Dynamic of Murdoch dynasty changing as scandal unfolds

Some years ago I had a depressing lunch with Lew Wasserman shortly after he sold control of his MCA Universal empire to a Japanese consortium. Silver-haired and stooped, but still keenly alert, the long-time king of Hollywood knew he had become instantly irrelevant — “forgotten but not gone,” as one of his executives put it. “No one asks my opinion anymore,” Wasserman told me as he consumed his customary tuna salad.

I thought of Wasserman last week as I observed Rupert Murdoch, discomfited and (briefly) humbled, take center stage in defense of his empire, one that is vastly bigger than Wasserman’s. Unlike Wasserman, Murdoch is a man who refuses to surrender power, yet seems to have outstayed his welcome. He’d intended to build a dynasty, but instead of bequeathing power to his progeny, he has left them a perverse array of booby-traps.

Murdoch’s basic defense is that no CEO running a $42 billion empire with 52,000 employees can be held responsible for the minor operating mistakes of a subsidiary, but this legalistic argument runs into three problems. First, the mistakes were far from minor. Second, Murdoch is known as a deal junkie but people have also characterized him as a detail junkie (I have observed this trait in several encounters with him).

Lastly, Murdoch’s problems stem not from specific indiscretions but from a corporate operating philosophy for which he is singularly responsible — a “take no prisoners” approach, as the Economist terms it. The Murdoch mantra: Don’t just win, but be certain your rivals lose. The New York Times last week reported how this style even permeates its News America Marketing division, resulting in payouts totaling $655 million to settle charges of corporate espionage and anticompetitive behavior.

The Murdoch scenario in Europe was to create a Sky-dominated TV landscape based in the U.K., Germany and Italy (augmented by Star Asia), which could potentially control the market for sports and for film. This plan may now be damaged, if not permanently stalled.

Murdoch-watchers remember how he was outmaneuvered by John Malone on Direct TV and how, desperate to outbid Viacom, had paid $580 million for MySpace only to unload it recently for $35 million. Murdoch won accolades for winning the fight for Dow Jones and the Wall Street Journal, but he then had to write down half the value of the $5.6 billion deal.

If some rivals now view Murdoch as a deal junkie whose empire seems in self-destruct mode, many also view him as a political iconoclast who has moulted into a fervid ideologue. A read of his newspapers last week elicits a distorted version of the London theatrics. The Wall Street Journal ran a shrill editorial declaring that “we shudder what the Journal would look like today without the sale to News Corp.”

Sarah Ellison’s book “War at the Wall St. Journal” delivers many examples of how the Murdoch ideology affects coverage. Writes Joe Nocera in his New York Times column, “The Journal has become Fox-ified.” A cover story in New York magazine carried the headline, “Fox News has made a circus out of the Republican Party.” Even Murdoch’s defenders concede Fox News has played a major role in polarizing the political parties and advancing the Tea Party cause.

No power player wants to surrender his seat of power, especially in the media business. Louis B. Mayer gave up, then fought fiercely to make a comeback. Sumner Redstone remains a force at Viacom.

Nonetheless, Murdoch would do himself, his shareholders and his progeny a favor by climbing aboard his yacht and drifting into the sunset. His board of directors should find a CEO who understands corporate civility as well as corporate warfare — someone who is content to run a company, not realign the global political landscape.

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