The Murdoch Summer

"At the end of the day not much changes, unless there is a smoking gun in the U.S.," says a banker I know who deals with News Corporation, as well as other media companies. His view reflects, I think, the basic business faith in the power of a controlling position—that is, the Murdochs’ effective lock on the voting shares of the company.

     And yet, of course, everything has changed.

     The final battle that has begun is between a legalistic defense—trying to create distance between the key executives and criminal acts by placing the responsibility on others—and the existential challenge to elemental aspects of the company’s identity.

  For one thing, there is a new Rupert. The old Rupert’s tenure, no matter how wavering he might have seemed to his executives and family, was indefinite. Nobody had been in a position to challenge his control. Now, his age is evident to everyone. Senior managers and board members, who heretofore have chosen to see no issues, must now sheepishly acknowledge what everyone knows. The above banker, applying the most positive analysis possible to the new Rupert, says, “He’s still compos mentis, but his judgment is going.” That faltering judgment may be key both to the crimes themselves and to how the management of the crisis has unfolded. Rupert, the Houdini of so many business escapes, isn’t, obviously, the master of this one.

     And there is a new James, far now from heir apparent. In a level world, he would obviously have gone the way of both Rebekah Brooks and Les Hinton, executives with whom he has shared myriad and overlapping responsibilities. Instead, because he is named Murdoch and is backed by the ultimate resources of the company—including a legal strategy that delays the reckoning—he still has a job, if not credibility. Indeed, the overwhelming likelihood is that he will be arrested soon. It is, therefore, a company without its main organizing principle: the inevitable ascension of a Murdoch.

And, too, there is a new Britain. That is, at least, a Britain in which the Murdochs have lost their power. The structure of the Murdochs’ influence has all but been dismantled—any connection to them is now toxic. The only way the prime minister can hope to survive his link to the Murdochs is to become a cheerleader for their vilification.

     There is, too, a new family dynamic. The company’s most significant shareholders are Rupert’s four adult children, who not only hold enormous influence over him, but who also ultimately vote the controlling shares in a system that depends on their consensus (four votes but no tiebreaking mechanism). But now it has become every man for himself, with each blaming the other. Elisabeth Murdoch and her husband Matthew Freud blame James and their former friend, Brooks. James blames Elisabeth and Matthew for helping to build Brooks’ power in the company and in London. Lachlan, previously deposed as the heir apparent in favor of his brother, is exerting new influence over his father. Even the emergence of Rupert’s wife Wendi as an uplifting part of this tale is a problem: She rankles his children, and, as well, his inner circle (neutralizing Wendi’s influence has always been part of the shared responsibility of Rupert’s children and executives).

     And there is, surely, a jaunty new outlook in the White House. What better election cycle gift could there be than for a Democratic president to have the wherewithal to put Fox News on the ropes? The slow moving, and vastly expensive, process of the federal government investigating you is always transformative if not mortal.

     The British Parliament is in recess now and that might otherwise provide a summer respite. But the judge at the center of the civil cases that have been filed by hacking victims has now asked News International to supply all discovery evidence, including the vast trove of emails, to plaintiffs by Aug. 8. The leaking will start soon after.    

     U.S. businessmen, like my friend the cautious banker, tend to prefer a bankruptcy or indictment before they entertain the end of the world. But it has already ended for Rupert Murdoch.