Rupert Murdoch’s 2007 acquisitions of The Wall Street Journal significantly altered the power structure of the U.S. newspaper industry—and of the broader business culture. In War at the Wall Street Journal: Inside the Struggle to Control an American Business Empire, Sarah Ellison chronicles the backstory behind the deal. Ellison, a former Journal reporter, spoke with NEWSWEEK’s Daniel Gross. A podcast of their conversation can be heard here.
The origins of this tale are really in the Bancroft family, one of those strange, old WASP clans that nobody has much heard of. Tell us about them.
The Bancrofts are one of these old American newspapers families, and which are sort of a dying breed. They were made up of about 35 adults and largely had their roots in New England and Boston. These were the descendents of Clarence Barron who bought The Wall Street Journal very early on and was sort of the founder of the Journal and Dow Jones as we know it.
And 70 years later, the family was collecting dividends, but they weren’t involved in the business in any substantial way.
Exactly. There wasn’t any encouragement to be involved with the business, or certainly not within news. And while that allowed the newspaper to flourish without any kind of intervention from its owner, it created this very strained relationship and distant relationship with the company that they actually owned. And so when it came time to figure out exactly what they were going to do with it in order to keep it going, they were sort of paralyzed.
Throughout the early part of this past decade, the Journal was doing well journalistically, but the parent company wasn’t performing that well. Peter Kann, a former great journalist for the Journal, was the CEO. They had lost a lot of money on Telerate, which is a data business. And this new guy comes on the scene: Richard Zannino. How did he get into the position of power at Dow Jones?
Peter Kann was an amazing journalist and maintained the journalistic standards at the Journal for a long, long, long time. There was enough concern about how the company was doing after this disastrous Telerate performance, which was a deal that they had sort of bumbled into and then couldn’t really get out of without having a write down of a billion dollars. They looked outside for someone to be the chief financial officer. And a search firm found this very bright, very smart, very financially astute guy—Rich Zannino. He was CFO for several years and then became the chief operating officer and then he became the CEO once Peter Kann stepped down.
So you’ve got the disgruntled cousins who want money, this CEO who doesn’t really care all that much about the future of the newspaper and knows his time is limited, and then the predator, Rupert Murdoch. Was he always interested in the Journal?
The Wall Street Journal is the most powerful business paper in the most powerful country in the world. And for him that is an enormously tantalizing opportunity. He tried to buy the Financial Times years ago. That didn’t work. And he had his eye on the Journal and was waiting for this very opportune moment where you had a change in the CEO, a change in the trustee that was representing the Bancroft family, and a major change at the top of the newsroom at the Wall Street Journal, which was that Paul Steiger was retiring and being replaced. [Murdoch] thought he might be able to take advantage of that situation.
The way you describe it, it was sort of child’s play for him. It was Murdoch against these cousins, who really had very little to do with business and didn’t know much about it.
Murdoch was collecting information and doing a lot of research on the family. He is very democratic in the way he will take information from anyone who has a tip. But he managed to define the fissures in the family, which were many. And so when he finally made the offer—and the important thing about the offer is that it was $60 per share and was far higher than anyone else was willing to go—it was almost a foregone conclusion that they were going to sell.
So this offer comes, April of ’07. You were at the Journal at the time. What was the reaction in the newsroom?
As much as people anticipated and knew that Murdoch was very interested in buying the Journal, when the offer actually came in people were pretty surprised and shocked by it. The reaction in the family and in management was just completely a scramble to figure out exactly how they were going to handle things. The Bancrofts had no clear leader. They were not united by any matriarch or patriarch in the family. And these old divisions that had been present for years and years came to the fore and it made it impossible for them to actually all face in the same direction and agree on a certain strategy.
The Bancrofts didn’t want to be seen as simply selling out to Murdoch for whatever price he was willing to pay. So in addition to price, they tried to negotiate some protections for the newsroom. How did that pan out?
They essentially told Murdoch they were willing to sell because they needed and wanted the money, but that they wanted the Journal to remain protected. So they came up with an editorial independence agreement that is similar in some ways to what Murdoch agreed to when he bought the Times of London 20-some years ago. It was supposed to protect the three top editors of the Journal from commercial interference from the owner. Murdoch was pretty offended by that—just the overall notion that he was unfit to own this newspaper. And of course four months after he took the paper over he forced the top editor of the newsroom to resign. And now he’s making all the kinds of changes that he always wanted to make to the newspaper with his new editor, Robert Thomson.
How are the Bancroft family members coping with their postownership lives?
The ones that I’ve spoken to recently are financially very happy that they sold the newspaper, because even though the newspaper industry was struggling in 2007, it’s nothing compared to what happened to it during the financial crisis when all of the advertising really, really dried up. And some of them think that the newspaper is better than it ever was under their own ownership, because Murdoch’s been able to add news pages and he’s investing in the newspaper.
And does the Journal make money now?
My reporting showed that in the first fiscal year under News Corp.’s ownership, it lost money. News Corp. is saying that it’s on track to be profitable for 2010. When you’re a division of a larger conglomerate, there’s a lot of leeway in terms of the way you allocate expenses that can have a major, major effect on whether or not you’re profitable.
As you show in the book, Murdoch has a sort of obsession with The New York Times. And literally within the past couple weeks, has assaulted them frontally with this new metro section. Was that in the works from the beginning?
No, but his motivation was always to knock The New York Times off of its perch. One of the things that Murdoch is very, very good at as a businessman is to sort of spot opportunities. So he looks around and he sees all of these New York businesses that have no where else really to advertise, except for The New York Times if they’re looking for that particular type of audience. He’s been able to offer enormous discounts on the advertising to local New York companies. What he also wants to do is control the conversation that The New York Times has typically controlled in arts and culture. And I think that The Wall Street Journal’s embrace of more general news and arts and cultural coverage is really his effort to no longer cede ground to the Times.
With Emily James