Lessons from Rupert Murdoch
How to do business the News Corp way.
Given my focus on venture investing, media, and politics, it is perhaps no surprise that I find Rupert Murdoch to be one of the most fascinating, albeit controversial, investors to study. He is hands-down one of the most influential men of the last century. There is much about his politics that I oppose, but his journey since taking the helm of Adelaide’s The News in 1954 as an Oxford recent grad provides a vast trove of case studies in building a business empire and amassing influence over culture and politics at an enormous scale.
I have read extensively on Rupert Murdoch and News Corp, both through biographies and years of media coverage, so I thought I’d break down what I see as the 14 core tenets of the Murdoch approach to business.
He’s an interesting animal, at times filled with contradiction. While News Corp has long been a publicly traded company, he approaches it like he’s managing a family office that makes long-term control investments in companies that strategically advance his personal/political agenda. Understanding Murdoch is valuable for investors — who are generally aware of Murdoch as a powerful media figure but unaware of how he got there — and is equally as valuable for those keen to better understand how the interplay between politics and the media industry led us to where we are today.
1. Controlling ownership is everything.
Rupert’s father Keith was one of the most prominent figures in the Australian publishing industry — a journalist-turned-executive who ran a major media company — yet for all his influence and wealth he was still an employee. When he died, Rupert inherited only a controlling stake in the small Adelaide News from an investment his father had made on the side. Lesson: an empire is only yours if you’re the controlling shareholder.
Rupert has always gone to extreme lengths to avoid dilution of Cruden Investments’ (his family’s trust) stake in News Corp, in particular by aggressive use of debt rather than equity financing, and he has always maintained voting control even though his shares are <50% of the publicly-traded company.
Complete operational control is also fundamental to Murdoch’s approach as a businessman. He’s not a venture capitalist or stock picker; he’s an empire builder who wants to set strategy, hire/fire staff, and circulate profits around his holdings as needed. Nearly the only time he buys a small stake in a company is if it’s the first move in a campaign to take over (see: Southdown Press, News of the World, Warner Communications, St. Regis Corporation, Pearson, The Herald Group, William Collins, Twentieth Century Fox, New World, DirecTV, etc.).
He’s also a risk-taker whose competitive advantage has always included the flexibility that comes with not being handcuffed by the risk-aversion and short-term thinking of fellow public company CEOs whose jobs are tied to quarterly performance.
2. Build small monopolies.
Murdoch didn’t build one media company so much as amass a portfolio of media companies, varying widely in size, focus, and geography. The foundation of the empire was lots of small monopolies that provided a base of solid, stable profits back to News Corp so it could continue its conquests elsewhere. Cheap capital is a key to the holding company model — the ability to use cash flow from one operation that’s stable into order to finance a second operation that’s in a competitive environment without needing outside investors.
At times this was a geographic monopoly — owning the local newspaper or television property in smaller cities that faced no major competition. His first property in Adelaide — Australia’s sixth-largest city — had one main, larger competitor in Sunday news, The Advertiser. He waged war against the Advertiser for a year before getting them to agree to a 50/50 merger that left him at the helm and allowed one company to monopolize the market. His next acquisitions were mostly newspapers that also dominated smaller Australian cities like Darwin, Alice Springs, Mount Ida, and Perth. When News Corp moved into US in 1973, Murdoch’s first target was similarly buying up three papers in San Antonio, Texas — The Express, The News, and their jointly-run Sunday paper — and pitting them all against the incumbent in order to overtake the market.
Other times, his properties faced a major rival in a city — a traditional, high-brow newspaper — but it wasn’t competition so much as a Goliath to brand his David against; Murdoch dominated his target of “downmarket” tabloid properties for the common citizen, resenting the condescension of the political and journalist class. The Mirror in Sydney and the Chicago Sun-Times, for example, aimed to monopolize the tabloid segment of the market rather than take on the more sophisticated papers.
3. Fuck tradition. Fuck etiquette. Challenge the establishment.
While Rupert grew up with a bit of a silver spoon in his mouth, he was also quite the “larrikin” in Aussie parlance — he was a shy boy and bullied at prep school but developed his own rebellious entrepreneurialism — killing rats and selling their skins, and sneaking away from boarding school by motorcycle to bet at horse races. During his time at Oxford he became even more resentful of the snobbery and hypocrisy he saw around him among the British “elite”. Rupert wants to call a spade a spade and challenge common assumptions, not follow etiquette of what’s proper or traditional. This personal resentment came to define his business strategy through the present day — building media properties worldwide that aggressively challenge cultural norms, government authority, and political correctness.
From a business perspective — in both the media industry and in selling consumer products — there can be huge opportunity in the gap between what everyday working people want and what wealthy owners and executives think they want. (I believe this was particularly true pre-Internet Revolution when startup costs for a business were much higher). Most people prefer to read/watch something entertaining rather than memos on public policy — Murdoch capitalized on that reality. Critics have long called him sleazy and offensive; proponents might say his businesses have been no different than what VICE Media is praised for today…provocative, appealing, and profitable.
Murdoch has always explained his actions through the narrative of standing up for working people who traditional media condescends. It’s framed as a cause, not merely a business strategy — although branding one’s company as the underdog taking on the stuffy establishment has no doubt been a very successful business strategy for him.
4. Humans are more emotional than rational. Sensational sells.
Sex sells. Violence sells. Celebrity gossip sells. Political scandal sells. Class conflict sells. Fear of feminists, blacks, gays, and Muslims sells. This has been the formula for News Corp properties, replicated again and again as the empire expanded across Australia, New Zealand, the UK, and the US; first in newspapers and magazines, then on television.
It’s a tabloid approach to news that was well practiced by Rupert’s mentors in London, Lord Beaverbrook and Ted Pickering, during a stint at the Daily Express after Oxford. From the topless girls on Page Three of the The Sun to America’s Most Wanted on Fox, the News Corp style has been to shock and captivate by appealing to raw, primitive emotion over intellectual stimulation.
Murdoch resents the criticism of moving “downmarket” as elitist. As he sees it, there’s unpopular media and popular media — the former is a charity case that appeals to snobs, the latter serves the average citizen and pumps money like an oil well. In his own words: “Anybody who, within the law of the land, provides a service which the public wants at a price it can afford is providing a public service.”
5. The end justifies the means.
That sensationalism has often come with offending individuals and entire demographic groups in a way many find immoral. The culture of many News Corp-owned papers encouraged reporters to go to extremes to create a meaty story, from impersonation of police to framing speculation as reality. The side effects of this appear repeatedly over the decades, from The Mirror’s ongoing false reporting of a school sex scandal in Sydney in the 1960s that led a boy they targeted to commit suicide, to the massive phone hacking and bribery scandal that brought News Corp to its knees in 2011–12 (and resulted in closing News of the World and splitting News Corp in two).
Giving the benefit of the doubt that he was indeed unaware of illegal activity across his UK operations, Murdoch nonetheless seems to have a comfort with collateral damage that goes beyond most business or public leaders. His media properties have always embraced sensational stories and looseness with facts in order to sell papers and shape public opinion. It has helped him build the empire he has — indeed, consumers have rewarded it with their wallets and their attention — and it has helped build a solid base of working- and middle-class citizens across Australia, the UK, and the US who embrace his political views.
Rupert’s own father Keith gained his original fame for his letter uncovering the Gallipoli scandal (in which British troops supposedly sacrificed their Aussie allies during WWI) despite efforts by the British elite to squash it — except of course, that Keith’s account was heavily fictionalized. Decades later, Rupert’s response to an interviewer who asked about his father: “Oh, sure, it may not have been fair, but it changed history, that letter.”
6. If you’re good at politics, you can seize big opportunities most others won’t bother with.
Pre-internet revolution, media required use of a limited, capital-intensive distribution method like printing presses and truck delivery or telecom partnerships, and labor was heavily unionized. News in all forms was regulated to ensure it served the public interest and wasn’t overly controlled by any one company. Most acquisitions required review by regulators, and laws in the US and Australia blocked simultaneous ownership of newspapers and television stations in the same city.
For all his frustrations with it, Murdoch thrives in the arena of regulated industry, and his savvy in playing politics has repeatedly enabled him to clinch business success where others would have not thought possible or not worth the risk. He negotiated with unions to support each of his major newspaper acquisitions (including the layoffs that would come with them), convinced regulators not to refer his purchase of the Times and Sunday Times to the Monopolies Commission as was normally done, gave a knock out blow to unions in his British printing operations with the support of the Thatcher government in the 1986 “Battle of Wapping”, directly influenced cross-ownership regulation in Australia, and repeatedly got waivers from the FCC in the US to bypass cross-ownership conflicts there (or regulatory treatment of Fox as a major network). While he was forced to backtrack amid the phone hacking scandal, Murdoch is likely to get approval soon from UK regulators to buy the remaining 61% of Sky he doesn’t already own despite outcry from the public over his outsized influence over media in the country.
Murdoch isn’t just savvy at government politics, either. Many of the newspapers Rupert bought over the years were family businesses, passed down from one generation of wealthy local family to the next. These papers provided them cash flow and social influence, and as such any attempt to acquire one required navigating family infighting. Most notable — and complex — among them might have been the Bancrofts, who owned Dow Jones & Company, the parent of the Wall Street Journal. Countless moguls have desired to snatch up the prestigious WSJ or New York Times, but both were firmly in the hands of families with no intentions of letting go and it was thought a waste of time to even attempt. Murdoch waded deep into the internal politics of Dow Jones and the Bancroft family, however, and ultimately came out with the prize, purchasing Dow Jones in 2007 for $5 billion.
7. Businesses that give you influence are lucrative, even if they themselves aren’t profitable.
Some of the crown jewels of the News Corp empire — in terms of their prestige and the influence they gave Murdoch as a powerbroker — were bad businesses. The Australian, The Times of London, the New York Post, the Melbourne Herald, all operated at a loss for most if not all of their history under News Corp (the Post at a rate of $2M per week). Even the purchase of Dow Jones had been opposed by News Corp’s second-largest shareholder, John Malone, as being against shareholder interest given the opportunity cost and downward trends in print media.
Yet Murdoch cherished these papers. They shaped public policy and popular opinion, commanded respect among business leaders, and helped balance against some of the reputation his other tabloids earned. In short, they made Murdoch a mover-and-shaker across business and politics. A man in such a position gets to take advantage of lucrative opportunities that an owner solely of entertainment brands wouldn’t see. They caused elected officials across the political spectrum to court him, rather than vis versa, which increased his influence on regulators. (Indeed, politicians have a track record of flying across the world to enlist Murdoch’s endorsement, from Tony Blair flying to Australia, Gordon Brown flying to Idaho, David Cameron to Greece, Kevin Rudd and Tony Abbot to New York, etc.)
8. Power comes from backing the underdog, not sucking up to the incumbent.
At its simplest, power is the influence that comes from others doing what you want them to, either out of fear or out of appreciation. Murdoch has always been an eager student of this game, and his guiding rule has been to back underdogs with the full force of his media properties.
It’s quite rational from an investor perspective. The return-on-investment in backing a politician who is already in power or widely expected to win is marginal — everyone else is trying to please them too, and your support won’t be deemed that impactful/special. Alternatively, if you put your muscle behind an underdog, they will be deeply indebted to you if they win because you had a direct impact on that outcome. Even if your underdog loses as expected, your willingness to aggressively back competitors makes you a threat that the incumbent is keen to placate if possible — they may give you more time-of-day than if you had supported them.
Murdoch helped put the Labor Party into government in Australia’s 1972 elections, breaking 20 years of conservative leadership, with aggressive endorsement of them across all his Australian media properties. His papers helped promote Ed Koch’s rise to mayor of New York and have helped bring Republican governors to power in liberal Massachusetts. Murdoch has a consistent track record of backing new leadership in the UK, then turning against them in favor of someone new if he loses influence over their policymaking: The Sun switched from longstanding Labour leanings to come out in force for Margaret Thatcher in the 1979 elections and remained fiercely loyal to her throughout her time at Number 10; News Corp properties supported then turned against her successor John Major in favor of Tony Blair, went back to the Tories in enthusiastically supporting David Cameron, then turned against him in favor of the Brexit movement that brought Theresa May in as his replacement this past year.
Beyond politics, he also employed this strategy to his advantage in business. Soon after taking over News Ltd, he switched their accounts from the big National Bank of Australia to the small Commonwealth Bank, where he could quickly become their biggest client. If you are a service provider’s biggest client, they will bend over backwards to help fuel your empire’s expansion — as long as you keep paying bills on time — which gives you an advantage over competitors who can’t get as generous loans. When he expanded to the US two decades later, he applied this lesson to his choice of law firm (Squadron, Ellenoff, Plesent, & Lehrer) and investment bank (Allen & Company) as well.
9. Business is war, and there’s nothing more important than the loyalty of your soldiers.
As a rule of thumb, Murdoch hires for loyalty and hustle over having a prestigious resume, and fills job openings by promoting internally in order to reward that loyalty. Australian executives have often been relocated to spearhead changes at newly-acquired properties in the UK and US, and executives tied to the ways of prior owners are quickly pushed out. He doesn’t want his top executives to push back against his commands, outshine him, or think of themselves on an equal playing field as him.
As the commander at the top of the hierarchy, that expectation of loyalty doesn’t always work in reverse. While there are certain lieutenants who have stayed by his side and whose medical expenses (or legal expenses) he has personally covered in tough times, he has repeatedly let go longtime loyalists as well. (The main exception has been at Fox News, where Murdoch came to dislike CEO Roger Ailes and primetime host Bill O’Reilly, but they were such big profit-generators that he let them be.)
10. Opportunism > Grand Strategies.
News Corp’s only guiding light has been Murdoch’s ambitions to dominate the global media industry and be a force among political leaders. He has had high-level desires (like to expand to the UK in the 1960s or to get involved in the satellite communications revolution in the 1970s) and a few trophy targets (to someday buy CNN, the NYT or WSJ, and The Melbourne Herald where his father had been managing editor), but nearly all of his deals have been opportunistic.
If an opportunity comes across his desk — or pops into his head — that he finds compelling, he goes after it. There are no 5- or 10-year business plans. There were new acquisitions that expanded the company nearly every year of its existence, but not at any set pace: for example, News Corp grew by 600% between 1985 and 1988 because that’s when opportunities arose to acquire a major film studio, US television chain, and several newspapers and book publishers, and when political timing was right to battle unions in the UK. Murdoch’s opportunism even led to a few outlier assets, like owning 50% of Ansett Airlines which became a cash cow that helped keep his Australian newspapers afloat for several years.
11. Craftsman-proprietors have an advantage.
Murdoch isn’t an investor who owns media companies as his assets, he is a newspaper man to the bone. He grew up absorbed in it, is energized by the smell of the printing presses, and could do any job within a newspaper (pre-digital era at least). He spent his first year in business, at the helm of The News in Adelaide, just pouring over every component of its finances and operations in order to learn the ropes. He makes changes to the design of papers, re-writes front page headlines, and has a heavy hand in editorial (directly, or by insinuating his approval/disapproval).
Media companies rise and fall based on the substance of their content, and Murdoch lives for the storytelling of a tabloid reporter. This was an advantage over other media moguls; he had a far more intuitive sense for how to differentiate his companies, who to hire and fire, and how to most effectively help or hurt certain politicians through press stories because he mastered the creative side as well as the business side.
12. Look for arbitrage opportunities everywhere and always.
News Corp didn’t make money solely from the appreciation in value of its subsidiaries. It made money anywhere along the way where Murdoch saw the opportunity. This includes shuffling money between subsidiaries in different countries in order to make tens of millions each year by arbitraging the currency markets. It included taking advantage of differences in Australian and American accounting standards, like the ability to revalue intangibles (like the value of a paper’s brand) as assets in Australia. And it included moving profits through a complex web of shell companies around the world — before it was quite as common — in order to (legally) average a tax rate of just 7% during much of the 80s.
Even when his hostile takeover attempts were unsuccessful, he found ways to come out ahead — either by being such a nuisance to management that the company bought his shares at a premium to get rid of him (i.e. Warner Communications) or by maintaining the facade of a bidding war while secretly offloading shares to the competing bidder (at that bidder’s premium price) without them immediately realizing (i.e. Herald Group).
13. Make people let their guard down.
Charm is a powerful weapon. If you want to be successful in negotiating business deals or in retaining talent at a company you’ve acquired, you need the other party to trust that you’re a respectable person and will keep your word. This is especially tough to accomplish when you’ve an industry-wide reputation for cutthroat tactics, battling unions, laying off staff, and making papers more tabloid-like.
Murdoch is very good at counterattacking preconceptions of his personality with calm demeanor, close listening, matter-of-fact explanation, and reassurances of his editorial intentions. He also paints a picture of how the managing editor of a publication he’s acquiring will do well under him (whether or not he intends to keep them at the helm).
14. Keep it in the family.
Rupert Murdoch has always been a contradiction of loudly challenging the traditional order while at the same time being very much a part of it. Amid the topless women on the pages of The Sun, the “Married…with Children” portrayal of family life on Fox, and the frequent talking points against the establishment, he is a product of it, he holds values more traditional than most in social policy, and he seems to crave having a seat front-and-center among the class of the world’s top political and business leaders.
Perhaps nothing better highlights his traditionalist side than the manner in which the News Corp empire (which is now split into two companies, News Corp and 21st Century Fox) is a hereditary monarchy. Much as Keith Murdoch worked hard to ensure his son Rupert would inherit a worthy company in the form of News Ltd, Rupert has only ever entertained one narrative about News Corp’s chief executive seat — one of his sons will take the helm after him (or perhaps in the new structure one will run each company).
This is partly out of the respect Rupert has for his late father and passing off the baton in similar fashion. It is also tied to the advantage Murdoch sees in a craftsman-proprietor: Rupert’s sons grew up in the business, training to one day take over, and have held a wide range of executive responsibilities in it since college. They’ve been groomed to understand and lead News Corp in the Murdoch style better than anyone else could.