Murdoch the Fox Finds his Weapons – Part 3

This is Part 3 of a three-part story. Go back and read Part 1 and Part 2.

14. ‘You’ll be hearing from me’

It was in the midst of this moment — the biggest deal of his career — that the 86-year-old Murdoch tripped on his way to the bathroom on Lachlan’s yacht and had to be transported to Los Angeles. With their father laid up at the Ronald Reagan U.C.L.A. Medical Center at the start of 2018, Murdoch’s children descended on Los Angeles, unsure if this would be the end. Lachlan and his wife, Sarah, met them at the hospital. Elisabeth and her husband, Keith Tyson, came from London, James and Kathryn from New York. Murdoch’s surgery was successful. Not long after his children arrived, his condition stabilized. Following his near-death experience, Murdoch joked that he did not realize how serious his condition was until he had seen all his children gathered around his hospital bed.

Video: The night Fox News and President Trump became one.

Murdoch would be laid up for the next few months but still in command, running things from his bedroom at Moraga. In an email to his senior management leaked to Vanity Fair’s Gabriel Sherman, he described the incident as “a sailing accident” and said that he would be working at home for a little while. “In the meantime,” Murdoch wrote, “you’ll be hearing from me by email, phone and text!”

The negotiations continued. As they did, Lachlan and James adjusted to their new realities. Unable to secure a job at Disney that he wanted, and wary of its aggressively safe and hierarchical culture, James decided in the winter that he would not try to follow the family’s assets to their new home, according to three people who are close to him. Lachlan would take over what was left of the Murdoch empire without interference from his brother.

In early June 2018, before the final terms were settled, another bidder emerged. Brian Roberts, the chief executive of Comcast, offered Murdoch $65 billion for 21st Century Fox, $12.6 billion more than Disney was prepared to pay. Murdoch didn’t want to sell to Comcast, according to three people familiar with his thinking. He preferred Disney for a variety of reasons, including his personal admiration for Iger, whom he viewed as a risk-taking leader in his own image. What’s more, the Comcast offer was all cash, which would create a big tax burden for Murdoch. But Murdoch did like the prospect of a bidding war. And he had a potential path to securing both a higher price and his preferred buyer in the Justice Department’s ongoing lawsuit to block a proposed merger between AT&T and Time Warner.

Comcast’s interest in 21st Century Fox allowed Murdoch to drive up Disney’s purchase price to $71.3 billion. Iger and his team delivered what they hoped would be their final offer personally to Murdoch in London, traveling through Ireland because they were worried that Comcast might be tracking the movement of private planes flying in and out of London from the United States. Murdoch had Disney on the hook.

His back now healed, Murdoch attended the Allen & Company media conference in Sun Valley, Idaho, in July 2018. With Roberts and Iger nearby, he seemed exhilarated; once again, he was in the middle of the action. The problem for Murdoch was that if Comcast made another counteroffer, he might have a fiduciary responsibility to present the offer to his board, and it might accept it, absent extenuating circumstances. He didn’t want his stalking horse to overtake his favorite.

[Read 6 takeaways from this story.]

The Trump Justice Department came to Murdoch’s rescue, appealing a federal court ruling in the AT&T and Time Warner case. On its face, the lawsuit had nothing to do with Comcast, but because the company had its own history of tangles with government regulators, the appeal would give Murdoch the cover he needed to accept Iger’s latest bid: Comcast now looked risky. There is no evidence that the Justice Department factored Murdoch’s interests into its decision-making process; nevertheless, he had gotten another $20 billion for his company while still selling to his preferred suitor.

When the deal was finalized, Murdoch would personally make roughly $4 billion, bringing his net worth to $18 billion. All six of his children would receive $2 billion each. Lachlan and James would get even more — an additional $20 million in Disney stock, plus golden parachutes worth about $70 million each. Yet neither one was getting what he had really wanted.

15. ‘A deal that’s not good for the country’

Media empires are built on the foresight and audacity of their leaders, their ability to anticipate and embrace sudden changes in an industry that’s constantly evolving. But they are also built on something far more mundane: government regulations. More than anything, it’s the moving of lines, the lifting of caps and the rewriting of rules that enable moguls to transform businesses into empires. These decisions are invariably opaque, the product of a labyrinthine bureaucratic process and the inherently subjective definition of what’s in the public interest. Under President Trump, these decisions have almost always broken Murdoch’s way.

The Time Warner-AT&T deal was itself a good example of the ambiguities of this bureaucratic process. It worked out perfectly for Murdoch, but Trump had his own reason to try to block the acquisition: Time Warner was the owner of CNN, with which he was constantly feuding. He called it a “a deal that’s not good for the country,” and privately urged his chief economics adviser, Gary Cohn, to stop it, according to two people who were told about the conversation. (The exchange was first reported in The New Yorker.) Deals like this, a “vertical merger” between two companies in separate businesses, rarely face antitrust scrutiny. And yet Trump’s Department of Justice sued to prevent it, the first time the federal government had taken such a step in 40 years. The Justice Department antitrust enforcer who filed the government’s lawsuit against the deal, Makan Delrahim, was in fact on record saying earlier that he didn’t see it “as a major antitrust problem.” And yet when a federal judge, Richard Leon, dismissed the Justice Department’s case, calling one of its key arguments “gossamer thin,” the government appealed, and just in time to stave off Comcast’s next bid for 21st Century Fox. The process had dragged on for more than two years.

The speed with which Murdoch’s Disney deal was approved stood in stark contrast. This type of agreement — a “horizontal merger” bringing together Hollywood’s largest and third-largest studios — would give the combined company near-monopoly power to raise consumers’ prices and limit their choices. Such deals ordinarily invite strict government scrutiny. The Department of Justice approved it in just six months. (Fox executives credit the company’s thorough preparations for its speedy and successful review.) After calling Murdoch to ensure that the deal wouldn’t affect Fox News, Trump had applauded it: “This could be a great thing for jobs,” his press secretary, Sarah Huckabee Sanders, said when asked to characterize the president’s reaction to the agreement. Wall Street analysts predicted that the deal would result in thousands of layoffs.

The ambiguities of the regulatory process were also evident in another deal with major implications for Murdoch’s empire. In the spring of 2017, months before Murdoch started negotiating with Iger, the Sinclair Broadcast Group agreed to buy Tribune Media for $3.9 billion. Sinclair was already the largest owner of local TV stations in the country. It was also overwhelmingly pro-Trump: Its local stations, many of which were in key swing states, provided Trump with positive coverage during the campaign — a result, in part, of a deal that Kushner had personally struck with Sinclair’s chairman, David Smith. Murdoch had been concerned about the company’s steady growth. With Sinclair’s acquisition of Tribune, which was already in 39 percent of American households, the company would now be in more than 70 percent. What’s more, Tribune owned WGN, an unremarkable cable channel with unexploited potential: It reached nearly 80 million homes and could easily be converted into a right-wing national news network — an instant competitor to Fox News. In conversations with colleagues, Murdoch worried that Sinclair might hire O’Reilly as the marquee star of the new Fox rival.

Sinclair seemed to have a friend and ally not just in Trump but also in the Federal Communications Commission’s chairman, Ajit Pai. Days after the election, when he was still just a commissioner at the agency, he appeared at a Sinclair executive retreat at the Four Seasons in Baltimore, according to a Politico story. After he became chairman in 2017, he effectively enabled Sinclair’s bid for the Tribune stations, easing limits on how many stations a single company could own. There was enough suspicion that Pai might be inclined to give Sinclair favorable treatment that the F.C.C.’s inspector general started an investigation into the commissioner’s relationship with the company. But then, in the summer of 2018, Pai basically blocked the deal, announcing that he had “serious concerns” about it. Sinclair officials said they were “shocked.”

Once again, things had broken Murdoch’s way. The report cleared Pai of inappropriate conduct — either to help or hurt Sinclair — though it left some questions unanswered about Fox, like what Pai and Jared Kushner discussed during a conversation just before the deal was announced. Pai was asked if anyone from Fox News had tried to influence the ruling. He “responded in the negative,” the investigators wrote.

16. ‘Do you think Malcolm is going to survive?’

In the middle of August 2018, Lachlan Murdoch emerged from his Gulfstream G550 in a T-shirt and jeans and climbed into a black Range Rover waiting for him on the tarmac. Australian paparazzi were waiting there, too, as they often were when Lachlan or his father arrived in Sydney. This time, they were both in town: Murdoch had landed two days earlier. They went for a company awards dinner, but they had another agenda as well.

The night after his arrival, Lachlan invited a small group of Sky employees and managers to his $16 million mansion in Sydney for drinks. With its new prime-time lineup of hard-right opinion hosts, Sky had become a force in Australian politics. Its audience was still small by American standards, but it was the network of choice in the capital, Canberra, and it was finalizing a deal to expand its reach into the Australian Outback — demographically speaking, the equivalent of Trump country.

It was a mirror of Fox News, with its fixation on race, identity and climate-change denial. Night after night, Sky’s hosts and their guests stirred anger over the perceived liberal bias of the media, “suicidal self-hatred” of Western civilization and the Australian equivalent of the Central American “caravans” that were dividing the United States: asylum seekers coming to the country by boat from Indonesia and Malaysia, many of them Muslim. Days before Lachlan’s arrival, a national neo-Nazi leader, Blair Cottrell — who had recently been fined for “inciting contempt for Muslims” — appeared on one of the network’s shows. Cottrell had been interviewed on Australian TV before, but his deferential treatment by Sky caused a national outcry. Under gentle questioning, he called on his countrymen to “reclaim our traditional identity as Australians” and advocated limiting immigration to those “who are not too culturally dissimilar from us,” such as white South African farmers. (Sky apologized and suspended the program.)

Inside Lachlan’s living room, the talk turned to national politics. “Do you think Malcolm is going to survive?” Lachlan asked his staff. Malcolm was Malcolm Turnbull, the relatively moderate Australian prime minister who took office a few years earlier. Inside the government, a small right-wing uprising had been brewing over his plans to bring Australia into compliance with the Paris climate accord. It is well established among those who have worked for the Murdochs that the family rarely, if ever, issues specific directives. They convey their desires indirectly, maybe with a tweet — as Murdoch did in the spring of 2016 when he decided to back Trump — or a question, the subtleties of which are rarely lost on their like-minded news executives.

In the days that followed, Sky Australia’s hosts and the Murdoch papers — the newspaper editors had their own drinks session at Lachlan’s mansion — set about trying to throw Turnbull out of office. Alan Jones, a Sky host and conservative radio star, called for a party “rebellion” against him on his program. Days later, the Murdochs’ major paper in Sydney, The Daily Telegraph, broke the news that a leadership challenge was in the works. Cheering on the challenge, Andrew Bolt, the Murdoch columnist who was once convicted of violating the country’s Racial Discrimination Act, told his Sky viewers that Turnbull’s “credibility is shot, his authority is gone.” Peta Credlin, the commentator who was Tony Abbott’s former chief of staff, chewed out a member of Parliament for the chaos inside Turnbull’s administration. The Australian, the Murdochs’ national newspaper, was soon declaring Turnbull a “dead man walking.”

Word got back to Turnbull about Lachlan’s remark to his staff. He knew that Sky After Dark had been becoming increasingly critical of him: Months earlier, an aide showed him a video montage of promotional clips from the network questioning his leadership of the country. “Is it always like this?” the aide recalled him asking. But he now believed that this tough coverage was part of a concerted campaign. One of his senior aides confronted the Murdochs’ Australian executives in a text that was shared with us. The Turnbull camp knew, it said, that “Lachlan had made it clear at the editors drinks on Tuesday night that he would like MT to get rolled.”

Turnbull heard, too, that Rupert Murdoch was miffed at him because he had not reached out to him since he landed in the country, according to three former officials in Turnbull’s government. Turnbull’s chief of staff had been trying to set up a meeting with Murdoch; he now redoubled his efforts. Turnbull settled for a phone call, pleading with Murdoch to back off. “Let me have a look at it, and let me talk to Lachlan,” Murdoch said. “I’m retired. I’ll talk to Lachlan.” (Through a spokesman, Murdoch denied that he felt slighted by Turnbull.)

Two days later, Turnbull’s right-wing opponents ousted him through a definitive intraparty vote, known in Australian politics as a leadership “spill.” Chaos ensued, creating round-the-clock political theater for Sky Australia, which logged its highest ratings in the network’s history. (The Murdochs have denied any role in the ouster.)

It was always difficult to separate the personal from the financial and the ideological with the Murdochs. All appeared to be in evidence in their decision to turn against Turnbull. To begin with, he took office a few years earlier by ousting Lachlan’s friend Tony Abbott, and it was Abbott who helped lead the Turnbull uprising. Turnbull’s policies were also not perfectly aligned with the Murdochs’ interests. For instance, he had expedited the construction of the country’s national broadband network, which directly threatened the family’s highly profitable cable business by giving Netflix a government-subsidized pipeline into Australian homes.

The small number of Australian media outlets that the Murdochs did not own portrayed Turnbull’s ouster as a Murdoch-led “coup.” Kevin Rudd, a former prime minister whom the family had helped push out of office years earlier, described Murdoch in an op-ed in The Sydney Morning Herald as “the greatest cancer on the Australian democracy.”

Turnbull was replaced by the right-wing nationalist Scott Morrison, who quickly aligned himself with Trump. The two met in person for the first time in late 2018 at the G-20 summit meeting in Buenos Aires. “I think it’s going to be a great relationship,” Trump said afterward. With a national election scheduled for May 2019, Morrison quickly staked his party’s prospects on the polarizing issue of immigration, promising a new hard-line approach. It dovetailed with Sky’s regular prime-time programming. Andrew Bolt, who previously warned of a “foreign invasion,” said in one segment, “We also risk importing ethnic and religious strife, even terrorism,” as the screen flashed an image of Australia’s potential future: rows of Muslims on a city street, bowing toward Mecca. When the opposing Labor Party managed to muscle through legislation that would allow doctors to transfer severely sick migrants in detention centers on the islands of Nauru and Manus into hospitals in Australia, Sky Australia’s prime-time hosts went on the offensive.

17. ‘No, I’m not embarrassed’

The third generation of the Murdoch dynasty was finally taking control. The Disney deal was still pending regulatory approval in a few countries — the two companies had overlapping operations in China, Mexico, Brazil and elsewhere — but Lachlan was already shifting to his new role as chairman and chief executive of the new Fox. The empire was much smaller, but in political terms, at least, it was no less powerful, and its direction was clear.

Lachlan generally avoids on-the-record interviews, but now that he was taking ownership of the family business, it seemed appropriate to make at least one public appearance. He chose the New York Times-sponsored DealBook conference about corporate leadership. On Nov. 1, less than three months after the Australian “coup,” Lachlan appeared onstage in the Time Warner Center in Midtown Manhattan. Tieless, in a white shirt, a navy suit and his trademark black outback boots, he offered a selfless account of the Disney deal. “We immediately saw that this made a great deal of strategic sense,” he told his interviewer, the New York Times columnist Andrew Ross Sorkin. He asked Murdoch if there was any part of him that was disappointed at the prospect of the shrinking of his would-be empire. “Your first thought is shareholders,” Lachlan replied. During the brief Q. and A. that followed, Lachlan dismissed the critics of Fox News as narrow-minded. “No, I’m not embarrassed by what they do at all,” he said of the network’s prime-time hosts. “I frankly feel that in this country, we all have to be more tolerant of each other’s views.”

In the days leading up to the conference, some Fox News hosts and guests had been moving ever closer to openly embracing the most bigoted sentiments of the white-nationalist movement. A few days before the anti-Semitic attack on a Pittsburgh synagogue that killed 11 Jewish worshipers, a guest on Lou Dobbs’s show had said that a migrant caravan headed to the United States border from Honduras was being funded by the “Soros-occupied State Department.” (The network apologized.) The shooter, according to a post he made on social media, had come to believe that Jews were transporting members of the migrant caravans. When Tucker Carlson came under fire for his increasingly pointed attacks on immigration — “We have a moral obligation to admit the world’s poor, they tell us, even if it makes our country poorer and dirtier and more divided” — he received personal text messages of support from Lachlan, according to two people familiar with the texts.

The lines between Fox News and the Trump White House were continuing to blur. At Hannity’s urging, Trump hired the unemployed Bill Shine as his deputy chief of staff for communications in the summer of 2018, ushering in a new era of increased hostility between the White House and the mainstream media: Within days of his arrival in Washington in July 2018, Shine called the Fox control room to change an onscreen chyron about Ivanka Trump that he considered unflattering, according to a source inside Fox, who says his request was denied. Shine also barred Kaitlan Collins, a CNN White House reporter, from an event after she asked Trump several questions about Michael Cohen and President Vladimir Putin of Russia.

Unlike his father, Lachlan did not have a long-term relationship with Trump, but he hired the former White House communications director Hope Hicks as the new chief communications officer for the new Fox. Hicks was only 29, but she was the rare member of Trump’s inner circle who left the administration on good terms, and she remained very close to the president, the Trump family and others in the White House. (Kushner has privately told people that he provided a reference for her to Murdoch.)

Lachlan’s first initiative was Fox Nation, a subscription-only, on-demand streaming service started last fall for Fox “superfans.” It would be a platform for a new generation of Fox stars and viewers. One of its most prominent personalities was Tomi Lahren, a 26-year-old recent graduate of the University of Nevada, Las Vegas, who had built a large social-media following with bite-size quips; for instance, she referred to Black Lives Matter as “the new KKK” and to refugees as “rape-ugees.” Most of its shows would be live-streamed during the day, making it a convenient alternative to the network’s daytime news programming, which was too politically neutral for many Fox watchers. And because Fox Nation was on the internet, the content could be even less restrained than the network’s evening programming. In addition to opinion-heavy political coverage, there would also be lighter fare — such as a cooking show with the “Fox & Friends” host Steve Doocy — and “deep dives,” including a documentary about the former anchor of the CBS Evening News: “Black Eye: Dan Rather and the Birth of Fake News.” Lachlan’s longer-term plan was to take this undiluted, unchecked form of Fox News overseas.

Roger Ailes once blocked Sean Hannity from hosting a Tea Party fund-raiser on his show. When Hannity and the Fox host Jeanine Pirro joined Trump onstage at his final rally before the November midterm elections, the old Ailesian concern that the network should keep at least some distance from its political allies had come to feel quaint. Hannity played to the crowd, referring to all the reporters in the press pen as “fake news” and praising Trump’s accomplishments. After a tepid rebuke from management for participating in the rally, he clarified his comments about the press: They were not intended to refer to Fox’s reporters at the rally, he said, just the rest of the media.