How Rupert Murdoch Injected Innovation, Confrontation Into the Media Business

Rupert Murdoch Competition and innovation Media
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“Disruptive technology” has become one of the favorite buzz phrases in today’s media environment, referring to innovations that have rapidly reshaped the industry. Yet long before many of those gadgets came into being, Rupert Murdoch was, in many ways, the great disruptor.

At first blush, it’s strange to think of Murdoch — who was 56 years old when the Fox network made its primetime debut in 1987 — as some sort of renegade. As the head of a major media conglomerate, he’s been a firmly entrenched part of the establishment.

Through the series of deals on which he built Fox, however, as well as the expansion of the studio, Murdoch has seldom been bound by convention. And his fierce competitive tactics ratcheted up the media business to a level of guerrilla warfare, complete with surprise attacks and psychological ploys.

Nigel Buchanan for Variety
 

Much of Murdoch’s bare-knuckled style comes from his background in newspapers, having gained entry into media by inheriting a paper from his father. The Australian-born baron parlayed that into a print empire before embarking on a plan to conquer America, acquiring the Metromedia TV stations, which he then used as the foundation to launch the Fox network.

The fourth major broadcaster faced early struggles, and responded with daring, tabloid-oriented programming. Out of necessity, Fox shook up the content landscape, whether that meant more risque sitcoms or unscripted shows that pushed boundaries, prompting then-NBC Entertainment chief Don Ohlmeyer to accuse the network of putting on programs, like “When Animals Attack,” which were “one step short of a snuff film.”

Critics also tut-tutted over such shows, but their successes were frequently emulated. Murdoch also stunned the major networks by outbidding them for exclusive rights to televise the Emmy Awards in 1987, causing ratings for the telecast to plummet — and triggering boycott threats from ABC, CBS and NBC.

Still, that was merely the appetizer, as it turned out, to Fox’s boldest move: nabbing CBS’ rights to the National Football League in 1993, and subsequently agreeing to a $500 million affiliation agreement with the New World station group, which had been aligned with CBS. The maneuver instantly put Fox on the map with the U.S.’ most popular sport, and dramatically bolstered its distribution system by giving the fledgling broadcaster stronger affiliates in 12 major cities.

The blindsided networks, meanwhile, were forced to scramble in order to secure their ties to stations. A war of words ensued between Murdoch and Laurence Tisch, the billionaire who then owned CBS, with the latter accusing his rival of using “Australian accounting” to buttress his network’s financial performance. For their part, Fox executives papered the CBS affiliate meeting with signage inviting stations to shift their allegiance to Fox, while Murdoch suggested that New World’s defection had less to do with sweetened fees than “dissatisfaction with CBS.”

Murdoch was equally adept at dealing with federal regulators, who let Fox skirt the financial interest and syndication threshold for what qualified as a “network” in terms of programming ownership, and thus facilitated its growth. Before those rules were relaxed across the board, the company built up its production studio as a supplier to the network, tapping into the synergies associated with owning hits like “The X-Files” and “The Simpsons.”

The master stroke of disruption came in the arena of cable news, where Murdoch enlisted Roger Ailes — the former head of NBC’s America’s Talking network, and a political aide to presidents Nixon, Reagan and George H.W. Bush — to oversee it. Viewed by many as being handicapped in seeking to create an alternative to CNN next to rival MSNBC, which boasted the backing and resources of NBC News and Microsoft, Ailes tapped into conservative discontent with mainstream media, positioning Fox as the “fair and balanced” antidote to the liberal bias he claimed held sway elsewhere.

The consequences of that marketing strategy have gone well beyond the confines of television, and in the eyes of some critics — including, most recently, former Reagan administration aide Bruce Bartlett — have dramatically contributed to the political polarization in the country at large. Ratings for Fox News grew, capitalizing on events like the Monica Lewinsky scandal and President Clinton impeachment efforts, and swelled further after the shock of the Sept. 11 attacks in 2001.

Just as Murdoch enlisted his newspapers to advance his political views and business interests, Fox News gave the mogul an enormous megaphone — and an annual profit that now exceeds $1 billion — to influence the debate. But it has also fed into a dynamic where the political parties not only disagree about policy but basic facts, with their constituencies free to retreat to competing outlets that offer vastly different narratives.

Ever the capitalist, Murdoch has always positioned his expansion into new frontiers as a matter of providing more choice to consumers. That was part of his rationale, for example, in seeking to launch a national sports presence in cable to challenge ESPN.

Not all of Fox’s gambits have worked out, and his continuing infatuation with print — which included paying an enormous premium to acquire the Wall Street Journal, and absorbing considerable losses operating the New York Post — has often rankled investors. Reluctantly, Murdoch agreed to spin off his publishing holdings, splitting off the studio (renamed 21st Century Fox) from those assets, which kept the corporate designation News Corp.

There was also a misstep in his entry into new media: The acquisition of MySpace, initially deemed an enormous coup, also turned out to be a disaster. In an interview last year with Fortune magazine, Murdoch conceded it was “one of our great screw-ups of all time.”

Murdoch’s determination to pass the studio down to his children has yielded its share of second-guessing, and resulted in the departure of top executives, like Peter Chernin and now Chase Carey. (Asked at a forum about what he saw in regard to the company’s future when he was still chief operating officer, Chernin quipped, “A lot of Murdochs.”)

Indeed, although the enterprise has far outgrown the one Rupert inherited, it’s been understood for years that the reins would pass to another Murdoch, culminating with promotions for sons James and Lachlan. Even the phone-hacking scandal that roiled the company and resulted in the shutdown of one of its British tabloids couldn’t derail those plans, though it might have delayed them.

While such a shift was long expected, Murdoch’s oversized shadow still makes it feel like a seismic event. As part of a fading breed enamored with newspapers, the elder Murdoch doubtless appreciated that the announcement warranted above-the-fold front-page coverage in the New York Times and Los Angeles Times, although not, as it happens, in his own Journal.

In interviews — which have become somewhat more rare in recent years, although Murdoch has been active and characteristically outspoken on Twitter — the mogul has professed to have a “thick skin” when it comes to criticism, but told Fortune, “I’ve never read a book about myself.” Given the scrutiny they’ll face from those wondering how far the apples fell from the tree, his heirs will likely need the same, at least in the short term.

Certainly, Murdoch doesn’t leave the cupboard bare. Several of the studio’s assets can likely run on autopilot, and there are tantalizing contributors to the bottom line on the runway, like James Cameron’s upcoming sequels to “Avatar.” That said, the industry is undergoing dramatic change, which is forcing everyone to adapt, evolve and lay down the kind of big bets that Murdoch has routinely undertaken, most recently a failed attempt to acquire Time Warner, which he abandoned less than a year ago.

Murdoch has often spoken of following in his mother’s footsteps by living past 100, and it’s clear he’ll remain a presence within the company. Even so, the prospect of a Fox/News Corp. without him makes any step in that direction feel like a milestone — potentially representing his final, and biggest, act of disruption.

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