Politicians and Murdoch's invisible hand

Rupert Murdoch says he never asks for favours from politicians, but so strong is his ability to elicit cooperation it's clear he doesn't have to ask out loud.

FT.com

Lord Leveson’s inquiry into the British press yesterday tackled one of the most pressing mysteries facing government and the media: how on earth does Rupert Murdoch ever get anything done?

By his own, often amusing, account, the 81-year-old head of News Corp never asks for favours from politicians, does not give orders to his editors and has very little charisma. Given this, it is a puzzle how, over 43 years, he has managed to build the UK’s most powerful media company and break his way into US newspapers, television and film.

The polite way to describe Murdoch’s evidence – on the heels of his son James’s disclosures about private communications with the office of Jeremy Hunt, the culture secretary – is implausible. It was belied by his presence. Droll, dismissive and impatient, he was not the "deaf, doddery, proud old man” observed by Tom Watson, the Labour MP, in parliament last July.

It is now obvious, despite Murdoch’s modesty, that News Corp has exercised an unholy grip over British politicians, who helped it to avoid antitrust barriers as it bought The Times and The Sunday Times in 1981, and British Sky Broadcasting in 1990. Those politicians were so in awe of Murdoch that they leapt to accommodate him without him needing to ask out loud.

It is also clear that cabinet ministers can be trusted to adjudicate impartially on media mergers about as much as they could be trusted before 1997 to set interest rates for the good of the economy, as opposed to their parties. After the fiasco of Vince Cable, the business secretary, "declaring war” on the Murdochs over their attempted full acquisition of BSkyB, comes Hunt’s humiliation.

The long-term question is how to prevent another baron – perhaps a rich migr such as Evgeny Lebedev, chairman of the Evening Standard and The Independent – from pulling off the trick again. In a fluid and troubled market, roiled by the internet and loss-making papers, there will be opportunities similar to the ones Murdoch seized.

One way for any company to rise rapidly to dominance in a foreign market is to pay bribes to local officials, as Walmart is accused of having done in Mexico. The New York Times reported last weekend that Walmart had paid out more than $24 million in "envelopes of cash” to mayors and city council members to be allowed to build stores.

The other is to wield influence on elections. Humbert Wolfe’s observation that: "You cannot hope to bribe or twist/thank God! the British journalist./But, seeing what the man will do/unbribed, there’s no occasion to” applies equally to a politician facing a media mogul.

The News of the World, the Murdochs’ defunct tabloid, hacked phones and is accused of bribing police officers for stories. But Murdoch operated in a subtler way in building his empire. "I asked Mrs Thatcher whether I could see her and she said: ‘Well, why don’t you come to lunch on Sunday?’ ” he recalled innocently yesterday of his swoop on Times Newspapers.

The idea of a quid pro quo for supporting her government never entered his head, of course: "I did not expect any help from her, nor did I ask for any.” Politicians had higher expectations, judging by how, according to Murdoch, Gordon Brown reacted when The Sun turned against him: "Your company has declared war on my government and we have no alternative but to make war on your company.”

Murdoch described Brown as "not in a very balanced state of mind”, and his papers have had that effect on others. "He was literally raving... his voice was broken and distorted, and he was talking crazy,” Watson, in his book Dial M For Murdoch, quotes a friend as describing the MP’s mental state after he was attacked in The Sun.

Murdoch’s ability to elicit cooperation is only one of his competitive skills. His willingness to take long-term gambles on capital-hungry start-ups such as Sky and loss-making acquisitions such as The Times has reaped rewards – both The Sun and BSkyB fought for dominance in their markets rather than owing it to history.

He has also a talent for anti-establishment populism – both The Sun and the Fox News network are reviled for their brashness and right wing mischief-making but they have a highly loyal audience (as did the News of the World before its illegal methods were exposed). Once he has cleared regulatory barriers, he seizes his opportunities brilliantly.

But it is not only individuals who have been driven mad by Murdoch – he has unbalanced the relationship between the media and government. The implicit bargains struck between prime ministers and media barons for three decades were unhealthy.

This might be solved by the rise of digital media and weakening of old media monopolies. James Murdoch suggested to the inquiry on Tuesday that "we have already entered an era of what will become ultimate plurality”. If so, no oligarch will be able to reproduce Rupert Murdoch’s media empire.

Plurality is far from guaranteed, however. The declining economics of network television and newspapers will provide opportunities for others to convince politicians to relax regulatory standards in return for taking on loss makers. That was how Murdoch started out, with all of today’s consequences.

Hunt still insists he adjudicated on the BSkyB bid fairly but it will be nigh-on impossible for any politician to be trusted with a similar role in future. Murdoch says that he didn’t ask anything of prime ministers over the years, yet they somehow gave away their support and their credibility.

Copyright The Financial Times Limited 2012.

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