Can anything stop the rise of Rupert?

Rupert Murdoch is courting Tony Blair, but the media magnate has more power than the politician, says Mathew Horsman; Is it right that culture is uprooted, uncoupled from the community and reinterpreted by the corporation?

When Tony Blair rose to address the News Corporation conference early this morning in Hayman, off the coast of Australia, he shared the podium with a man more powerful than he is. Mr Blair may be but a step away from Downing Street, but Rupert Murdoch is on his way to becoming the world's leading media mogul: a film-maker, a television broadcaster, and a newspaper and book publisher, not only through the traditional routes but along the information superhighway as well.

He wields a different kind of power from politicians, for his is the power of communications technology and the marketplace, a combination wholly characteristic of the Nineties. The reason lies in the very nature of Mr Murdoch's business. Information is fast becoming the most significant economic sector globally: trade in goods and services is giving way to trade in information as the driving force of growth, and it is the creators, packagers and distributors of "knowledge-based" goods that stand poised to reap huge rewards.

They wield a power, moreover, that does not easily yield to government action. At the turn of the century, anti-trust legislation could work in one country: national governments could regulate national economies. This no longer applies. Companies in the information sector, such as News Corporation, are carving out an economic space that transcends borders. Like other multinational companies, their reference points are not nation- state governments, national economies, discrete national markets, but rather a space where the currency is information and the marketplace is the whole world.

Governments have connived to make Mr Murdoch's rise possible, even if it is communications technology that has fuelled his company's growth. Liberalisation of markets on a global scale, and the political revolutions of Thatcherism and Reaganism, removed impediments such as powerful labour unions and competition from state-owned corporations. Mr Murdoch knows that it now makes less difference to his plans whether Labour forms the next government, just as having Bill Clinton in the White House rather than George Bush or Ronald Reagan has done little to stymie the expansion of multinational companies. The Department of Justice in the US might be able to stop Microsoft from buying a software house, as it managed to do earlier this year. But this is simply a nuisance, rather than a fundamental obstacle.

It is no great surprise that Mr Blair accepted Mr Murdoch's invitation. News Corporation's huge stable of media interests, particularly its five national titles in Britain, give it considerable influence. And while the Sun may not really be able to make prime ministers, it can certainly influence the outcome of elections. But does Mr Murdoch need Mr Blair?

He would certainly have been listening with interest as Mr Blair spelt out the principles underlying Labour's policy on the information superhighway, which will be launched today: diversity of content; plurality of ownership; regional strength; quality of programme-making; and the avoidance of excessive dominance by any one company. Mr Blair calls for choice and diversity, an open and competitive media market, adding: "though the special place that the media has in the dissemination of information means there is a need, of course, for a proper framework of rules".

In other words, governments may yet cause trouble for media moguls such as Mr Murdoch. In many jurisdictions, the laisser-faire ethos that prevailed in the Eighties is giving way to a renewed emphasis on competition policy. Proposed media cross-ownership rules in the UK, for example, directly target his huge empire, threatening to cap his growth.

Mr Murdoch recently had a scare in the US, where for a while it looked as if the Federal Communications Commission might force him to restructure his extensive American media holdings. The European Commission is working on new proposals to regulate the market for media and information, already expressing concern about the dominance of very large media companies.

The sheer size of Mr Murdoch's holdings makes many distinctly uncomfortable. In an age of electronic communication, is it right that so much information is derived from a single source, or that culture is uprooted, uncoupled from the community and reinterpreted by the corporation?

The new challenges that Mr Murdoch faces go further than shifting political ideology, however: creating a true, global information highway will require that new markets be opened, and while technology and corporate power togetherforce the pace of change, only governments can turn the key.

For an American citizen like Mr Murdoch, with an Australian-based company, it makes sense, therefore, to forge close links with politicians in his overseas markets. Britain is particularly important, as it provides a counter-balance to more communitarian and corporatist impulses evident elsewhere in Europe. Australia is still an important source of income for News Corporation, while Asia may be the biggest prize of all. Little surprise, then, to see Mr Blair joined in Hayman by Paul Keating, the oddly pro-Murdoch Labor Prime Minister of Australia, and Malaysia's Deputy Prime Minister, Datuk Seri Anwar.

Mr Murdoch faces intense competition from other media companies, also eager to build a business on the electronic highway. He may have some advantages over them: size, reach and the ability to move quickly, unencumbered by slow-moving boards of directors. But competitors such as Time Warner, Viacom and Ted Turner's Cable News Network (CNN) are already battling head-to-head with Mr Murdoch in Asia, Europe and the US.

As always, he will look to secure advantage in the ways he knows best. In the past, these have included pushing at the limits of regulation, negotiating with governments where necessary, and taking big risks where the returns look promising.

During his last big expansion in the late Eighties and early Nineties, Mr Murdoch had the environment he needed: easy-going regulators in the US and the UK particularly; friends at Number 10 and the White House; a hopelessly fragmented cable industry and a disorganised commercial television sector in the UK, slow to invest in satellite broadcasting; and a sleepy network system in the US, cash-rich but complacent.

Armed with such advantages, he built the UK's only successful pay-TV system, Sky, and did what no one in the US thought even remotely possible: build a fourth national network, on the back of six Fox TV stations. He did so without losing control of his other media assets, including five national titles in the UK, a chain of newspapers in the US and Australia, and the world-class publisher HarperCollins.

Mr Murdoch is now in heady company indeed. Only Ted Turner, founder of CNN, and Sumner Redstone, the man who built the giant media company Viacom out of a family chain of cinemas, even come close as bona fide world media moguls. News Corporation now vies with widely held and well-heeled corporate giants such as Time Warner in reach and scope.

Little is missing in this grand scheme. Purists might suggest that Mr Murdoch needs a record label to complete the picture, and he could do with more television too. The US and the UK look well-developed, and he is ahead of his competitors in the all-important Asian market, with a controlling stake in Star TV. But his continental European presence is light - and he appears unlikely to win control of Silvio Berlusconi's Italian TV stations, now the subject of negotiations.

The key to Mr Murdoch's fortunes will be "convergence", the buzzword of the Nineties. Convergence means the coming together of telecoms and cable, of supply and distribution. The characteristics of the information revolution are well understood by Mr Murdoch. The key supplier for the electronic highway is Hollywood, where he owns the film studio Twentieth Century-Fox. The most important mass distribution system today is television - terrestrial, satellite and cable. Here, too, he is richly endowed. The likely networks of tomorrow combine broadcasting and narrowcasting, involving satellite, fibre-optic cable and telecoms. With his many partners, Mr Murdoch is positioning himself to be ready for these next stages of the revolution as well.

Mr Murdoch will one day be able to provide consumers with a "black box" providing access to films, TV, online shopping and banking. He will control the supply and distribution of information and entertainment: making films and TV programmes, broadcasting them, selling CD-roms based on characters and themes in the Murdoch library - even, eventually, making the whole catalogue available online. This is not a long way off: through his Internet access service, Delphi, as well as joint ventures with Telstra, the Australian telecoms company, and his newest partner, MCI, the second-largest long- distance phone operator in the US, he is already putting the pieces in place.

When it comes to the idiom of the electronic highway, Mr Murdoch has distinct advantages. Computers, television, CD-roms and electronic games are predominantly English-language vehicles. Even where the language is different, relatively simple fine-tuning for local markets is easy. The very nature of global communications - instantaneous and extensive - favours the emergence of a monolithic cultural code. Local variations of course there will be, as Mr Murdoch learned in India, when he was forced to broadcast in Hindi in the face of home-language competition from local broadcasters. But the idiom of the highway, the grammar if not the precise words, is more Mr Murdoch's than the consumers' in China, Chile or Bangladesh.

Other companies have learnt a lesson from Mr Murdoch, and many are following in his path. Global alliances between communications and entertainment companies have proliferated in recent years, particularly involving US corporations. A taste of the competition yet to be unleashed on Mr Murdoch came earlier this year, with the announcement that Microsoft had signed a joint-venture deal with DreamWorks, the new entertainment venture grouping the Hollywood director Steven Spielberg, the billionaire record producer David Geffen and the former Disney film chief Jeffrey Katzenberg.

In the UK, the biggest challenge would come from a united cable industry, equipped with a state-of-the-art fibre-optic network, ready to compete head-on in the provision of online services. On present form, however, the cable industry is so hopelessly fractured and disorganised that a common front is unlikely to emerge. Cable operators should be pooling resources, buying sources of programmes, and developing their own encryption and subscription management systems. Instead, they expend more energy complaining about Mr Murdoch's "abuse of monopoly position" and his dominance of supply and distribution channels for pay-TV.

The most the cable industry can expect from regulators is some slight pruning of Mr Murdoch's freedom to dominate non-terrestrial television. No serious attempt will be made to dismantle his empire.

But if the cable companies do not challenge him, other multinational players may. Candidates include Pearson, the media giant, which has spent heavily developing its television production arm and expanding into multimedia. It lacks a link with a telecommunications company, however, leaving it scrambling behind News Corporation in the race to develop commercially viable online services such as movies on demand or home shopping.

Outside the UK, Mr Murdoch faces more serious competition. In the key Asian markets, several large integrated media companies are already fighting it out, including CNN, Viacom and Time Warner. Smaller local competitors have scored points by providing services in the local language, although Mr Murdoch has been quick to respond by localising his own products.

To win, Mr Murdoch will need three things. First, a steady supply of programming and information that appeals to consumers: "content is king", runs the new orthodoxy. Here, News Corporation is particularly rich, able to create films, TV programmes, newspapers, CD-roms and games. Second, he will need to extend his distribution channels around the world, either through satellite, cable or telecoms networks. He already dominates the Astra satellite, and has contracted to take additional capacity in order to launch digital TV by the end of 1996. With MCI, he is developing interactive services such as on-demand movies, home banking and online shopping.

Finally, he will need a regulatory environment conducive to expansion, not only in countries such as Britain, apparently firmly committed to deregulation and liberalisation in the communications sector, but on the continent and in the more difficult markets of South-east Asia and China.

It is here that Mr Murdoch's crucial challenge is political, and this is the chief reason for his wooing of politicians, in Hayman and elsewhere. He has distinct advantages, however, in any political negotiation. Governments may have the ability to deny him local markets, impose conditions for access or force him to alter his business, but he wields the far greater power. If Mr Blair gains Number 10, he wins Britain; Mr Murdoch's remit extends far beyond these shores.