&c1=usa&c2=(none)&c3=The+Guardian&c4=Media,Press+and+publishing,Business&c5=&c6=Neil+Chenoweth&c7=2001_07_05){kind=small}
- guardian.co.uk, Thursday July 5 2001 07.38 BST
The decline of a dynasty can take half a century. Or it can be over in a moment. History will probably show the Murdoch family succession ended in an awkward meeting on Monday 23 April in the New York Post's newsroom in Manhattan, just before 5pm.
For most of the journalists that crowded around the publisher, Ken Chandler, the news was shocking enough. But it was a five-minute wonder - another Murdoch editor had bitten the dust.
The Post's Xana Antunes (pronounced Sharna), a former protégé of the Sun's David Yelland, had been replaced by Col Allan, the editor of Rupert Murdoch's Daily Telegraph in Sydney.
But this was no ordinary sacking. In the last week of April, the future of Rupert Murdoch's media empire was in the balance. Thirteen months of delicate negotiations with General Motors to merge Murdoch's satellite operation, Sky Global Networks, with GM's Hughes Electronics had stalled, and investors were dumping News Corp stock.
Meanwhile in Australia, telephone company One.Tel, where Mr Murdoch's son Lachlan was a director, was on the brink of collapse. Lachlan's £200m investment would be a total loss. It was a mercy that One.Tel had failed in its £2.1bn bid, backed by News Corp, for a British 3G spectrum licence a year before, or the damage to News Corp would have been catastrophic.
One.Tel was going to run out of money within days, although Lachlan didn't know this at the time. There were more personal problems looming. Rupert Murdoch was faced with a brutal decision about the family succession that he had spent the last decade fashioning, the delicate power balance that would deliver control of News Corp on his death to one of his children - Lachlan, James and Elisabeth Murdoch, Prudence McLeod, and the new baby that Murdoch and his third wife, Wendi Deng, were expecting.
Legacy or destiny
Rupert Murdoch was facing a tremendous opportunity. The General Motors deal offered the global power base that he had been striving towards for half a century. It involved combining his Sky Global satellite operation with Hughes's subsidiary, DirecTV, the largest US satellite broadcaster.
With DirecTV Rupert Murdoch would control his own global highway, a patchwork web of interactive satellite broadcasters and media operations worth £70bn that stretched across North and South America, Britain, Germany, Italy, through the Middle East and across India, China and Japan, down to Australia and New Zealand.
The personal cost to Rupert Murdoch in pursuing his dream was more difficult to quantify, however.
If he wanted to make the deal work, Mr Murdoch knew he would need to make concessions to General Motors. He knew that although he would control the mega-media company that would emerge, he probably would not be able to pass control to his children.
General Motors was insisting that if Mr Murdoch wanted to merge Sky Global with Hughes and DirecTV, he would have to cut News Corp's share of the venture from 35% to 30%.
With powerful fellow shareholders such as General Motors, Bill Gates and John Malone, this would be enough to ensure Mr Murdoch ran the show. But it would not be enough to ensure his children would follow him. If Mr Murdoch wanted DirecTV, he would probably have to jettison the succession - to accept that his children would inherit the wealth without the power.
They would still be fabulously wealthy, influential and connected beyond any mortal's dreams, but running News Corp would amount to little more than overseeing a media investment holding company, with a few newspapers on the side. The engine rooms of the empire, Sky Global and Fox Entertainment, would be in other hands.
So Mr Murdoch's choice on April 23 was between legacy and destiny. Should he limit his prospects for the sake of his children, or should he seize the day?
Mr Murdoch had turned 70 six weeks before. He and Wendi had celebrated quietly with a party in their Manhattan loft; and less quietly a week later with Lachlan at a $250-a-head charity function by the Robin Hood Foundation at Irving Plaza, with the Red Hot Chilli Peppers at maximum decibels.
But Mr Murdoch's mind was never far from the business, from the day to day working of the media empire he had forged. Through March and early April the DirecTV problem nagged at him.
The talks with GM had become a nightmare. If there is a modern vision of purgatory, it must be spending eternity negotiating a media deal with an American carmaker.
Global reach
But the transaction would give Mr Murdoch a global reach and power that even AOL Time Warner could not match. The worldwide platform of Sky Global and DirecTV would ensure that, whichever way the competing technologies in the information revolution led, Mr Murdoch would be a player. Perhaps the player.
It was the ultimate new-media deal. Mr Murdoch had always said News Corp was a reflection of his character, his values. Sky Global DirecTV offered an opportunity to write his vision of the world across a grand stage.
So it was ironic that the outcome of this new-media deal would be marked on April 23 by events in the heartland of old media, a down-and-dirty New York tabloid.
Later in the evening of April 23, the still shocked Post journalists regrouped across the street at Lanyon's Bar to try to make sense of their change in fortunes.
In the 1970s and 1980s, the Post had been famous for headlines such as "Headless Body in Topless Bar", and "Teen Gulps Gas - Explodes". But in the 1990s the Post under Mr Yelland and more recently Ms Antunes had gone upmarket, with a sophisticated media and business coverage.
The Post staff already knew that their new editor, Col Allan, was nicknamed Col Pot. Crikey.com.au, a website run by a former Daily Telegraph chief of staff, Stephen Mayne, was full of stories about Mr Allan, beginning with his alleged occasional practice of using the washbasin that was in a cupboard in his office as a urinal during news conferences.
Reverting to the past
Mr Allan was a good tabloid editor, probably a brilliant one, but the stories about him tended to focus on his exploits out of the office. New York's Daily News would report that his nickname during an earlier stint in New York had been "canvas back" for falling over in bar room fights.
It seemed uncomfortably like a reversion to the Post's downmarket past.
What was Rupert Murdoch thinking, the Post journalists asked. In fact, where was Rupert Murdoch?
Rupert Murdoch was in Detroit. It was the drop-dead date for the General Motors deal. That morning he had put a final presentation to the GM board subcommittee handling the Hughes sale.
Afterwards the Hughes chairman, Michael Smith, had put a counter-presentation to argue that Hughes should be spun off as an independent company.
Mr Murdoch's presentation that day was critical. He had brought Microsoft's chief executive, Steve Ballmer, along with him to show that Microsoft was behind his bid, and would not be supporting Mr Smith's counter-proposal.
By doing this, Mr Murdoch took Michael Smith out. Without Microsoft, Mr Smith's spin-off plan would not work.
Mr Murdoch indicated that he was at last prepared to be flexible on the parts of the deal that troubled General Motors. The loss-making Stream pay-tv operation in Italy would be taken out of Sky Global, and Star TV would also go if GM demanded it. Most of all, Mr Murdoch would drop his shareholding in the new entity from 35% to 30%.
It seemed he would concede pretty much anything to make this deal happen. That meant the succession was in doubt.
The future was already uncertain for the Murdoch heirs.
"Lachlan is in a very difficult situation," a former News Corp director said in March. "Rupert is going to go on working forever. Lachlan could find himself 45 years of age, then suddenly miss the opportunity to run News."
In his determination to make the DirecTV deal happen, Mr Murdoch last year swung a deal over TV Guide Inc with his old friend and rival John Malone of Liberty Media. Mr Malone had ended up with 18% of News Corp. He now owned almost as much of News Corp as the Murdochs.
Even though Mr Malone had only non-voting shares, this meant that if Mr Murdoch died, his children would face an uphill battle against a much more experienced and skilled opponent if Mr Malone opposed their move to succeed their father at the helm of News Corp.
Any prospect that the Murdoch children would control Sky Global DirecTV was even more remote. That was what Mr Murdoch's trip to Detroit on March 23 meant. He had made his choice.
Lachlan's move
This throws an interesting light on the decision to dump the New York Post editor, Xana Antunes.
Last September, in a bid to avert growing speculation about Mr Malone's future role in News Corp, Mr Murdoch had appointed Lachlan deputy chief operating officer of News Corp. Despite this, since Lachlan's elevation to New York in 1999 after five years in Australia, his range of responsibilities had been limited. His most visible responsibility was the Post.
In Sydney, Lachlan had worked closely with Col Allan for years. The decision to replace Ms Antunes with Col Pot could only have come from him.
This is what makes the meeting in the Post newsroom on the afternoon of April 23 so poignant. Lachlan was asserting his authority and independence, he was making a big call in the small part of the empire that he controlled.
At the same time, his father was in Detroit, securing the deal that probably limits any chance the Murdoch heirs have of running the whole show. In the most cynical view, calling the change at the Post was a consolation prize.
Perhaps most remarkably, no one would believe that the Post decision was Lachlan's. Story after story would note Lachlan's growing involvement with the paper, but any decision at News Corp had only ever been seen to be Rupert's.
Since May 1, when the GM and Hughes board tentatively approved the terms of the new deal with News Corp, it has been agonising to watch negotiations dawdle on. At any time, a final agreement seems days away, yet it is still not finalised.
Charlie Ergen at Echostar has made a spirited attempt to derail Mr Murdoch's deal with his own credible bid for DirecTV. "Murdoch has always underestimated Ergen," says a former News Corp director.
Where does Mr Murdoch go from here? He still seems odds-on to win the tussle with Mr Ergen for DirecTV. At some point even General Motors must be able to make up its mind.
When he turned 70, Mr Murdoch lamented the limited number of working hours he had left to him, though the generous figures he cited suggested he had arranged to die at the age of 135. In the meantime, he is awaiting the arrival of his fifth child. Reports from New York say if the child is a boy it will be named Keith. If it is a girl, it will be called Xana. Mr Murdoch might have dropped the editor, but ever economical, he kept the name.
• Neil Chenoweth's book, Virtual Murdoch, is published today by Secker & Warburg. To order a copy for £15.99 plus p&p (usually £18.99), call 0870 066 7979 or send your order with a UK cheque, payable to the Guardian, to FREEPOST Books, LON3590, London, W3 6BR. Delivery is £1.99 1st Class, 99p for 2nd
