War at the Wall Street Journal Read online

  Table of Contents

  Title Page

  Table of Contents

  Copyright

  Dedication

  Cast of Characters

  Prologue

  1. The Fix

  2. Cousins

  3. The Unraveling

  4. The Newsroom

  5. Billy

  6. The Chase

  7. The Letter

  8. The Wait

  9. Personal and Confidential

  10. Not No

  11. Exploring Alternatives

  12. Family Meeting

  13. Editorial Independence

  14. Decisions

  15. First Day

  16. Meet Mr. Murdoch

  17. Interregnum

  18. Chiefs

  19. Taking Bullets

  20. Resigned

  21. Thomson's Journal

  22. One of Us

  23. Urgent

  Epilogue

  Acknowledgments

  Sources

  Index

  Copyright © 2010 by Sarah Ellison

  ALL RIGHTS RESERVED

  For information about permission to reproduce selections from this book, write to Permissions, Houghton Mifflin Harcourt Publishing Company, 215 Park Avenue South, New York, New York 10003.

  www.hmhbooks.com

  Library of Congress Cataloging-in-Publication Data

  Ellison, Sarah.

  War at the Wall Street journal : inside the struggle to control an American

  business empire / Sarah Ellison.

  p. cm.

  ISBN 978-0-547-15243-1

  1. Wall Street journal. 2. Dow Jones & Co. I. Title.

  PN4899.N42W28 2010

  071'.3—dc22 2009046266

  Book design by Brian Moore

  Printed in the United States of America

  DOC 10 9 8 7 6 5 4 3 2 1

  Excerpts from "Family Dynamics: Behind the Bancrofts' Shift at Dow Jones—Mounting Pressure from Dissident Wing Raises Odds of a Sale," by Matthew Karnitschnig, Sarah Ellison, Susan Pulliam, and Susan Warren (June 2, 2007), and from Richard F. Zannino's letter to the Dow Jones board are reprinted by permission of Dow Jones & Company.

  For Jesse

  Cast of Characters

  THE BANCROFTS

  Clarence Barron, Bancroft patriarch, early Dow Jones owner

  Hugh Bancroft, Clarence Barron's son-in-law, early Dow Jones president

  Jessie Cox, Clarence Barron's granddaughter

  Jane Cook, Clarence Barron's granddaughter

  Hugh Bancroft Jr., Clarence Barron's grandson

  Jane MacElree, Jessie Cox's daughter

  Bill Cox Jr., Jessie Cox's son

  Jean Stevenson, Jane Cook's daughter

  Martha Robes, Jane Cook's daughter

  Lisa Steele, Jane Cook's daughter

  Christopher Bancroft, Hugh Bancroft Jr.'s son

  Hugh Bancroft III, Hugh Bancroft Jr.'s son

  Bettina Bancroft, Hugh Bancroft Jr.'s daughter

  Elisabeth "Lizzie" Goth Chelberg, Bettina Bancroft's daughter

  Leslie Hill, Jane MacElree's daughter

  Michael Hill, Jane MacElree's son

  Tom Hill, Jane MacElree's son

  Crawford Hill, Jane MacElree's son

  William Cox III, Bill Cox Jr.'s son

  ADVISERS

  Michael Puzo, Hemenway & Barnes attorney, Bancroft trustee

  Jim Lowell, financial adviser to Hemenway & Barnes on Bancroft accounts

  Roy Hammer, Hemenway & Barnes attorney, Bancroft trustee, Dow Jones board member

  Michael Elefante, Hemenway & Barnes attorney, Bancroft trustee, Dow Jones board member

  Martin Lipton, partner at Wachtell, Lipton, Rosen & Katz, adviser to Bancroft family

  THE MURDOCHS

  Rupert Murdoch, News Corp. chairman/CEO

  Wendi Deng Murdoch, Rupert Murdoch's wife

  Prudence MacLeod, Rupert's eldest daughter

  Elisabeth Murdoch, Rupert's daughter

  Lachlan Murdoch, Rupert's elder son

  James Murdoch, Rupert's younger son

  Grace Murdoch, Rupert's daughter

  Chloe Murdoch, Rupert's youngest daughter

  ADVISERS

  Andrew Steginsky, independent money manager, adviser to Rupert Murdoch

  DOW JONES & COMPANY

  Peter Kann, former Dow Jones CEO, president, and Journal publisher

  Karen Elliott House, former Journal publisher

  Paul Steiger, former Journal managing editor

  Richard Zannino, former Dow Jones CEO

  Marcus Brauchli, Journal managing editor

  Gordon Crovitz, Journal publisher

  Irvine Hockaday, Dow Jones board member

  Frank Newman, Dow Jones board member

  Peter McPherson, Dow Jones board member

  Harvey Golub, Dow Jones board member

  Lewis Campbell, Dow Jones board member

  William Steere, Dow Jones board member

  Bill Grueskin, Journal deputy managing editor for news coverage

  Paul Gigot, editorial page editor of the Journal

  Nikhil Deogun, Journal editor

  Martin Peers, Journal editor

  Paul Ingrassia, president of Dow Jones Newswires

  Joseph Stern, Dow Jones general counsel

  James Ottaway, Dow Jones board member

  Richard Beattie, chairman of Simpson Thacher & Bartlett, adviser to Dow Jones's independent directors

  NEWS CORP.

  Gary Ginsberg, News Corp. EVP of global marketing and corporate affairs

  Lon Jacobs, News Corp. general counsel

  David DeVoe, News Corp. CFO

  Roger Ailes, chairman/CEO of Fox News Channel and Fox BusinessNetwork

  Leslie Hinton, former executive chairman of News International

  Robert Thomson, former Times of London editor

  James Bainbridge Lee Jr., JPMorgan Chase banker, adviser to News Corp.

  Blair Effron, Centerview Partners, adviser to News Corp.

  Prologue

  GAIL GREGG WALKED confidently up the gangway to join the small gathering on Barry Diller's yacht on a warm August night in 2007. Yet when she saw Rupert Murdoch, nemesis of her husband, New York Times publisher Arthur Sulzberger Jr., she forgot the promise of the evening and almost threw herself into the Hudson River.

  The tabloids would note the party briefly, but this event wasn't designed for mentions in columns with boldface names. No press passes had gone out to humble journalists. The powerful would mingle privately, exchanging pleasantries and tidbits, setting up potentially useful future exchanges. Relationships would evolve quietly under the setting sun. Yet beneath the clinking of cocktail glasses something else was taking place, namely, the latest phase of a competition involving the future of two of America's most important publications and a battle for supremacy over who would control what the nation read, thought, and believed.

  The guests aboard Diller's beautiful 118-foot cruiser knew that reality was the creation of the highest bidder. Their media empires didn't merely report the news; they chose and shaped it. Yet tonight's stated purpose was not strictly business: at the top of the agenda was the viewing of Diller's new IAC/InterActiveCorp headquarters from the water, with a tour to follow. Diller, a comfortable host and a bit of a showman, had arranged things a week or so earlier. The evening light would perfectly showcase the rather controversial building, designed by architect Frank Gehry to evoke eight wind-whipped sails ready to glide out onto the river. But the strange and graceful edifice was no one's notion of the big news story on that particular evening.

  In the wee hours of that morning, Rupert Murdoch had
secured a $5 billion deal to buy Dow Jones & Company and the Wall Street Journal from the Bancrofts, one of the country's last remaining newspaper families, who had owned the company for 105 years through thirty-three Pulitzers. The only other time Dow Jones had been purchased was for $130,000 in 1902 by Clarence Barron, whom some called the originator of financial writing but whom the Bancrofts referred to as "Grandpa." The founder of the Boston News Bureau, he had purchased the company with a $2,500 down payment loan from his wife, Jessie Waldron, whose cooking the five-foot-five, 330-pound patriarch had enjoyed as a longtime guest at Ms. Waldron's boarding house.

  The purchase had ensured that the later generations of the Bancroft family were bonded together, however reluctantly or tentatively. Without it, the Boston-based clan would feel like "just another rich family," a status the elders in the clan were reluctant to embrace. As the generations progressed, their relationships grew ever more tenuous. Murdoch's money would allow them to be rid of one another. It would allow him something else entirely: the $5 billion purchase of the "daily diary of the American dream" was the likely culmination of his controversial career, which had helped shape the century. The paper would become the flagship of his News Corporation.

  The seventy-six-year-old Murdoch, his auburn-dyed hair receded halfway back his head, his brow permanently creased as his smile emerged from the crevasses that lined his face, looked relaxed and vibrant in the stifling summer heat. He accepted congratulations in his softly accented Australian mumble. For almost two decades he had coveted just these plaudits. But the question of whether the purchase was actually a triumph would be avidly debated in the Hamptons and elsewhere as the summer came to its close. Some called his timing all but laughable, given the print medium's sorry state. Most noted that the man who had always indulged his penchant for what he called "populist" papers had now steered himself into an impossible challenge—engineering the subtle metamorphosis of a beloved, sophisticated publication with a dwindling audience in the midst of the scariest media moment in recent memory.

  Murdoch, worth $9 billion and ranked thirty-third on the Forbes list of the four hundred richest Americans that year, remained an awesome competitor. His challenges were just beginning. After capturing the Journal with a motley team of advisers and his shareholders' cash, he faced an inevitable battle with its staid newsroom along with emerging calamities that would transform what had seemed a trifle in his mammoth empire into a drain on his business—and his reputation.

  Gail Gregg held a unique position as the first lady of Murdoch's biggest competitor, the Sulzberger clan who controlled the New York Times. She and her husband had fallen in love when they were both young aspiring journalists, in the days when, thanks to Woodward and Bernstein, journalism was steeped in romanticism. After Nixon's fall, reporting was glamorous; the country had loved the Fourth Estate. The adoration was short-lived.

  It was no longer easy to enjoy being a member of America's most powerful publishing dynasty, reigning as Manhattan's all-but-official royal family. Online competitors mocked the self-importance of the once unassailable Times from cyberspace as the accountants forecast the demise of the entire newspaper industry.

  Many of the other guests at the dinner party were also under siege and uncertain. Technology was upending the old monopolistic industry models, which had made newspapers one of America's great businesses. Media companies were collapsing as the nation fell out of love with publications upon which they once depended. Readers' patience was wearing thin. They had continued to subscribe to papers they perceived as lifeless, drained by their corporate owners of local muckraking, voice, excitement, individuality. Scores of papers across the country were closed or clinging to diminished existence, though the news—wars, terrorism, economic disaster—was more epochal than ever.

  Even the proud Sulzbergers seemed insecure. Gail's entrance to the festivities didn't cause the guests to look up as quickly as it once would have. Yet, despite her earlier temptation to brave the waters of the Hudson, she was too tactful to make any sort of scene. Instead, as she spied Murdoch, she slipped off her shoes so she wouldn't scuff the gleaming white deck of the yacht, pulled her lips into a smile, and made her way on board.

  The year had been terrible for the Times with an ever diminishing paying readership and plummeting ad revenues. (The company would end up mortgaging its new headquarters, taking a usurious loan from Carlos Slim Helú, a Mexican billionaire.) Still, the Sulzbergers saw themselves as survivors. Among old-fashioned American journalism's most serious advocates, they were nearly unapproachable, closely engaged in the business, influential with editorials and endorsements, and involved in a modernization of the paper. But would they, too, be unseated? Would Murdoch or another usurper set his sights on their old Grey Lady? Would his ownership of their rival, the only other truly nationally influential paper, damage the Times by forcing it to become more commercial, or further weaken its already addled business?

  For three anxiety-ridden months, Gail and Arthur had watched Murdoch struggle to snatch up the Journal. Throughout the pummelings of his earlier takeover battles, the press baron always seemed buoyed by his jousts with the "old guard" who disdained his screaming headlines and pulpy stories. But Murdoch's outsider status was yesterday's cliché. He had been a media titan around the globe for nearly half a century. Some may have seen his latest move as a brash upstart's most recent triumph over tradition—a view Murdoch encouraged—but it was much more complicated. Many of the Bancrofts, in fact, had come to see him as not a spoiler or a corrupter, but a savior.

  The Sulzbergers begged to differ. Gail still called Murdoch "dreadful." It didn't matter that his instincts might just keep their medium alive. Those same instincts, they feared, would debase the country's dialogue. They knew that perhaps one (maybe two) strong survivors would become America's national newspaper or newspapers. Mur doch believed that the race would be between his own new flagship publication and the Times.

  The medium still fascinated Murdoch, who had come from a newspaper family and inherited his first, the Adelaide News, as a twenty-one-year-old fresh from Oxford. Within a few years he was acquiring (the Sydney Daily and Sunday Mirror) and in 1964 launched Australia's first national paper, the Australian. Forty-three years later, he controlled the 20th Century Fox movie studio, the Fox television and "fair and balanced" Fox News empire, the BSkyB and Sky Italia satellite businesses, and now the Journal.

  Murdoch had inherited his taste for politics from his father, Keith, who, after having lost out to a rival reporter for the assignment to cover Australian troops in World War I, wrote a passionate letter critiquing the Gallipoli campaign. Frustrated with the censorship that didn't allow the press to report on the actual events at Gallipoli, he delivered the letter directly to the Australian prime minister. Though riddled with errors, the lacerating memo helped bring about the dismissal of the commander in chief of the campaign and, some say, the end of the campaign itself. Historians credit his letter with a greater impact on the events at Gallipoli than any articles published in the press.

  Murdoch, like his father, didn't hide behind rules of journalistic objectivity; he wasn't too bothered by the occasional mistake. Murdoch was unafraid to use his media outlets, particularly his tabloid papers, as instruments of influence. In fact, he measured the success of his papers by their influence. In Britain, he achieved his greatest impact with the Sun. With nearly eight million readers, the Sun, in addition to its topless Page Three girls, carried more weight in its home country than almost any other paper in the world. It had steered the 1997 British parliamentary election to Tony Blair after Murdoch, alienated from Prime Minister John Major, led the Thatcherite British tabloid in an energetic campaign for the Labour candidate, who then won the election for prime minister in a landslide. The move shocked British Conservatives into nearly apoplectic fury. That was fine. Murdoch was no fan of pussyfooting in public, in private, or in print.

  The Journal's conservative editorial page made it a n
atural Times antagonist; Murdoch would apply his predatory tactics to create an even tougher competitor to the more liberal institution. The Journal was the heartland's choice, but TV news programs, other newspapers, and magazines took cues from the Times. That rankled Murdoch, who sensed Sulzberger's politics on that paper's every page. The old posture of objectivity, Murdoch believed, was just a way to con Times readers into imbibing left-leaning perspectives. His Journal, never more feisty, would launch an old-fashioned newspaper war with guerrilla warfare and terrorist techniques. The battle for the future was on.

  Born into privilege, Murdoch was Oxford-educated and pampered, but none of it showed. He revealed little and seemed the natural enemy of the overblown or lavish. He treated six palatial homes—in New York, Los Angeles, London, Long Island, Carmel, and Beijing—as more convenience than excess. The accouterments of wealth weren't what he was about. For Murdoch, the great game was its own reward; there was always the next move. There was a bit of theater to it all, and he went along with it, but he didn't put himself on display as an authoritative TV or social presence. He kept at the battle day by day and told his employees (there were almost sixty thousand) to call themselves pirates.

  The Australian's conquest of Manhattan had begun in the 1970s when he snatched up the liberal New York Post and changed its political philosophy. He then moved on to New York magazine, where nearly all the staff walked out rather than face the new owner's reinvention of their magazine. Once, his breach of the Dow Jones fortress would have been unthinkable, but a series of lucky coincidences had given him his opening, and he had seized it.

  Nearly eighty years after Clarence Barron's death, his family, to whom he left an estate of $1.575 million in 1928 ($19.4 million in 2009 dollars), had little in common with "Grandpa." None worked at his company or shared his passion for the business. (His last words were "What's the news? Are there any messages?") They lived off family trusts set up in the 1930s by Barron's adopted daughter Jane after she was widowed. Most of the money was tied up in the family business. Jane's three children, Jessie Cox, Jane Cook, and Hugh Bancroft Jr., who had lived comfortably off the fortune, entertained in their Boston Back Bay mansions and tended their horses. (Hugh, Jessie, and Jane died in 1953, 1982, and 2002, respectively.)