Media: Murdoch means business in Europe

Rupert Murdoch's newspapers may be wildly anti-Europe, but the man himself has a different agenda.

Last week's noisy blast by The Sun at the single European currency was widely and wrongly interpreted as a declaration by Rupert Murdoch that he would "fight, fight, fight" (as The Sun put it) for the pound. It was an easy mistake to make, but it underestimates Mr Murdoch, who has another agenda, and attributes rather too much importance to a publicity- grabbing stunt by a newly appointed editor making a name for himself.

Murdoch's attitude to Europe is more complex than acknowledged, certainly by The Sun. Recently, at a meeting of News Corporation executives, various of Murdoch's factotums were reciting the standard arguments against the euro, when their boss interrupted to demand: "But what if it works?" It is a good question, and one that his British newspapers have been slow to grasp. Simply by asking it, Murdoch aligns himself more closely than not with Tony Blair, whose own attitude has been to see if it works and then, expecting that it will, to stage a referendum and go in. Some of Murdoch's editors, particularly Peter Stothard, the editor of the viscerally eurosceptic Times, and David Yelland, in charge at the xenophobic Sun, are in danger of finding themselves wrong-footed.

With Murdoch, the key is always to watch what he does more than what he (or The Sun) necessarily says. Murdoch is a man in a hurry. He wants to get his company into Euroland and knows that, if he fails, he will have failed in his ambition to create a truly global media colossus. In just over six months, all of the marks, francs, lire, pesetas, guilders, escudos and crowns will be stirred together in the single currency pot and Euroland will become the second largest economy in the world. On current form it will be virtually a Murdoch-free zone.

Murdoch's competitors intend Euroland to be a platform for huge digital media businesses. Those who operate inside the single currency zone will benefit from access to the world's second largest capital market, and one that shows signs of growing fast. To be excluded from this euro action will, for Murdoch, be humiliating.

Deals like last week's massive tie-up between telephone giant AT&T and America's biggest cable TV company TCI have the potential to make News Corporation look distinctly second-tier. If News Corporation is to compete, it will have to grow and, with the company at the limit of permitted media ownership in Britain and Australia, and no particular place to go in America, it is suddenly all aboard Murdoch's Euroland express.

Murdoch is currently discussing deals in Germany, Spain and Italy, exploring television, telecommunications and publishing. But he is finding it heavy going. Years of abuse by The Sun have not gone unnoticed, and headlines such as "Hop off you Frogs" and "Wapping task force to teach Krauts holiday manners" have done nothing to endear Mr Murdoch to the natives.

After the fall of the Berlin Wall, Murdoch lost a bundle in a joint venture with Burda Verlag to establish a new tabloid newspaper in eastern Germany. The title, Super Zeitung, was coarse beyond belief and quickly earned the hostility of Chancellor Helmut Kohl, who accused it of being "a dirty paper" that was stirring up animosities between eastern and western Germans. Advertisers boycotted the paper, which ultimately closed. Kohl has remained viscerally hostile to Murdoch ever since, reflecting a common attitude among the German elite.

In France, Murdoch is loathed by much of the media and political classes, who see him as an emblematic Anglo-Saxon barbarian. In Italy, Murdoch is a bogeyman to the Italian PDS party (the former Communists) which would not matter except they are now members of the coalition government. All this would suggest to Murdoch that if he wants to get ahead, he is going to have to display a more co-operative attitude and make a better effort to win friends and influence people. In this, Blair has become a major ally.

Last week, even as The Sun was preparing to publish its hysterical exegesis on behalf of the pound, Alastair Campbell, the Number 10 press secretary, was telling a House of Commons committee that it was rubbish to imagine that Blair had discussed Mr Murdoch's affairs with the Italian prime minister. It is to be noted that Mr Campbell's denials were drawn very narrowly and tightly, and that he declined to reveal what had in fact been discussed.

However, those claiming to be privy to the content of the actual conversation tell another story. In both Rome and London it is asserted that the telephone call did take place, it having been arranged in advance that Prodi (for scheduling reasons) would initiate the call to Blair. Alastair Campbell is perhaps technically right: at no time did Mr Blair intercede as such on behalf of Mr Murdoch. He merely asked Prodi a question. The question was seemingly innocuous. It was to inquire what would be the attitude of the Italian government if BSkyB, the British-registered and licensed company in which Mr Murdoch's interest is 40 per cent, were to attempt to take over Mediaset, the largest Italian commercial broadcasting company, controlled by the former Italian prime minister and media tycoon, Silvio Berlusconi.

Prodi replied that, as far as he was concerned, there would be no problem, but that his "friends" (i.e., the former Communists who make up a vital part of his coalition's parliamentary majority) were unlikely to be sanguine. This message was subsequently passed back to Dr Irwin Stelzer, the American economist who handles News Corporation's day-to-day liaison with Downing Street.

(It is worth noting the role here played by BSkyB, as a Trojan Horse for Murdoch's intended entry into Euroland. Crucially, BSkyB is a European company under legal definitions. The majority of its shares are owned by Europeans; its chairman is Jerome Seydoux, a prominent French businessman; it is regulated and licensed by the Independent Television Commission, and it is established as a company in Britain, subject to EU competition and media law. The fact that Mark Booth, BSkyB's chief executive, in effect reports directly to Murdoch, a naturalised US citizen, and that the company is for all intents and purposes run as a subsidiary of News Corporation, is immaterial.)

If he looks thwarted for now in Italy, in Germany Murdoch is stepping up his efforts. The media and political scenes in Germany are currently destabilised. Germany is therefore pregnant with possibilities for Murdoch. The possible ejection from government of Kohl later this year will remove an old adversary; Murdoch knows how to get along with ideology-free modernist social democrats like Kohl's SDP opponent Gerhard Schroeder.

Murdoch already has a 49 per cent stake in Vox, one of the least successful of the German satellite and cable stations, but hopes to turn it into a German version of Fox and is trying to buy a stake from Canal Plus, the French pay-TV operator, to give him control. The collapse of the digital joint venture between Bertelsmann and the troubled Munich media owner Leo Kirsch, who is now running close to the end of his credit lines, is also an opening for Murdoch. Finally, there must always remain the possibility of a rapprochement between Murdoch and Gus Fischer, the former chief operating officer of News Corporation, who is now chief executive of Axel Springer Verlag, publisher of Germany's leading tabloid, Bild Zeitung. Any of these deals coming through will see News Corporation with a euro-denominated income stream. What price then "fight, fight, fight"?

Murdoch knows that persistence is a crucial quality in business. His recent speech at the Birmingham media summit in which he spoke warmly of Europe was a clue to his ambitions.

Tony Blair, whose links with Murdoch are much closer than last week's Sun would have suggested, is the politician who can help grease the skids, should attempts be launched to keep Murdoch or BSkyB out of Europe. In return for this, Blair is likely one day to demand, and get, the support of The Sun (or at least its acquiescence) in Britain joining the single currency. That's why Blair seemed unflustered last week at the blast from The Sun, Murdoch disinterested, and why David Yelland may have protested too much.

it's all work

and no play

at news corp

THE THOUGHT of meeting Rupert Murdoch by a swimming pool when he is clad in only a T-shirt and shorts is enough to put anyone off their holiday, especially his employees. So they will be glad that the media mogul's next get-together for his senior management is to be at an Idaho ski resort next month.

Mr Murdoch made his poolside appearance at the Hayman Island meeting that was addressed by Tony Blair in 1996. Next month, Gordon Brown, the Chancellor of the Exchequer, will address the News Corporation senior hierarchy, sans trunks.

"There was a surprising amount of relaxation time at the Hayman Island meeting," says one who was there.

But getting together a few hundred of the most ambitious men and women in the world of media means that even relaxation at a News Corp resort never stops being competitive.

"We were all selected on the basis that we had brains and could impress," says a former senior executive of a Murdoch paper. "And that continues after hours.

"At the workshops and meetings everyone has to have what they called an `SBI' or single big idea. It is very definitely a beauty contest, with everyone vying to be seen and heard by the very senior advisors to Murdoch and, of course, by him himself."

The Labour Party obviously believes that the News Corp gathering is important but others are not so sure.

The formal reason for the gatherings is that Murdoch and his advisors want to learn from their employees: "Lachlan Murdoch got up and said all this American business school stuff about listening to employees last time," says one of Murdoch's ex-executives. "Then Sam Chisholm [former BSkyB chief executive] stood up and basically said `that's a load of cobblers, we built this company by being good and smashing the opposition'. It was a big put-down for the heir apparent."

Many inside News Corp feel it has to put on a show of listening to its managers, so it doesn't appear totally ruled from the centre: "But that is exactly how it is ruled and always will be, no matter where they take them."