The Telecom Travelogues, Part I: News Corporation in Flames, Media Moguls on Trial

I’ve been gone for two the past two weeks. Traipsing the streets, alleys and waterways of Istanbul with Kristina, my wife.

We conferenced, we hung-out with friends, and we partied at a swank event held for IAMCR conference goers at the Archeology Musuem in the heart of the old part of Istanbul, Sultanamet.

We gazed about the Hagia Sofia, the world-renowned Christian Church constructed in the 5th century (CE) and subsequently remodeled into a mosque after the Ottoman Empire conquered the city in 1453. The Topaki Palace was a sensorial blend of opulence, barbarism, and glories of a cosmopolitan empire whose time has passed.

Perched atop the slopes of the Bosphorous fjord that separates Europe from Asia, we could see a wide swath of the landscape. And from where I stood, the following five telecom-media-Internet (TMI)-related issues kept coming into view:

1. The News of the World telephone hacking scandal.
2. The deal between Hollywood and ISPs providers in the United States — Verizon, AT&T, Comcast, Time Warner, etc. – that will see the latter take on greater gate-keeper roles vis-a-vis online content.
3. The export of bandwidth caps and the pay-per Internet model to the U.S. from Canada, as Time Warner and Verizon get set to follow the adoption of such measures by Comcast and AT&T (in 2008 and in May 2011, respectively).
4. The outbreak of information guerilla warfare between Wikileaks, Anonymous, LulzSec, and so forth against Paypal, Visa, Disney, News Corp, Lockheed Martin, Arizona State Police because they see all of these entities as links in a much bigger cyber-military industrial chain (also see James Der Derian’s Virtuous War for one of the best scholarly treatments of this issue).
5. The relationship between rapid TMI expansion and economic development in Turkey versus the reality of a strong state with a solid grip on Internet censorship and control, a system of moral and political regulation that the LGBTT community in the country expects will hit them especially hard.

I will write about these things in the next few days. The first post, though, is on the strange illusion that the News of the World telephone hacking scandal might somehow drive the final nail in the coffin for the much reviled, and seldom revered, Media Mogul.

First up, the dominant owners and hands-on controllers at News Corp, the world’s third largest media conglomerate: Rupert and James Murdoch. The News of the World telephone hacking scandal that has engulfed News Corp has already wiped out twenty percent of the media behemoth’s market capitalization in two weeks, roughly $8 billion (see here).  This is indeed a steep cost for transgressing the boundaries of law, good taste and solid journalism.

The Murdoch Family wield controls in News Corp despite the modest scale of their economic ownership stake.  While the family only owns about 12.5 percent of the capital stock of the company, it controls the company through voting shares and via positions in the executive and on the company’s board of directors. In narrow terms, the family’s coffers have definitely taken a hit.

News Corps’ telephone hacking scandal threatens bigger damage to the media conglomerate. Its contentious attempt to gain the remaining sixty percent ownership stake in BSkyB that it does not yet control has been suspended. The News of the World (NOTW) — a hundred and sixty some odd year old popular low brow paper — has been shuttered. The NOTW editor-in-chief (Rebecca Brooke), a sub-editor (Clive Goodman), Prime Minister Cameron’s director of communication and ex-editor at the NWOT (Andy Coulson) and two high ranking police officials have all resigned and/or been arrested (see here, here and here for chronologies and over-views).

This was not a one off deal. It has been going on for years, with episodic attention to this aspect of the sordid underbelly of journalism in the UK spurred on at the instigation of journalist Nick Davis and Guardian newspaper. Now, the subject has has been dragged out of the closets and once again been put into the spotlight. Heads may yet role.

What is interesting, however, is the extent to which observers are already extrapolating from the troubles of the Murdochs to the fate of media moguls as a whole. Indeed, many are predicting the imminent demise of the media mogul, the widely reviled character of the 19th and 20th centuries ‘industrial media age’, as if somehow the travails of News Corp and Mssrs. Murdoch — Rupert and James — are an index of what will happen to the media industries as a whole, and to media barons specifically.

The Economist seems to hope for the demise of the media mogul writ large should the Murdochs fall. It worries, however, that the world will be a worse off place without News Corp. The giant global media conglomerate with $40 billion plus per annum revenues and a vast stable of globe straddling entities — 20th Century Fox Films, Fox News, BSkyB, MySpace, Wall Street Journal, the Times, etc — plays an valuable role in the media and entertainment world, and in journalism and politics, too. It’s loss would impoverish us all.

I doubt that any such thing will come to pass. However, I do agree with Jeff Jarvis, albeit for entirely different reasons that will become evident below, that should this somehow turn out to be the beginning of the end for News Corp, such an outcome is not to be lamented.

Jeff Jarvis agrees with The Economist that the media mogul as a ‘type’ is on its last legs. He has some great stories from a long career that basically boils down to the idea that, individually, media barons are quirky and drawn to power and like to use it for personal gain and on a whim. Some moguls are pleasant and unobtrusive (he lists Rupert Murdoch as one of these types, based on his own personal experience); most are not and come across as tiny tyrants. All, however, Jarvis declares, are doomed to die, slaughtered by ineptitude and the Internet.

I first heard this chain of reasoning that stretches from the phone hacking scandal and News Corps woes, on the one side, to predictions about the imminent death of the mogul, on the other, last week when the New York NPR station WYNC contacted me in Istanbul to do an interview. The topic? The role of the media baron in American media history and “whether Rupert Murdoch is one of the last”.

The story was temporarily put on the shelf, for one reason or other. In retrospect, it is clear that the NPR folks were on to something. I hope they’ll pick it up again and run with it.

My answer, though, from the get-go is no, Murdoch is not the last of a dying breed. The future of the media mogul rests on much bigger forces in finance, markets and technology than the hacking scandal. The media mogul type, as I will argue, almost by design, gives rise to intrigue and scandals like those now afflicting the UK press. That is the ‘causal chain’ in such events, rather than the reverse one assumed by the Economist, Jarvis, etc., where scandal takes down moguls.

These events will undoubtedly cause NewsCorp to flounder, as I have already clearly indicated above, and maybe some heads will roll. But I do not believe for a moment that the phone hacking scandal will, by some lengthy chain of reasoning, lead to the death of the media baron.

To be sure, the media baron no long cuts as an imposing figure as Jay Gould, William Randolf Hearst or Lord Beaverbrook did in the 19th and early 20th centuries when the ‘industrial media age’ was taking root.  As Eli Noam (2009) indicates in his authoritative Media Ownership and Concentration in America, the number of owner-controlled media firms in the U.S. fell from 35 percent to just 20 percent between 1984 and 2005 (p. 6).

So maybe the Murdochs are hang-overs from a time now slipping irretrievably into the past?

I don’t think so. They may have declined overall, but not as much as Noam and others suggest. In fact, far from being a dying breed, the mogul type is actually quite prominent right across the TMI industries, and is in the process of being retrofitted for the digitally-networked media age.

Three of the top ten firms in the U.S., the largest and most developed medie economy in the world, are owner-controlled: Comcast (Roberts), News Corp (the Murdochs), Viacom-CBS (Redstone). Steve Jobs also holds a significant, but not controlling, stake in Disney. Other significant players still stand out as well, notably the New York Times (the Ochs family) and the Washington Post.

In Canada, the mogul cuts an even more imposing figure, with 7 out of the 10 biggest mediacos being owner-controlled (eg. Shaw, Rogers, QMI, Astral, Thomson-Reuters, Cogeco, Toronto Star). A similar scene prevails in Latin America, Russia and some parts of Europe too.

Of the top ten global media players, five are owner-controlled — Comcast (the Roberts family), News Corp (the Murdoch family), Viacom-CBC (Redstone family), Bertlesmann (remnants of the Bertlesmann and Mohn families) and Thomson Reuters (the Thompson family).

The media baron is not just a hold-over from the industrial media age, either, but a prominent feature among seven of the leading ten Internet firms as well: Apple (Jobs), Facebook (Zuckerberg), Google (Page, Brin and Schmitt), Microsoft (Gates and Ballmer), Yahoo! (Yang), IAC (Diller and Malone) and CBS (Redstone). In sum, new technologies and the Internet firms have not whisked away the owner-controlled media organization.

News Corps’ organizational structure thus is a mirror of this broader phenomenon and an index of something unique and deeply intriguing about the media, even in the 21st century and at a time when Google, Apple, Facebook and so forth are moving ever closer to centre stage. News Corp embodies the resilience of the media mogul form initially forged in the 19th century, and provides us with an opportunity to understand just how this seemingly anachronistic form is being retrofitted for the 21st Century TMI industries.  For the time being, we might call the new versions TMI Barons.

The media mogul has been familiar figure since the late-19th century industrialization of the press and entertainment industries, typically more prone to being reviled than revered. The Robber Baron Jay Gould was the target of public scorn when he ruled the Western Union, Associated Press, a couple of New York dailies, and railways across the country in the 1870s and 1880s (see Richard R. John’s Network Nation or my review of it).

All of these entities worked in tandem to advance the interests and intrigues of the movers and shakers arrayed around Jay Gould. They served the Republicans in the 1876 elections especially well, too, essentially throwing the outcome to that Party’s candidate over the Democratic opponent.

Upton Sinclair revived the indictment of the media mogul in his hugely popular The Brass Check, first published in 1920 and already in its ninth printing with over a 150,000 copies sold by 1928. As the power of the media mounted in the 20th century, Orson Welles’ 1941 film Citizen Kane updated the indictment of the press baron for the cinema, with its key protagonist, Charles Foster Kane, a media mogul cut from the mould of William Randolph Hearst. The film, like Orson Welles’ War of the Worlds radio drama before it, served as a meditation on power and persuasion in the age of the mass media.

The basic problem of the media mogul form of ownership and organizational structure stems from the fact that it personalizes power and politics. It colonizes public space and discourse with powerful personal agendas.

Its very form and the unremitting flash of all-too-many of those who occupy the role clash with popular and journalistic sensibilities. The ‘free press’, as A. J. Liebling (1947) famously quipped, as a result belongs mostly to those who one. Criminality is not foreign to the role, but at least episodically seems endemic too it, as the Corporate Fraud Task Force’s Report to the President put into place after the collapse of the dot.com bubble regularly demonstrate (see, for example, pp. 25-30 in the 2008 report)

The ‘familial model’ of ownership, control and politics that are the hallmark of News Corp, as the Financial Times stated the other dah in direct reference to the events at hand, are midieval in character, opaque and impenetrable. News Corp has always been close to the centres of political power in the US, UK and wherever it operates, it brazenly wields its influence in way that are as much opportunistic as they are ideological. That company’s owners do use political influence for their own commercial ends, there is no doubt.

News Corps’ board of directors is also one of the most politicized of the leading global media conglomerates. Whereas bankers, financiers and commercial goods purveyors such as Proctor and Gamble stack the boards of most major media conglomerates, of the seventeen members of News Corps’ board, three are from the Murdoch family (James, Lachlan & Rupert) and two are ‘global war on terror’ veterans closely aligned with the Bush II Administration (2000 – 2008):  Viet Dinh, a Georgetown University law school professor and one of the main architects of the Patriot Act, and former Spanish President during the ‘war on terror years’, José María Aznar.

The sprawling global media behemoth’s second largest share-holder is Prince Alwaleed bin Talal, the nephew of the King of Saudi Arabia. He is also one of the Murdochs’s steadfast allies on the board and business partner in other joint Arabic media ventures with News Corp (see News Corps’ Annual Report, 2009, p. 112). All of these murky political ties irretrievably compromise News Corp’s ability to live up to the standards of autonomy from governments demanded by the most mainstream theories of a free press.

The fact that the Murdochs have played their political connections opportunistically and ideologically in equal measure has served them well. To the untrained eye, the fact that the company endorsed Tony Blair’s ‘third way’ Labour Party in the UK at the same time that it stood behind the rabidly conservative Bush II Administration in the US might seem to be ideologically incoherent. However, such a stance has the virtue of allowing News Corp to further its commercial interest regardless of the political context that prevails at any single moment in time.

In Britain, these ties have persisted with the discredited NWOT editor Andy Coulson having served as advisor to Brit PM Cameron before the 2010 election and then as his director of communication after the election, until is resignation last week. Indeed, News Corp is a fixture of the deep state, the buried channels of political communication within the countries in which it operates. These are the grounds that breed things such as the phone hacking scandal.

The News of the World telephone hacking scandal is not new but has been doggedly pursued by the Guardian journalist, Nick Davis, for the past half-decade or more. The story of calumny, political intrigue and the over-inflated egos of media moguls, senior and junior – i.e. Mssrs. Rupert and James Murdoch – continues to have legs and may be growing in scope.

Davis provides an excellent account of the history behind the phone hacking scandal and many of the other woes facing the British press in his 2009 book, Flat Earth News. Over the past few weeks the re-igniting of the phone hacking scandal has also spread across the Atlantic, where James Murdoch, the deputy chief operating officer of News Corp and son of the company’s famous public face, Rupert, could face criminal charges in the US as well.

The fact that the events occurred at all and eventually saw the light of day is probably also due in no small measure to the fact that the UK newspaper market is more competitive and ideologically robust than anything we’d find in Canada or the US. The fact that it targeted the cellphones of the Royal Family, dead soldiers, celebraties, politicos and murdered school girls also thrust the scandal into the limelight, pissing off a broad spectrum of the powerful and popular alike as a result.

The subject has stayed at a steady boil throughout the two weeks we were in Istanbul, and a Parliamentary Inquiry in the UK is looking into these events is now under way and releasing testimony and documents pretty much as it occurs. Call this the acceleration of the political cycle and scandal laundering.

Besides destroying wealth, the scandal has put media moguls on trial. Indeed, the whole British Media System, is on trial. The British Press Complaints Council, for example, has been thoroughly discredited for its previous whitewash of widespread and systemic uses of phone hacking in 2007 and 2009. The rot runs deep and is, as they say in sociological circles, it is systemic.

The Press Complaints Commission (PCC) first report, for instance, stated categorically that “the activities . . . of two people [private investigator Glenn Mulclaire and Royal Affairs editor Clive Goodman] working for the News of the World in 2006 were deplorable, illegal and unethical”.

And the PCC kept its head stuck in the sand the next time around, in 2009, when its second report on phone hacking stated: there was “no new evidence to suggest that the practice of phone message tapping was undertaken by others beyond Goodman and Mulcaire, or evidence that News of the World executives knew about Goodman and Mulcaire’s activities.”

In other words, according to the PCC, phone hacking by News of the World journalists was the product of two bad apples: the Royal page editor Goodman and one-time petty criminal, Mulclaire. Once the ‘two bad apples’ story line was taken, the PCC stuck to it and, for all intents and purposes, abdicated its responsibilities.

The Murdochs are now trying to extend this argument by claiming that the ‘organizational complexity of modern media conglomerates’ is so Byzantine, that they cannot possibly know what is going on in every nook and cranny of the company. According to this tale, the two Murdochs – Rupert and James — were unaware of the goings on at the NOTW. This was pretty much the line that the PCC took. Others say they turned a blind-eye. The first tact injects a sense of humility into events that may now be spinning out of company and its owners’ control, while the latter looks just clumsy and neglectful. Stupid yes, but not a crime.

The scale of global media corporations like News Corp. does mean that the Murdochs cannot be, and are not, privy to every single act that takes place across its sprawling operations. Indeed, with $40 billion plus in annual revenues and interests spanning the globe, News Corp and others of its kind cannot be run on a day-to-day basis by just two people, no matter how omnipotent. However, the Murdochs have also over-played their hand on this score.

Owners do control the media they own indirectly through their control of resources (i.e. allocational control) and long-range decision-making. They sometimes also intervene directly on a day-to-day basis (i.e. operational control).

The Murdochs, in fact, are hands-on owners, in the classic mogul type, not just passive investors and dividend takers. Some former executives have stepped forward to argue that the Murdochs were complicit in, paid for, consented to and helped cover up illegal behaviour. As a result, the Murdochs’ testimony to Parliament has already been tainted and even PM Cameron as admonished them to double-check the accuracy of their testimony at last week’s Parliamentary hearings.

The idea that moguls, or at least editors’ interpretations of their interests, can set the agenda and output of a company like News Corp can be seen in the current phase of the phone hacking scandal. As a timely Project for Excellence in Journalism study released in the past week shows, Fox News has aired much, much less coverage of the phone hacking scandals as CNN and MSNBC, the two other major cable tv news outlets in the US.

Whereas CNN and MSNBC each gave about 130 minutes to the topic from July 6-8 and between the 11-15th, Fox News gave just a fifth of that amount, with only 23 minutes of airtime devoted to the subject. Coincidence, or the guiding hand of the owners and News Corp. interests in setting the editorial agenda? News Corp and the Murdochs have interests, and the flagship of their ideological enterprise in the US, Fox News, is helping to set the parameters of public knowledge and debate on the topic.

So, whether by the structure of interests or direct editorial intervention, it comes to pass that editorial policy within News Corp. is being bent to personal and political imperatives. It is just this reality that not only leads to congenital suspicions of media barons, but which have a corrosive effect on journalism as a whole.

Thus, while newspapers elsewhere flourish, and even enter something of a ‘golden age’ in Turkey, South Africa, India, China, Brazil, Indonesia and Russia, among other places, the crisis of journalism in parts of Europe, Britain and the US is being aggravated by self-inflicted wounds. The crisis may also reflect the deadhand of the media mogul – a figure that is well-past its past due date — running companies for power and personal profit, rather than standards of good journalism or corporate governance.

In sum, it is still far too early to erect the RIP epitaph over the grave of the last media mogul just yet. However, one thing is for sure and that is that the phone hacking scandal does so much portend the death of the mogul but rather reminds us of the dangers of media moguls and media concentration.