well they kick you to death. It was impossible to be accepted as a competitor there. We learned a lot there and reached a critical size to be able to think about coming here [to the U.S.], which has always been open to everybody.

WS: News Corp. is the most entrepreneurial of all the major media companiesit’s faster, it’s more aggressive and less fearful in decision making. How do you pass along that kind of mentality to the thousands of employees you have?
MURDOCH: You build it into the DNA of the company, and in the sort of people that you employ. And you have to keep fighting for it and see that no part of the company is building bureaucracies, which slow down decision making. But with our size, some degree of bureaucracy is essential to keep check on things. But we have very accurate financial reporting and information. So we can know very quickly if I am making mistakes.

WS: BSkyB is the model of a successful pay-TV service. Are you satisfied with it? Is it what you envisioned it to be?
MURDOCH:Yes, it is what I envisioned it to be, yes, I’d like to see more in programming. But it has done a wonderful job at giving British people choice. We were lucky in that we started really before cable got serious.

Cable started with a lot of conditions that made it difficult for them although they are now doing better. But we are still making very strong progress.We were encouraged to switch to digital, which we did three years ago, and we’ve done it at a huge cost, because we gave away all the equipment. And because we didn’t have a competitor, [the government] was the only threat to the future of Sky. In London, we had to report to about eight or nine different bodies, and that has been reduced to one, which is a big help.The BBC is still very dominant, and in the end the BBC gets what it wants.

WS: How would you envision the role of the BBC in this multichannel universe?
MURDOCH: They can see it and they are starting to evolve into multichannel themselves and not charging for [the channels they offer].They are using the poll tax they have that owners of a TV set have to pay, about ‘120 a year.They have immense revenues and some of that they are putting into free channels, children’s channels, news channels, etc., which they distribute at no cost to cable operators and we put them on our platform quite happily. But it’s not what you call an even playing field.To overcome it you just have to do it better.We’ve had great success, for instance, with our news.

WS: Do you have plans to launch a DTT platform to counter Freeview?
MURDOCH: We do in fact have a stake in that, we do have three channels, and we have the right to change that if we want to put on more general channels. But at the moment we think all our creative efforts and drive should go to Sky itself.

WS: There was a time when BSkyB was losing a lot of money and you were having problems with the banks.
MURDOCH: That was very early days. When we started we had to pour money in and we were building and renewing our newspaper plants all over the world. Banks were willing to lend us money and then, all of a sudden, they didn’t want to because there was a squeeze on the banks themselves, who were under a lot of pressure.

WS: Did you have any fear that your plans were not going to go through?
MURDOCH: No. It was a major diversion handling that problem for a year, but there was never really any question that we would

get through that. As a result, we don’t owe a bank any money at all, anywhere.We borrow in the public markets, which is more expensive, but you sleep better!

WS: I’ve heard you are a newspaper publisher at heart, is that correct?
MURDOCH: I’d say newspapers are my first love, more as an editor than a publisher. No, I don’t enjoy running down to sell ads, [laughs] which is very necessary.

WS: Where do you see the future of newspaperswhere will newspapers be in 40 years, with all the electronic innovations?
MURDOCH: Newspapers will still be there, but will they be there in the existing tactile form or something we download on our computer and maybe print out, no one knows that yet.

WS: You spent a lot of time in China with your son James.
MURDOCH: I used to go three times a year. Now I go about once a year.

WS: What is your vision of China, and how important is China for News Corp.?
MURDOCH: Today it’s not, but in the long term, it’s going to have the most immense [importance]. But I would stress it’s going to be in the long term. The government is very concerned about media and the role it plays, and is very careful. So it makes it very difficult to expand. We’re doing well; our programs are getting well exposed there. We have a partnership with one successful network and we own another one 100 percent. It’s coming into its second year and we believe it will soon be profitableit’s got more limited distribution, as you’ve got to get permission province by province. We think we’re right to be there and establish a friendly presence, if you look at the economic progress of that country and where it is going to be in 30 or 40 years.

The world changes so fast, and sometimes quite unpredictably, that I believe there is security for a media company in being truly global. We’re not going to bet the company on one investment in China or India, but I continue to make strategic investments there. In India, we were in television and radio. We walked away from the radio because of the licensing conditions. On the other hand, we are doing extremely well with our Hindi channels in India. And, with partners, we are going to launch a satellite service for all of India, probably within this calendar year.

WS: How does News Corp. cope with the pressures of Wall Streetof trying to get short-run returns when you invest in countries like India and China, that may possibly take 20 years for something to show up?
MURDOCH: Well, I hope it will be better than that! And we are already showing good profits in India.

WS: It’s more short term than I envision?
MURDOCH: Oh, yes. And when you talk about investment in U.S. television stations, you are talking billions. There, you’re talking tens of millions.

WS: SKY Italia is doing quite well.
MURDOCH: It’s making strong progress and getting a lot of subscribers. It’s not breaking even, but we expect it to hit breakeven by the end of our fiscal year in June.

WS: Why was the Italian market important to you?
MURDOCH: We wanted to get into Continental Europe and, no regrets now, but if we look back at the time, we probably wouldn’t have bought or gone into partnership with Telecom Italia or Stream. It was very badly run and very difficult. But Vivendi equally was making a big mess of Telepiu. And we were trying to get out, and we sold out to Vivendi, but when it came the day to send us the money, they didn’t have any. So we reversed it and bought them out. That’s how we became the owners of SKY Italia. And it’s a fun market to be in, but it has its twists and its turns.

WS: Indeed it does, starting right at the top with the prime minister!
MURDOCH: Yes, but he doesn’t have time, and he certainly can’t interfere with the politics of RAI. In his own stations there is such a storm if he would appear to be influencing anything on the air. He’s a good businessman; he understands television very well, but he’s been away from it for ten years. The idea that he controls six out of seven channels is true, but the idea that he runs them is totally untrue.

WS: Where do you think Leo Kirch went wrong in Germany?
MURDOCH: It’s a very difficult situation in Germany, with the cable operators and so on. All I would say is that he is a clever man and he was getting old, and he was very badly served by his main executives. At the very end, there was a change in the chief executive, but it was too late to save [the company] financially. I would say that Mr. Kofler has turned [the pay service Premiere] around and has done a great job.

WS: In Latin America, you have stakes in both Sky and DIRECTV, which are merging.
MURDOCH: Yes. They have some regulatory hurdles in one or two countries, but I think it’s done, pretty much everywhere except for Brazil, which we expect to come through shortly. DIRECTV will be starting with more than 3 million customers in Latin America. And now there will be only one big platform, and I think it will grow very fast. When people have to choose between one against the other, and different contents, they often decide to wait and see and buy nothing. We think it will grow very strongly. We’ve also changed a lot of things there. We now pay for American programming in local currencies, not American dollars, so that has taken the uncertainty out of things.

WS: What are your plans for the world box?
MURDOCH: I wouldn’t say we have an exactly identical world box. We are moving very strongly to a common box with interactive capacity. Wherever we have a satellite service there is a great similarity between the box they are using in Britain and the boxes they are now putting out for DIRECTV and in Italy. Not perfect copiesthey have different operating systemsbut certainly with the same sort of capacity. And of course what is coming, and we will be pushing very, very hard, is the personal video recorder, and with a standard that is much higher than the one the cable companies are giving away. Secondly, toward the end of the summer, we’ll have a really strong push on high-definition. We are putting up more satellites with high-definition capacity. We believe this will distinguish us from a lot of different services.

WS: Why do you think satellite is better than cable?
MURDOCH: It’s easieras you get technological change, it’s easier to distribute and put it out. Cable is buried under the ground at great expense. They have spent a huge amount of money putting in storage for film and pay per view for every 2,000 to 3,000 homes, whereas we have already been putting the storage into the personal video recorder in the home. We’ve been doing a lot of it, but big storage is coming with the advance of compression.

WS: You have had two remarkable men working for you: Barry Diller [formerly the head of Twentieth Century Fox and then of the FOX network] and now Peter Chernin [currently the President and COO of News Corp.].
MURDOCH: Very different people in many ways. Peter would be the first to say that he learned a tremendous amount from Barry when Barry first recruited him. I don’t know how much Barry has changed, but he was always enormously hard working, and in most things, enormously cautious. He did not really enjoy the risk of making movies. He saw himself as being primarily a television person. He was always very cautious and completely honest. He treated the company’s money as if it were his own money. I wouldn’t want to say he hated the film businesshe would say so at the time. He didn’t like the risk.

WS: I heard you like risk.
MURDOCH: I think I’m a bit more of a gambler. Barry has done some pretty big things over these interactive companies. I think he’s still struggling with how it all fits together. He put together a company that has a market capitalization of over $20 billion, and that’s quite an achievement.

WS: When we interviewed Peter Chernin he told great stories of how Titanic came to be, including its escalating budget!
MURDOCH: With my full support. As it turned out, we made our greatest mistake with Titanic when we sold half to Paramount. When we saw the budget going over $110 million, then $130 million, we decided we needed a partner. We made a presentation to Mr. Redstone, which resulted in a $300 million to $400 million profit [for him]. Pretty nice. He hasn’t returned the compliment.

WS: Where do you find the patience to hang on to your vision when you are determined to do something?
MURDOCH: It’s not a question of patience. You work at it and put in people whom you trust. People said I was crazy for starting FOX News. There was only room for one news channel. It was partly borne out of frustration that I couldn’t get anyone at FOX Broadcasting to get interested in news and documentaries because they live in Hollywood!

I said at a speech one day that we would all wind up with news channels, which immediately set off a panic. NBC didn’t have a lot, so they got Microsoft to pick up half the bill. ABC went into it until Michael Eisner heard it would cost $40 million. CBS still hasn’t; they romance CNN from time to time, but nothing will happen from it. And we went ahead, and I was very lucky to secure the services of Roger Ailes, who was free at the time. We were pretty sure after a few months that we had a product that would succeed and, in a matter of time, get distribution.

And it was costly; we paid a lot of launch costs. The cost of running the service and losing money on it against the revenue that was coming in wasn’t so bad. The cost was buying the distribution.

WS: Of your political views, some people believe that you want to impose a conservative perspective. Then we read that you are actually quite pragmatic and, with FOX News, you just saw an opportunity to serve this group of people that would like to see a more conservative news service.
MURDOCH: We don’t agree with that. We are fair and balanced and we challenge anyone to show FOX News has any bias in it. People appreciate it for a number of reasons: it’s better presented, it’s more entertaining. We are first with the news. We beat CNN time and again on every big story. The major networks have been openly biased to the point of being very leftist. That’s different from being middle-of-the-road. I don’t call myself a conservative. I call myself an independent. Look at who our newspapers have supported. Democrats [in the U.S.] and Labour parties in Australia and Great Britain. They have been the best alternatives for our readers and for the countries that they serve.

WS: Is there anything you haven’t done yet in the media business that you would still like to do?
MURDOCH: Yes, we are working very hard at developing a proper Internet strategy. In the heyday of everyone throwing money at it, we threw our share of it and lost it.

WS: Not much, though.
MURDOCH: Mmmm, less than others, shall we say? We’ve developed websites for many things and now they are all gathering momentum and growing. We have to see what we can do to pull them together or start new things, but [stay] very conscious of what is going on and what dangers lie [ahead], certainly for newspapers.

We can do more at every levelmore and betterbe it with network television, channel television, television distribution, DIRECTV, which is growing very, very fast. And internationally, we’ve got to plant our flag in a few more places opportunistically.

WS: Negotiations with General Motors for DIRECTV were a very difficult process that took a lot of time, a lot of effort, and a lot of patience.
MURDOCH: It took that, certainlytime and patience and it was a diversion from running the main business.

WS: I read once that you said that if you had DIRECTV, it would be the Mona Lisa in your Louvre. Is that correct?
MURDOCH: No, I’m not eloquent enough to say this! These are distribution platforms. It’s important, but what’s more important in the long run to, say, Time Warner? Its movie and television studios, where they are number one, or their cable company, which is number three or four, if you include both satellite companies. And which is more profitable for them?

I would say that, particularly with new technologies’ greatly increasing the capacity of distribution platforms, that we’re going back now to where content is king. People who have no distribution platforms have always known content is king, absolutely. But we’ve found starting cable channels that distribution was king, or at least queen.

WS: You do need the leverage, too.
MURDOCH: Having DIRECTV and 20 million customers will be tremendous leverage, absolutely. If you create great content, no cable company can afford to leave you off.

WS: And Comcast and Time Warner became gatekeepers.
MURDOCH: Well, the first gatekeeper was John Malone. He’s no longer a gatekeeper.

WS: Speaking of Malone, he was very helpful to you in the beginning.
MURDOCH: Oh yes, with starting FX.

WS: How do you see him nowadays. Is he still a friend?
MURDOCH: Oh, he’s a very good friend. I think he’s working very hard on Liberty International and being an international gatekeeper. There is a lot of cable both in Europe and in Asia. He likes content, too.

WS: Is he is increasing his shares in News Corp. because he wants some assets?
MURDOCH: It’s very hard to say, because John is about as good a financial engineer as you can find anywhere in the world. And we’ll come to an arrangement with him about his shares, whether it’s a question of letting him have one or two assets of ours in return for shrinking the capital of our company. We’ll see. Whatever we do will be mutually satisfactory, I’m sure.

WS: What do think are the qualities that have helped you succeed in this business? It’s been an amazing ride.
MURDOCH: Well, we’d better keep it an amazing ride! It’s a challenge to be opening new opportunities for all your best executives and to keep it growing. We don’t have to be or want to be necessarily the biggest, but we certainly want to be the best. There are some things at which we are the best, and some things at which we are not. We’ve got to work at those things. That’s the beauty of mediaevery day you can improve on what you did yesterday.